[Federal Register Volume 75, Number 19 (Friday, January 29, 2010)]
[Rules and Regulations]
[Pages 4912-4962]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-815]



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Part II





Department of Agriculture





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Food and Nutrition Service



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7 CFR Parts 272 and 273



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

  Federal Register / Vol. 75 , No. 19 / Friday, January 29, 2010 / 
Rules and Regulations  

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DEPARTMENT OF AGRICULTURE

Food and Nutrition Service

7 CFR Parts 272 and 273

[FNS-2007-0006]
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: Final rule.

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SUMMARY: This final rule implements 11 provisions of the Farm Security 
and Rural Investment Act of 2002 (FSRIA) that establish new eligibility 
and certification requirements for the receipt of food stamps. The 
provisions of the final rule will simplify program administration, 
allow States greater flexibility, and provide enhanced access to 
eligible populations. This rule will 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 and resources 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 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 extend simplified reporting of changes to all households; 
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 cease to receive 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 years of age regardless of date of entry, or 
have lived in the United States for 5 years as qualified aliens 
beginning on the date of entry.

DATES: Effective Date: This final rule is effective April 1, 2010.
    Implementation Dates:
    1. Sections 273.4(a)(6)(ii)(H), 273.8(b), and 273.9(d)(1)--
amendments of this final rule were to be implemented October 1, 2002.
    2. Sections 273.4(a)(6)(ii)(B) through (a)(6)(ii)(F) and 
273.4(a)(6)(iii)--amendments of this rule were to be implemented April 
1, 2003.
    3. Sections 273.4(a)(6)(ii)(J) and 273.4(c)(3)(vi)--amendments of 
this rule were to be implemented October 1, 2003.
    4. State agencies must implement Sec. Sec.  273.4(c)(2)(v), 
273.4(c)(3)(iv), 273.4(c)(3)(vii), 273.9(b)(1)(vi), and 
273.9(c)(3)(ii)(A) amendments no later than August 1, 2010.
    5. State agencies may implement all other amendments on or after 
April 1, 2010.
    6. States that implemented discretionary provisions, either under 
existing regulations or policy guidance issued by the Department, prior 
to the publication of this final rule have until August 1, 2010 to 
amend their policies to conform to the final rule requirements.

FOR FURTHER INFORMATION CONTACT: Angela Kline, Branch Chief, 
Certification Policy Branch, Program Development Division, Food and 
Nutrition Service (FNS), USDA, 3101 Park Center Drive, Alexandria, 
Virginia 22302, (703) 305-2495. Her e-mail address is: 
[email protected].

SUPPLEMENTARY INFORMATION:

Background

    The Farm Security and Rural Investment Act of 2002 (FSRIA), Public 
Law 107-171, enacted 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. On April 16, 
2004, we published a rule proposing to codify (published in the Code of 
Federal Regulations) the eligibility and certification requirements of 
the FSRIA. The period for comment on the proposed rule ended June 15, 
2004. We received comments from 19 State and local agencies, 90 
advocate groups, and 6 individuals. In this final rule, we will not 
discuss comments that supported our proposals. We will not discuss, in 
detail, comments that concerned merely technical corrections or 
inadvertent omissions; we have simply made the corrections. We will not 
discuss several provisions on which we received no comments. We will 
adopt these provisions as proposed. For a full understanding of the 
background of the provisions in this rule, see the proposed rulemaking 
which was published in the Federal Register on April 16, 2004 (69 FR 
20724). With the exceptions noted above, we will discuss each provision 
and the comments made.

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

    Section 11(e)(2)(B)(ii) of the Food Stamp Act (7 U.S.C. 
2020(e)(2)(B)(ii)) requires State agencies to develop a Food Stamp 
Program application. Section 4114 of FSRIA amended Section 
11(e)(2)(b)(ii) to require 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. This final rule amends current regulations at 7 CFR 
273.2(c)(3) to implement this provision. Section 4114 of FSRIA also 
required State agencies to provide 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.
    Commenters suggested other information that the Department should 
require State agencies to place on their Web site such as fax numbers 
and the service area of each local office or some other means to 
connect individuals to the correct local office. We note that many 
State agencies do provide detailed local office information on their 
Web sites. However, we decided that requiring specific information 
about each local office such as a fax number and the service area of 
each office can be unduly burdensome to the State agencies, and should 
be a state option rather than a Federal mandate. The purpose of the 
statutory provision is to allow households to obtain a food stamp 
application without having to visit the local office and provide 
applicants with information to assist them in the application process. 
We believe that the commenter's proposal is best handled at the State 
level.
    The Department proposed to include a reference to Section 504 of 
the Rehabilitation Act of 1973 (29 U.S.C. 794) in 7 CFR 273.2(c)(3) to 
ensure that documents on a State's Web site are

[[Page 4913]]

accessible to persons with disabilities. Commenters suggested that the 
regulatory language specify examples of the kinds of services States 
must offer in order to make their applications accessible to people 
with disabilities. They also suggested that the Department reference 
helpful guidance written by the Architectural and Transportation 
Barriers Compliance Board on improving access to individuals with 
disabilities and how to comply with such guidance. Finally, they wanted 
the Department to provide information in the preamble of the final rule 
about various assessment tools available to determine whether or not a 
State meets accessibility standards.
    Although the Department appreciates these recommendations, it is 
impracticable to include such guidance in a regulation due to its 
extensive detail. As stated by the commenters, other agencies have 
already provided helpful guidance on improving access to individuals 
with disabilities. The Department encourages State agencies that 
administer the Food Stamp Program to consult information such as the 
guidance written by the Architectural and Transportation Barriers 
Compliance Board in the development of accessible systems.
    Commenters asked the Department to provide a report on State 
compliance with this provision in the preamble to the final rule. The 
Department will not provide such a report in the final rule because of 
the ever changing nature of State systems. Additionally, the Department 
does not provide reports in the Federal Register on State compliance 
with other regulatory provisions; therefore, it is not appropriate to 
provide a report on this provision.
    However, the Department has made it clear to all State agencies 
that the information provided on their Web site must be easily 
accessible. The Department also developed a page on its own Web site to 
assist participants in accessing program information for all 50 States 
and the District of Columbia. The Department's Web site contains a map 
and list of all 50 States and the District of Columbia. Participants 
can click on their State and obtain, at a minimum, an English language 
application form, acquire the food stamp hotline number for their 
State, and find the nearest food stamp office.

Partial Restoration of Benefits to Legal Immigrants--7 CFR 273.4

1. Expanded Eligibility for Certain Noncitizens

    Section 4401 of FSRIA substantially expanded 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). That section lists the groups 
eligible for food stamps which include qualified aliens, as defined 
under 7 CFR 273.4(a)(5)(i), who meet at least one of the criteria 
specified at 7 CFR 273.4(a)(5)(ii). Some of the criteria make a 
noncitizen eligible for only 7 years, while other criteria make the 
noncitizen permanently eligible for the program. The proposed rule 
contained a detailed discussion of these requirements; interested 
parties can refer to the current regulations and proposed rule for 
further discussion.
    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. As written, Section 4401 could be read to require that the alien 
has been in a qualified status at the time he or she entered the United 
States in order to be eligible under this provision. However, in 
reviewing the legislative history behind FSRIA in the development of 
the proposed rule, the Department came to the conclusion that it was 
not the intent of Congress to deny the benefits of the provision to 
aliens who are not qualified when they enter the United States but 
later attain qualified status. Therefore, the Department proposed to 
amend current regulations at 7 CFR 273.4(a)(5)(ii) to extend 
eligibility for the Food Stamp Program to any alien who has resided in 
the United States in a qualified alien status as defined in PRWORA for 
5 years.
    While most commenters approved of the language in the proposed 
rule, they asked the Department to clarify the 5-year residency 
requirement to incorporate guidelines regarding the calculation of the 
5-year period. First, they asked us to clarify that the 5 years do not 
have to be consecutive. Second, they asked us to clarify that temporary 
absences of less than 6 months from the United States, with no 
intention of abandoning U.S. residency, do not terminate or interrupt 
the individual's period of U.S. residency. Third, they asked us to 
clarify that prior residence in any one or any combination of the 
immigrant statuses that confer eligibility counts toward the 5-year 
residency policy. Finally, to ensure that, when the U.S. Citizenship 
and Immigration Services grants qualified status retroactively, the 
retroactive time counts toward the 5-year requirement. The Department 
has considered these requests and the final rule reflects the 
recommended clarifications.
    The 5-year residency rule 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 (for example, refugee or 
asylee status) set out in PRWORA and at current regulations 7 CFR 
273.4(a)(5)(ii)(B) through (a)(5)(ii)(F). Because the 5-year residency 
rule effectively eliminates the 7-year time limit on food stamp 
eligibility, the Department proposed to amend current regulations at 7 
CFR 273.4(a)(5)(ii)(B) through (a)(5)(ii)(F) to remove the reference to 
the 7-year time limit. One commenter noted that while it is technically 
correct to strike the now irrelevant 7-year time limit language, they 
felt that the proposed regulations would have required a confusing, 
redundant two-pronged test. They suggested that the changes proposed by 
Section 4401 gave FNS an opportunity for a substantial reorganization 
of 7 CFR 273.4(a).
    The commenter suggested that the Department move the ``refugee'' 
group to its own unencumbered section under 7 CFR 273.4(a) and 
separately group the remaining qualified immigrants who must meet the 
two-pronged test. They felt that eligibility workers would have 
difficulty determining what rule is applicable to the household and 
become confused about how a member of a refugee group can be both 
``qualified'' and ``eligible'' under the same set of facts but other 
non-citizens must meet a two-pronged test involving age, duration of 
status, disability, work history or veteran status. The commenter also 
recommended that the Department insert an additional provision to 
resolve any confusion around situations where an individual presents 
proof of lawful permanent residence (LPR) such as a Permanent Resident 
Card, I-551, which may have a ``date of entry'' based on when LPR 
status was granted, but the

[[Page 4914]]

immigrant may have previously entered in refugee or asylee status.
    FNS has considered these suggestions, but maintains that the two-
pronged test is a statutory requirement that must be addressed in the 
regulations. FNS finds that State agencies generally simplify their 
eligibility requirements for eligibility workers. We have attempted to 
simplify this provision by listing the requirements for eligibility for 
qualified aliens in one section at, 7 CFR 273.4(a)(6)(ii). In this 
section, we delete any reference to the 7-year time limit and delineate 
between those aliens that do not have to meet the 5-year residency 
requirement at 7 CFR 273.4(a)(6)(ii)(A)-273.4(a)(6)(ii)(J) and those 
that must meet the 5-year residency requirement at 7 CFR 
273.4(a)(6)(iii) in order to establish eligibility. We did not relocate 
the refugee group to a separate group as there are other exceptions to 
the 5-year residency requirement and we felt that all of the 
eligibility requirements for qualified aliens should be grouped 
together. We did not add a provision regarding the date of entry as 
current regulations at 7 CFR 273.4(a)(6)(iv) address aliens who change 
from one status to another.
    The 5-year residency rule also makes parolees and conditional 
entrants who retain qualified alien status for 5 years eligible for the 
program. Under the current rules, these two categories of qualified 
aliens have to meet one of the requirements under 7 CFR 273.4(a)(5)(ii) 
in addition to meeting the requirements for parolee or conditional 
entrant status. The Department proposed to amend the current 
regulations to accommodate this change in the law. These aliens are 
listed as qualified aliens in paragraph 273.4(a)(6)(i) of the final 
rule and are subject to the 5-year residency requirement listed at 
paragraph 273.4(a)(6)(iii) of the final rule. Section 4401 also 
effectively reduces the applicability of the 40 quarters of work 
requirement for aliens lawfully admitted for permanent residence under 
PRWORA and current regulation 7 CFR 273.4(a)(5)(ii)(A). Under the 
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 5 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 5 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.
    One commenter asked the Department to conform its regulations to 
those of the Supplemental Security Income (SSI) program and provide 
that quarters credited from a spouse are not lost if the couple 
divorces unless food stamp benefits actually terminate. The commenter 
believes that USDA should conform its policy to that of other programs, 
including SSI, to further simplify program administration. According to 
the commenter, individuals who meet the non-citizen requirements for 
SSI based on the quarters of a spouse retain SSI eligibility upon 
divorce but lose food stamp eligibility at their next recertification.
    Pursuant to 8 U.S.C. 1645, when determining the number of 
qualifying quarters of coverage under title II of the Social Security 
Act (SSA) (42 U.S.C. 401, et. seq.), an alien shall be credited with 
all of the qualifying quarters worked by a spouse of such alien during 
their marriage if the alien remains married to such spouse. Under the 
guidelines of the Social Security Administration, provided in Section 
SI 00502.135 of the Program Operations Manual (POMS), the qualifying 
quarters of a spouse cannot be credited if the marriage has ended, 
unless by death, before a determination of alien eligibility is made 
for aliens lawfully admitted for permanent residence. However, the POMS 
also states that qualifying quarters credited from a spouse are not 
lost if the marriage ends for any reason after a determination of 
eligibility is made unless the benefits terminate and a new claim is 
required.
    Unlike food stamp benefits which expire if there is no 
determination of eligibility for the new certification period, SSI 
benefits are provided on a continual basis with the Social Security 
Administration performing redeterminations on a schedule that is based 
on the likelihood that a recipient's situation may change. This 
difference has led the two agencies to apply different methodologies 
for crediting qualifying quarters worked by a spouse.
    In 2000, the Department received a similar comment to the proposed 
Noncitizen Eligibility and Certification Provisions (NECP) Rule. The 
analysis of this comment can be found in the final rule at 65 FR 70134 
on November 21, 2000. At that time, the Department rejected the 
proposal to conform their policies to mirror those of the SSI program. 
However, the Department did amend the regulation to allow the State 
agency to continue eligibility until the household's next 
recertification once they determine eligibility based on quarters of 
coverage of the spouse.
    The commenter asked for the Department to revisit this issue based 
on a belief that the Department unnecessarily relied on the 
technicality that food stamps are provided on a time-limited 
certification period. The commenter felt that this reliance on a 
technicality in 2000 was unnecessary because the statute only requires 
that the couple ``remain married'' at the time the quarters are 
credited, not that they continue to be married at the time of 
recertification.
    Although Congress intended to simplify program administration under 
the FSRIA, this was not an issue that they addressed. The FSRIA lists 
specific programs that the Department needs to work with to develop 
uniform policies. Congress did not include SSI in this list of specific 
programs. Additionally, the current regulations are consistent with the 
administration of the Food Stamp Program. As stated above, the 
certification period of the Food Stamp Program does not mirror that of 
the SSI program. Therefore, the Department developed a regulation that 
came as close to the SSI program policy as it could without violating 
the overall principles of the Food Stamp Program. All federal benefit 
programs are different in their administration of benefits because 
Congress implemented laws that fit the overall goals of each program. 
Therefore, the agencies governing these programs need to comply with 
Congressional intent and develop rules to achieve the specific goals of 
each program.
    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. 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.

[[Page 4915]]

The Department did receive comments regarding the deeming rules which 
will be discussed in detail below.
    In addition to extending eligibility to aliens who satisfy the 5-
year residency 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. Second, Section 4401 
extends eligibility to all qualified aliens who are under the age of 
18. The Department proposed to amend current regulations at 7 CFR 
273.4(a)(5)(ii) to incorporate the revised eligibility requirements for 
certain qualified aliens.
    Under the Act, individuals are considered disabled if they receive 
certain federal or State disability benefits. Most of the benefits 
listed in the Act require an individual to provide proof of a 
disability. The Act also provides that persons receiving disability-
related Medicaid, State-funded medical assistance benefits, and State 
General Assistance (GA) benefits may be considered disabled for food 
stamp purposes if they are determined disabled using criteria as 
stringent as federal SSI criteria. One commenter noted that some States 
will provide disability-related general or medical assistance to 
residents based on age. They were concerned that although some of these 
individuals also meet the SSI definition of disabled, they may be 
denied food stamps because they did not have to provide proof of their 
disability to receive their State-funded assistance. To ensure that 
this does not happen, the commenter suggested that the final rule 
clarify that an individual may qualify as disabled for food stamp 
purposes if the individual has been determined by the State to have a 
disability that meets SSI standards, as long as the individual is 
receiving a State-funded, needs-based, benefit. Although these points 
are addressed in the preamble to the proposed rule and in program 
policies, the commenter wanted to have these policies codified to avoid 
the anomaly of denying food stamps to disabled elders while allowing 
food stamps to non-elderly disabled persons.
    The Department has considered these comments and has determined 
that the issue presented by the commenter is so limited that it is not 
necessary to codify. Additionally, the Act requires the individual to 
receive these benefits based on their disability. The fact that the 
State agency has elected to provide benefits to individuals based on 
their age and not their disability is not something that the Department 
can control. The Department must comply with the Act and maintain the 
provision that the individual receive benefits based on disability 
criteria. There is nothing in the Act that requires State agencies to 
accommodate disabled individuals and make a disability determination to 
qualify under this provision. Therefore, the Department cannot amend 
this provision of the proposed rule and finalizes it as proposed.
    One commenter discovered what they believed to be conflicting 
language in the proposed rule. They noted that the preamble states that 
Section 4401 extends eligibility to qualified aliens who meet the 
definition of disabled and further discussion states that they need to 
be qualified aliens legally residing in the United States.
    The language in the preamble to the proposed rule that refers to 
the term ``lawfully residing'' is in a discussion about the current 
regulations. The proposed rule clearly states that the requirement that 
an individual be ``lawfully residing'' as of a certain date would be 
amended. The proposed language for 7 CFR 273.4(a)(5)(ii)(H) and 7 CFR 
273.4(a)(5)(ii)(J) would have amended the current language for those 
sections 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''. Therefore, there is no conflict for the Department to correct 
in the final rule. Under the final rule, to be eligible under 7 CFR 
273.4(a)(6)(ii)(H), a qualified alien must be receiving benefits or 
assistance for blindness or disability. Under revised 7 CFR 
273.4(a)(6)(ii)(J), a qualified alien must be under 18.
    As a result of the change in program rules qualifying individuals 
under the age of 18, the Department received several comments on the 
issue of sponsor liability regarding this group of newly qualified 
immigrants. Under the current rules, sponsors who sign a binding 
affidavit of support are responsible for food stamp benefits received 
by the immigrants they sponsor if those benefits were received during 
the period of time the affidavit of support is in effect. The affidavit 
of support remains in effect until the sponsored immigrant becomes a 
naturalized citizen, can be credited with 40 qualifying quarters of 
work, is no longer a lawful permanent resident and leaves the U.S. 
permanently, or until the sponsor or the sponsored immigrant dies.
    The NCEP Rule clarified that a State agency cannot request 
reimbursement from the sponsor during any period of time that the 
sponsor receives food stamps. The Department decided not to regulate 
the issue of sponsor liability any further until the Department has 
completed a thorough policy development process in coordination with 
other Federal agencies. Several commenters suggested that the 
Department amend the regulations to clarify that sponsors are not 
required to reimburse agencies for benefits provided to immigrant 
children. They believed that this would ensure that immigrant children 
have access to food stamps, as intended by the recent legislation.
    Sponsors are normally shielded from liability in the first 5 years 
of residence because, under prior law, sponsored aliens were not 
eligible (with limited exceptions) for 5 years. In amending the Act to 
make legal immigrant children immediately eligible for benefits, 
Congress made sponsors of these children potentially immediately liable 
for benefits issued to them. The commenters believed that this was the 
result of a Congressional oversight. Therefore, they suggested that the 
Department consider the option of excluding benefits received by 
sponsored alien children from sponsor liability for the first 5 years 
that they are in residence.
    The Department has considered these comments and will maintain the 
current rule as proposed. This was not an issue that Congress felt was 
necessary to raise in the statutory language and the Department does 
not want to regulate the issue of sponsor liability any further until 
the Department has completed a thorough policy development process in 
coordination with other Federal agencies. Since Congress did not raise 
this issue in the statutory language, the Department is following the 
statutory language and does not believe that it is necessary or proper 
to regulate beyond these statutory provisions.
    Several commenters suggested that the Department amend the current 
regulations to clarify that human trafficking victims and certain 
family members are eligible for food stamps to ensure that victims and 
their families are not denied benefits. This was not addressed in the 
proposed rule. The Department included this issue among several it 
addressed in the ``Eligibility Determination Guidance: Noncitizen 
Requirements for the Food Stamp Program'' issued in January 2003 (and 
in further guidance issued in August 2004).
    The guidance reflects the requirements under the ``Trafficking 
Victims Protection Act of 2000'' (Pub. L. 106-386), as reauthorized by 
the

[[Page 4916]]

Trafficking Victims Protection Reauthorization Act of 2003 (Pub. L. 
108-193) that adult victims of trafficking who are certified by the 
U.S. Department of Health and Human Services (DHHS) are eligible for 
food stamp benefits to the same extent as refugees. Additionally, 
children who are under 18 years of age and have been subject to 
trafficking are also eligible on the same basis as refugees, but they 
do not need to be certified. The Department is making a technical 
amendment to reflect the eligibility status of victims of trafficking 
as required by statute, by adding these provisions to the final 
regulations. Therefore, the final rule includes a new 7 CFR 
273.4(a)(5). This new paragraph will clarify that trafficking victims 
and certain family members are eligible for food stamp benefits.

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. As stated in the 
proposed rule, the requirements of the two laws are not fully 
consistent. However, the Department addressed and resolved the 
inconsistencies in the NCEP Rule.
    Current deeming requirements appear in food stamp regulations at 7 
CFR 273.4(c). A complete discussion of the current deeming rules is 
provided in the proposed rule. 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 proposed 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.
    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. However, because 
sponsored aliens under the age of 18 will now be exempt from deeming 
requirements, following current rules, the State agency must deem only 
a portion of the sponsor's income to the household. Even though the 
sponsored child is exempt from deeming requirements, the sponsor is 
still sponsoring that child. Thus, if an individual 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 proposed to amend current regulations at 7 CFR 
273.4(c)(2)(v) to clarify this point.
    While most commenters supported this provision, several had issues 
with what they regarded inequitable treatment of households with U.S. 
citizen children versus those with immigrant children. In a case 
involving a sponsored immigrant adult and citizen child, the 
eligibility worker would deem all of the sponsor's income to the 
household. In a household with sponsored immigrant parents and 
immigrant children, the eligibility worker would deem only that portion 
of the sponsor's income attributable to the adult and disregard the 
portion attributed to the immigrant child. According to the commenters, 
this could result in the reduction or even the elimination of food 
stamp benefits for the citizen child with sponsored immigrant parents 
because all of the sponsor's countable income is added when determining 
a household's eligibility for the Food Stamp Program. Commenters noted 
that according to the Urban Institute, 85 percent of immigrant-headed 
households include at least one U.S. citizen, typically a child. They 
felt that Congress could not have intended to provide less assistance 
to households with U.S. citizen children.
    The commenters asked the Department to place all sponsored 
households on equal footing by applying deemed income to households 
with citizen children in the same manner as it is applied to households 
with immigrant children. The deemed income would be divided equally 
among any sponsored immigrants and children in the household with the 
child's amount excluded. They felt that this would prevent the 
inequitable distribution of benefits among sponsored households and 
decrease program complexity.
    One commenter suggested that the household be divided into 
different units. In a household with a sponsored parent and two 
children (either immigrant or citizen children), for example, the two 
children would be considered separately with only their parent's income 
counted in determining their eligibility. Then the sponsored parent's 
eligibility would be determined separately, with the sponsor's income 
considered. This same commenter suggested an alternative approach which 
would allow the sponsored immigrant to ``opt out'' of the household and 
be treated under the State's formula for ``PRWORA ineligible'' 
immigrants.
    The Department believes it was not the intent of Congress to create 
an inequity between citizen children and sponsored alien children that 
is fundamentally at odds with the overall goal of the program. 
Therefore, the final rule places all households on equal footing 
providing the same income deeming procedures to households with citizen 
children as those applied to households with immigrant children.

3. Attorney General Notification of Indigency

    Current rules require that the State agency notify the Attorney 
General any time a sponsored alien has been determined indigent, and 
include in the notification the names of the sponsor and sponsored 
aliens. Moreover, 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 or State agency (or an 
agency of a political subdivision of a State) must request 
reimbursement by the sponsor in the amount of such assistance. 
Commenters 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 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 agreed with this concern over the 
mandatory notification requirement as a deterrent to participation and 
so proposed to amend current regulations at 7 CFR 273.4(c)(3)(iv) to 
allow a household to opt out of the indigence determination and be 
subject to regular sponsor deeming rules at 7 CFR 273.4(c)(2). Under 
the sponsor deeming rules,

[[Page 4917]]

failure to verify the sponsor's income and assets would result in the 
disqualification of the sponsored alien.
    The Department received one comment from a State agency that saw 
little benefit in this provision. The commenter stated that most 
sponsored alien applicants who are determined to be indigent have 
either little or no contact with their sponsor, or are receiving no 
monetary assistance from their sponsor. Therefore, it makes little 
sense for the alien applicant to try to request information from the 
sponsor for purposes of regular sponsor deeming. Additionally, the 
commenter noted that allowing the applicants to opt out will not 
necessarily increase participation because the aliens typically opt out 
completely or become ineligible if the sponsor's income is deemed to 
them. However, the Department believes that opting out may increase 
participation by other household members, particularly children. 
Accordingly, the Department will adopt the revisions as proposed.
    The Department also received a comment asking that the final rule 
contain a provision that will ensure that the sponsored alien is 
provided notice of the consequences of refusing an indigence 
determination. Namely, that 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. The final rule 
contains language to ensure that participants are notified of these 
consequences.
    Prior to the publication of the proposed rule, the Department was 
asked to permit State agencies to develop an administrative process 
which requires an eligible sponsored alien to provide consent before 
release of information to the Attorney General or the sponsor. 
Commenters suggested that many sponsored aliens would learn of the 
Attorney General notification and sponsor liability requirements only 
after they have disclosed their immigration status and social security 
number. Fearing adverse consequences as a result of the notification 
requirements, the sponsored alien may withdraw the entire application, 
resulting in other household members, in many cases U.S. citizen 
children, losing the opportunity to receive benefits. The Department 
stated in the proposed rule that it is within the discretion of the 
State agency 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 aware of the 
consequences of failure to grant consent or failure to provide any 
other information necessary for the purposes of deeming the sponsor's 
income to the alien. As stated previously, the consequence of failure 
to verify the sponsor's income and assets is the disqualification of 
the sponsored alien. The Department sees the new option as an 
administrative simplification, rather than a basic change in policy. 
The new provision allows the sponsored alien to opt out at the 
beginning of the application process. This results in an outcome that 
would have ensued under the existing regulations, but with much more 
time consuming administrative process. The Department received comments 
in favor of this provision. Therefore, we are incorporating this 
provision in this final rule.

4. Comments Related to Department Guidance on Immigration

    In addition to the comments that addressed provisions of the 
proposed rule that are discussed above, the Department received 
comments that address additional immigration issues. Most of these 
comments reflect primarily on the guidance issued by the Department in 
January 2003. Since these issues were not addressed in the proposed 
rule, the comments are beyond the scope of this rulemaking and should 
be addressed in a future rulemaking in order to have the force and 
effect of law.

Simplified Definition of Resources-- 7 CFR 273.8

    For the purposes of this final rule, the Department is defining 
cash assistance under a program funded under part A of title IV of the 
SSA as ``assistance'' as defined in the TANF regulations at 45 CFR 
260.31(a)(1) and (a)(2), except for programs grand-fathered under 
Section 404(a)(2) of the SSA. Under TANF, assistance includes cash and 
other forms of benefits designed to meet a family's ongoing basic needs 
including benefits conditioned on participation in work experience or 
community service. Programs grand-fathered under Section 404(a)(2) of 
the SSA 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.
    In the final rule, the Department is defining medical assistance 
under Section 1931 of the SSA as Medicaid for low-income families with 
children. This section, which was added by PRWORA, allows low-income 
families with children to qualify for Medicaid. It requires that States 
use the income and resource standards that were in effect in July 1996 
for the Aid to Families with Dependent Children (AFDC) program, but 
also provides options for States to use less restrictive income and 
resources tests for these families.
    This final rule adds a new paragraph at 7 CFR 273.8(e)(19) which 
provides 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, the final rule prohibits State 
agencies from adopting resource exclusions, for food stamp purposes, of 
TANF cash assistance and Medicaid programs that do not evaluate the 
financial circumstances of adults in the household while determining 
eligibility and benefits.
    The requirement at 7 CFR 273.8(c)(3) to deem the resources of 
sponsors of aliens as resources of the alien applicants continues to be 
in effect. However, if a State agency has chosen in accordance with the 
provisions of 7 CFR 273.8(e)(19) in this final rule 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.
    The final rule amends 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 an elderly or disabled member is reflected at 
7 CFR 271.2).
    A State agency that selects the option to use its TANF cash 
assistance or Medicaid resource rules in lieu of food stamp resource 
rules may not exclude the following:
    1. Licensed vehicles not excluded under Section 5(g)(2)(C) or (D) 
of the Act (7 U.S.C. 2014(g)(2)(C) and (D)). (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 proposed rule would have required that the term ``readily 
available'' apply to resources, in financial institutions, that can be 
converted to cash in a single transaction without going to court to 
obtain access

[[Page 4918]]

or incurring a financial penalty other than loss of interest. While 
commenters found the proposed definition of ``readily available'' to be 
easy to understand and specific, they also found that it added 
complexity to program administration. Some suggested that making the 
term ``readily available'' apply to all financial instruments would be 
simpler than the proposed definition, which would be more restrictive 
than current policy. Others argued that we should allow State agencies 
to exclude stocks, bonds, and savings certificates if their TANF cash 
assistance or Section 1931 Medical assistance programs exclude them. We 
disagree. These financial instruments are generally easily converted to 
cash. In the rare instances where they are not easily cashed, current 
regulations would exclude them as inaccessible resources. As examples, 
a stock certificate without value, one whose value is not easily 
determined, or an inherited stock that has not yet cleared probate is 
considered inaccessible under current rules and would not be counted 
against a household's resource limit. For these reasons the final rule 
defines ``readily available resources'' as resources the owner can 
simply withdraw from a financial institution. For example, one can 
withdraw funds from a money market account, or convert foreign currency 
stored in a safety deposit box to U.S. dollars, by simply going to the 
financial institution and going through the required procedures.
    Under the proposed rule, State agencies would have been able to 
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. This provision drew 
over 100 comments reminding FNS that the intent of the legislation is 
to simplify food stamp resource rules and to conform them to other 
Federal assistance programs. Commenters argued that IDAs are intended 
to help break the poverty cycle and to encourage work. We agree. The 
final rule allows States to exclude any and all IDAs from resources, 
provided their TANF cash assistance or Section 1931 medical assistance 
programs exclude them.
    The proposed rule would have offered States the option to exclude 
deposits in individual retirement accountants (IRAs) the terms of which 
enforce a penalty, other than forfeiture of interest, for early 
withdrawal. The intent of this language was to limit the exclusion to 
situations where converting the IRA to cash would entail significant 
loss of resources. Title IV of the Food, Conservation and Energy Act of 
2008 (Pub. L. 110-246)(FCEA) provided for the exclusion of all IRAs. 
Accordingly, any discussion of IRAs is dropped from this rule and will 
be discussed in a future rulemaking.

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

    Current regulations at 7 CFR 273.9(c) specify the 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. Provisions at 7 CFR 273.9(c)(1) through (c)(16) provide a long 
list of income exclusions that State and local agencies must apply when 
calculating a household's income.
    Section 4102 of FSRIA amends Section 5(d) of the Act (7 U.S.C. 
2014(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 SSA; and
    3. Any type 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. 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), X (Grants to States for Aid to the Blind), 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 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.
    Current regulations at 7 CFR 273.9(c)(3) provide an exclusion for 
educational assistance including grants, scholarships, fellowships, 
work-study, educational loans which defer payment, veterans' 
educational benefits and the like. These exclusions (based on an 
exclusion provided at Section 5(d) of the Act) are limited to 
educational assistance provided to a household member who is enrolled 
at a recognized institution of post-secondary education and that are 
used or earmarked for tuition or other allowable expenses. State 
agencies have the option of excluding this assistance from income for 
food stamp purposes to the extent that their 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).
    To implement section 4102 of FSRIA, the Department proposed to 
amend 7 CFR 273.9(c)(3) by adding a new 7 CFR 273.9(c)(3)(v) which 
grants State agencies the option to 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 
implement this option 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.
    One commenter recommended the Department take the opportunity in 
this final rule to clarify the interaction of the federal Higher 
Education Act (Pub. L. 99-498) with the Food Stamp Program. The Higher 
Education Act, as amended, provides that certain types of student 
financial assistance shall not be taken into account in determining the 
need, eligibility or benefit level of any person for benefits or 
assistance under any Federal, State or local program financed in whole 
or in part with Federal funds (20 U.S.C. 1087uu). Food stamp 
regulations at 7 CFR 273.9(c)(3) differ from 20 U.S.C. 1087uu by 
counting student aid as income when such aid is used for normal living 
expenses, as opposed to tuition and books. The commenter recommended 
that the Department amend food stamp regulations to conform to 20 
U.S.C. 1087uu.
    The Department reviewed the applicable language in the Higher 
Education Act and confirmed that current regulations at 7 CFR 
273.9(c)(3) are inconsistent with this law. The Food

[[Page 4919]]

Stamp Program is a federally funded program, thereby meeting the 
criteria of 20 U.S.C. 1087uu. Therefore, in addition to adopting 7 CFR 
273.9(c)(3)(v) as proposed, the Department is adding a new 7 CFR 
273.9(c)(3)(ii)(A) to exclude student financial assistance received 
under 20 U.S.C. 1087uu of the Higher Education Act. The Department 
notes that this section of the Higher Education Act funds work study 
programs. Therefore, any income received by an individual participating 
in a work study program funded under this section of the Higher 
Education Act shall not be counted when determining the individual's 
eligibility for food stamps. The final rule amends 7 CFR 
273.9(b)(1)(vi) to conform to this mandate.
    The Department proposed a new 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 SSA. 
Complementary assistance relates to certain types of assistance 
provided under the old AFDC program. In the proposed rule, we 
specifically asked State agencies to include, in their comments, 
examples of the types of payments that fall under the category of State 
complementary assistance program payments. We received only one example 
of such a program, the Supplemental Living Program in New Jersey. Due 
to the low response rate, the final rule does not include specific 
examples of these payments. This rule adopts as final the proposed 7 
CFR 273.9(c)(18).
    To incorporate the changes mandated by section 4102 of FSRIA, the 
Department proposed to add a new 7 CFR 273.9(c)(19), that would allow 
the State agency at its option to exclude from Food Stamp Program 
income the 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 of the SSA. 
However, this provision would not include programs that do not evaluate 
the financial circumstances of adults in the household and programs 
grand-fathered under Section 404(a)(2) of the SSA. Additionally, a 
State would not be able to 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.
    The Department received several comments regarding proposed 7 CFR 
273.9(c)(19). Most of these comments focused on the specific incomes or 
payments listed in the paragraph. We will address comments concerning 
specific incomes and payments in the order they appear in proposed 7 
CFR 273.9(c)(19). Before we begin this detailed discussion, we wish to 
address two miscellaneous items. First, the Department is changing the 
format of the language in the proposed rule. The final rule lists each 
income or payment that section 4102 of FSRIA does not exclude as income 
in a list format, starting with 7 CFR 273.9(c)(19)(i) and ending with 
(c)(19)(x). We believe this revised format will make it easier for 
readers to understand what income or payments cannot be excluded.
    Second, the Department received a comment regarding child support 
arrearages and whether such sums should be included or excluded as 
income. The commenter pointed out that, in some cases, a large 
arrearage of child support may accrue while the non-custodial parent is 
unemployed or working off the books to evade a wage attachment. State 
Child Support Enforcement offices (``State IV-D agencies'') sometimes 
are able to attach a bank account, tax refund, lottery winnings or 
other property of the non-custodial parent and may remit several months 
of support at once to the custodial parent. These non-recurring lump 
sums of child support must be excluded from the custodial parent's 
household income in accordance with 7 CFR 273.9(c)(8). However, the 
commenter thought that this may confuse some eligibility workers 
accustomed to querying their State IV-D agencies for information on 
child support received. The commenter asked the Department to include 
lump sums of child support arrearages to the examples of lump sums in 7 
CFR 273.9(c)(8).
    The Department disagrees with the comment. Current 7 CFR 
273.9(c)(8) contains some, but not all, examples of non-recurring lump 
sum payments. The paragraph clearly indicates that the examples 
included in the text are not exclusive. The Department sees no need to 
add more specific examples of non-recurring lump sum payments to this 
paragraph.

1. Income Excluded by State Agencies When Determining TANF or Medical 
Assistance

    The Department proposed to amend the current regulations at 7 CFR 
273.9(c) to permit exclusion of new types of income at State agency 
option. In addition to permitting the exclusion, one commenter 
expressed the desire to see this regulation apply to the ``treatment'' 
of income as well. If the TANF or medical assistance program treats a 
certain income as earned income, the commenter would have the State 
agency also apply the same treatment for food stamps. For example, the 
regulations governing the TANF program treat workers' compensation as 
earned income if it is employer funded and if the recipient is still 
considered an employee of the company. However, current food stamp 
policy requires worker's compensation be counted as unearned income.
    The definition of earned and unearned income, as well as how much 
of a particular type of income to count is set by regulation, not 
statute (although Section 5(d) of the Food Stamp Act does say household 
income includes all income from whatever source except that which is 
specifically excluded). Thus, even though FSRIA speaks only to types of 
income to count or exclude for food stamp purposes, the Department 
agrees with the commenter that having consistency among TANF, medical 
assistance, and food stamps in how they ``treat'' income would simplify 
budgeting for State or local staff who administer multiple programs and 
would be another step toward simplifying the Program. Therefore, the 
Department is amending 7 CFR 273.9 to expand the list of allowable 
earned income to include certain income as earned income if the 
household is receiving TANF and/or State medical assistance and this 
income is treated as earned income by a State's TANF or medical 
assistance program.
    Even though a State may exclude income in its TANF or medical 
assistance program, section 4102 mandated that certain types of income 
cannot be excluded. Many commenters said these specific income 
exclusions disregarded the clearly expressed Congressional intent that 
the Department only supplements the list in the case of unforeseen 
gamesmanship by some States. Others claimed the additional mandatory 
income exclusions would increase the administrative burdens on 
caseworkers and paperwork burdens on households. For example, State 
agencies would be required to ask about these types of incomes on the 
application forms and certification interviews even if a State does not 
find them worth counting for TANF and Medicaid. Moreover, commenters 
noted that each type of income affects very few households and the 
Department does not collect data on them through its quality control 
database. Commenters stated that by supplementing the Congressional 
list of exclusions, the language in the

[[Page 4920]]

proposed rule largely eliminates the simplifying purpose of the 
provision.
    The Department gave serious consideration to these comments. While 
Congress supported simplifying program administration, it did give the 
Department the authority to add types of income to the list of 
mandatory inclusions viewed essential to the equitable determination of 
eligibility and benefit levels. The Department has determined that the 
additional types of income included in the proposed rule can be 
significant sources of income to households and should be counted in 
determining food stamp eligibility and benefits.

2. Exemption of Gross Income From a Self-employment Enterprise

    Three commenters argued that States are unlikely to want to bear 
the expenses of a blanket disregard of self-employment income in their 
TANF and medical assistance programs. They believe the Department 
should leave it to the States to determine which particular types of 
self-employment income are rare and erratic forms of income and not 
worth the trouble to ask about through application questions and/or 
verification requirements. Commenters also stated that if the 
Department is determined to regulate in the area of self-employment 
income, it should only require the counting of self-employment income 
that is the household's primary source of support. The amount of income 
received from some self-employment sources, such as garage sales and 
sale of blood plasma, is sometimes minimal and is not a regular source 
of net income to the household.
    The Department does not see a need to clarify this point in the 
final rule. In determining a household's income for the certification 
period, State agencies are instructed by current regulations at 7 CFR 
273.10(c)(1) to consider income already received by the household 
during the certification period and anticipate income that the 
household and State agency are reasonably certain will be received 
during the certification period. Thus, the Department contends that 
State agencies should only count self-employment income that at 
certification can be anticipated with reasonable certainty. Income from 
rare or erratic sources, like garage sales and the sale of blood 
plasma, does not meet the standard of reasonable anticipation.
    Another commenter stated that there is no need for a single uniform 
definition of self-employment income for food stamp purposes. Most 
States count self-employment income in their TANF programs but take a 
range of approaches in their TANF definitions. The commenter felt that 
there are very legitimate reasons why a State may wish to develop or 
test an alternative approach. The commenter stated that imposing the 
uniform definition has the effect of forcing States to either adopt 
that definition for TANF purposes or have inconsistent TANF and food 
stamp definitions. This could greatly increase the complexity of 
eligibility and benefit determinations for self-employed households. 
This commenter suggested that the final rule specify that while States 
must count self-employment income, a State may elect to use the 
methodology it uses in its TANF or medical assistance program for 
counting such income.
    The Department disagrees with this comment. The methodology a State 
uses to count self-employment income in its TANF or medical assistance 
program may not conform to the rules and regulations of the Food Stamp 
Program. Moreover, these methodologies, if applied to the Food Stamp 
Program, could allow a greater number of individuals to qualify for 
benefits than would be the case if States had used a specific food 
stamp methodology. Self-employed individuals must be found eligible for 
food stamp benefits through the use of a food stamp methodology. State 
agencies that believe there is an administrative and cost advantage for 
applying TANF or medical assistance program methodologies for counting 
self-employed income to the Food Stamp Program may present their case 
to FNS through the certification waiver process.
    A commenter asked if it was the Department's intent to say that no 
self-employment income can be excluded under this provision. Currently, 
7 CFR 273.9(b)(1) indicates that gross self-employment income is 
counted and 7 CFR 273.11(a)(2) allows for excluding some self-employed 
income due to allowable costs. The commenter stated that the 
Department's proposal implies that gross self-employment income is 
countable without regard for allowable costs. The commenter noted that 
if this is the Department's intent, it is a major change and will 
exclude many from receiving food stamps. They also noted that the 
Department did not propose to revise the regulations at 7 CFR 
273.11(a)(2) and this regulation continues to provide that the costs 
for making the self-employment income are excluded.
    In developing the language for the proposed rule, the Department 
intended that States would count self-employment income just as they do 
currently, with the exclusions permitted under 7 CFR 273.11(a)(2). The 
Department appreciates the commenter pointing out this contradiction 
between 7 CFR 273.9(b)(1) and 7 CFR 273.11(a)(2). To address this 
conflict, the final rule includes a reference in 7 CFR 273.9(c)(19) to 
7 CFR 273.11(a)(2) and requires States to calculate self-employment 
income in accordance with this part.

3. Foster Care and Adoption Payments

    A commenter presented reasons why the Department should exempt 
adoption assistance for special needs children. Adoption assistance for 
special needs children are negotiated payments made to families who 
adopt a child with special needs. Such payments are meant to reimburse 
the adoptive parents for the additional costs incurred due to the 
child's needs, such as modifying a home, respite care, and medical and 
counseling needs.
    The commenter discussed a situation where a foster care family is 
receiving food stamps for its household, which includes a foster child 
with special needs. If the family decides to adopt the special needs 
child, once they adopt him/her, the child will become part of their 
household and the family will be eligible for the federal title IV 
adoption assistance program. The commenter noted that under the 
proposed rule, the adoption assistance payments will count, which may 
result in the household facing a reduction or, more likely, termination 
of their food stamp benefits. The commenter urged the Department to 
examine the issue and facilitate a change that will serve as an 
incentive for foster care families to adopt special needs children and 
proposed a remedy. The commenter suggested the Department exempt part 
of the adoption assistance that reimburses the family for special needs 
of the child.
    In the preamble for the proposed rule, the Department answered a 
specific question regarding whether adoption or foster care payments 
made to a household must be counted as income if they are excluded for 
TANF or Medicaid purposes. The Department said that section 4102 of 
FSRIA specifically requires that the State include benefits paid under 
title IV of the SSA as income for food stamp purposes. Title IV-E of 
the SSA authorizes federal payments for foster care and adoption 
assistance. Any benefits received by a food stamp household pursuant to 
a program operated under title IV-E must be counted as income to the 
household. The Department has no discretion to exempt adoption 
subsidies for families received under a title IV-E program.

[[Page 4921]]

Therefore, the Department cannot exempt part of these subsidies as 
requested by the commenter.
    Another commenter stated that the proposed rule is unnecessarily 
restrictive by limiting States' discretion. For example, by specifying 
that foster care and adoption payments must be counted as income, the 
proposed rule did not accommodate the broad range of different purposes 
and funding streams for these payments. As noted by the commenter, 
portions or all of these payments may be funded by State or local 
programs, and not just under title IV-E, and may be based on a child's 
special needs beyond normal living expenses. Thus, the commenter 
believed that it should be within a State's discretion to exclude 
foster care or adoption subsidies paid by State or local programs as 
income for the purposes of determining food stamp eligibility and 
benefit amounts.
    The final rule does not give States discretion to exclude foster 
care or adoption subsidies paid by a State or local agency. The 
Congressional intent in the 2002 FSRIA was to ensure that payments from 
a government source, such as foster care or adoption subsidies from a 
State or local agency, would not be excluded. Although it may be 
possible that funding for adoption or foster care payments may come 
from several funding sources, the legislation specifically refers to 
payments from a government source. This would include payments from a 
State or local government. Neither Title IV-E of the SSA nor the Act 
addresses adoption or foster care payments from a non-governmental 
source. Therefore, States have discretion in determining the exclusion 
of such payments. The final rule at 7 CFR 273.9(c)(19) does not grant 
State agencies the option to exempt any portion of adoption and foster 
care payments that are paid through federal, State or local government 
funds.

4. Regular Payments From a Government Source

    Section 4102 of FSRIA does not exclude regular payments from a 
government source. To fulfill this mandate, the Department proposed to 
add a new 7 CFR 273.9(c)(19). The proposed rule would require counting 
direct payments from a government source as income to a household. In 
addition, the proposed rule would also require counting of indirect 
payments or allowances from a government source that are paid to a 
household through an intermediary. For example, as stated in the 
proposed rule, 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. This rule would apply 
even if such payments would be excluded under the State TANF or medical 
assistance program. This requirement would not apply to payments which 
are excluded from income for the purposes of determining food stamp 
eligibility under another provision of law.
    Several commenters objected to this section of the proposed rule. 
The commenters contend that requiring States to count governmental 
payments, even if the household receives these funds from a non-
government source, can be extremely complex and goes against the idea 
of program simplification. For example, fuel funds and similar utility 
assistance programs may be available to assist low-income households to 
buy low-cost heating and cooking fuel or to pay utility bills. The 
commenters noted that these programs may be funded by a combination of 
money from State and local governments, utility companies, and 
voluntary contributions from individual ratepayers.
    The Department gave careful consideration to these comments. State 
agencies, the entities directly responsible for implementing food stamp 
rules, did not comment on this subject. The silence of State agencies 
leads us to believe that this may not be as serious a problem for State 
agencies as the commenters believe. Nevertheless, to ensure the 
regulation is understood, the final rule clarifies in 7 CFR 
273.9(c)(19) that States should count money paid through a private 
intermediary when it is clear that all the funding money comes from a 
government source.
    In the preamble to the proposed rule, the Department provided 
another example of a regular payment from a government source--
Volunteers in Service to America (VISTA) payments made under Title I of 
the Domestic Volunteer Service Act of 1973. (42 U.S.C. 4950, et. seq.) 
A commenter stated that States should be able to decide whether or not 
they want to exclude VISTA payments for VISTA volunteers who apply for 
food stamps after joining VISTA. The commenter noted that the proposed 
policy is inequitable because VISTA volunteers who are already 
receiving food stamps have these payments excluded but volunteers who 
apply for benefits after they become part of VISTA must have their 
subsidy counted as income. The commenter believed that this policy is 
inconsistent with the goals of State flexibility and program 
simplification.
    Current regulations at 7 CFR 273.9(c)(10)(iii) require that VISTA 
payments be counted as income only if the households applies for 
benefits after joining the VISTA program. There is nothing in the FSRIA 
that indicates current food stamp policy should be changed to exempt 
VISTA subsidies from income for these applicants. Therefore, the 
Department adopts in the final rule the portion of proposed 7 CFR 
273.9(c)(19) pertaining to regular payments from a government source.

5. Child Support Payments Made by a Non-Household Member

    Section 4102 explicitly requires that legally obligated child 
support payments made to 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. Therefore, the Department proposed that all child support 
payments made to a household be counted as income for food stamp 
purposes.
    We received several comments about voluntary child support 
payments. A couple of commenters agreed that voluntary child support 
should not be treated differently from court-ordered child support. 
However, they stated that the Department should explicitly reassure 
States that they should not count voluntary child support payments 
received by a household as income unless they are reasonably certain a 
voluntary child support payment will be received in a month. The 
commenters believed that no quality control error or claim should 
result when an irregular voluntary child support payment is received 
that the State did not budget when determining the household's income. 
Moreover, they stated that States need some guidance on the treatment 
of these payments but the Department failed to provide such guidance in 
the proposed rule. The Department disagrees with these comments. We 
discussed the issue of legally obligated or voluntary child support 
payments in the preamble to the proposed rule. The Department explained 
that voluntary child support payments should not be treated more 
favorably than legally obligated payments. Moreover, the Department 
noted that there may be circumstances in which voluntary child support 
payments to a household are paid infrequently or irregularly. The 
Department reminded State agencies that infrequent and irregular income 
can be excludable under current regulations

[[Page 4922]]

at 7 CFR 273.9(c)(2) if not in excess of $30 per quarter. State 
agencies are expected to apply appropriate food stamp policy and use 
their judgment in cases where a household receives voluntary child 
support payment. Therefore, the Department is adopting this provision 
in our final rule.

6. Monies Withdrawn or Dividends Received by a Household From Trust 
Funds

    The Department proposed that State agencies 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 a household.
    A commenter expressed the view that trust fund disbursements are 
typically made for specific purposes, such as medical or educational 
expenses. The commenter noted that if such disbursements are made for 
normal living expenses, they are not excludable under 7 CFR 
273.8(e)(8). In most cases, the household should be able to show that 
trust fund money is not accessible, is a non-recurring lump sum 
payment, or is an excluded reimbursement. The commenter stated that the 
final rule should allow any State to exclude these funds for food 
stamps, if it is willing to do so for TANF and medical assistance 
eligibility. This would avoid the burdensome and confusing process that 
the proposed rule imposes on States.
    The Department disagrees. As we stated in the proposed rule, trust 
fund disbursements may be of a significant amount and may be made on a 
regular basis to a household. While the trust account itself may not be 
accessible to a household, the household may still receive a trust fund 
disbursement that is accessible and available to them. The household 
must report this information. It is prudent for State agencies to ask 
about trust income at certification and recertification, and note the 
household's answer. Even if the household receives irregular trust 
disbursements, they must be reminded of their obligation to report any 
trust disbursements in conformance with the household's reporting 
requirement. This portion of proposed 7 CFR 273.9(c)(19) is adopted in 
the final rule.

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

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

    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 non-household member, including 
vendor payments made on behalf of the non-household member. Section 
4101 of FSRIA amended 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 non-household member to the list of income exclusions. It also 
amended 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, the Department proposed to 
amend 7 CFR 273.9 to add a new paragraph (c)(17) which would provide 
that legally obligated child support payments be excluded from 
household income. The proposed paragraph (c)(17) would give State 
agencies the option to treat child support payments as an income 
deduction rather than an income exclusion, and included a reference to 
7 CFR 273.9(d)(5) which contains existing requirements for the child 
support deduction. In the proposed rule, 7 CFR 273.9(d)(5) would be 
amended to reference a new 7 CFR 273.9(c)(17), and would 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. Commenters 
generally supported this new option while noting that it may benefit 
only a small number of households. However, commenters had several 
concerns regarding the implementation of this option and its effect on 
other eligibility calculations which will be discussed in further 
detail below. The proposed rule would further amend 7 CFR 273.9(d)(5) 
to require State agencies that choose to provide a deduction rather 
than an exclusion to include a statement to that effect in their State 
plan of operation. The Department did not receive any comments 
regarding this requirement so we are adopting it as proposed.
    Under the proposed rule, child support payments that qualify under 
the existing regulations for the income deduction would 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 
non-household member, including payments made to a third party on 
behalf of the non-household member (vendor payments). No deduction is 
allowed for any amount that 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.
    The preamble for the proposed rule also stated that if State 
agencies provide a household an exclusion for legally obligated child 
support payments rather than a deduction, households may reap the 
benefit of both. The proposed 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 be eligible for 
benefits. In addition, the excluded payments would not be counted as 
part of the household's net income, in effect deducting the payments 
from income. A detailed discussion of this provision follows.

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 must be determined 
before computation of the excess shelter deduction. The Department 
proposed to make 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. The Department did 
not receive

[[Page 4923]]

any specific comments about this provision so adopts it as proposed.
    Prior to the publication of the proposed rule, several State 
agencies 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 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 the current rules, if the State agency provides the 
household an income exclusion for child support payments, the 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 proposed to address this problem by amending current 
rules at 7 CFR 273.9(d)(2) and 7 CFR 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 asked interested parties for 
suggestions on other methods for ensuring that households receive the 
full earned income deduction when they receive an exclusion for child 
support payments.
    While the Department received comments supporting the proposed 
amendment, several commenters expressed concern with the time consuming 
calculations involved. Some thought it was going to be difficult to 
train workers and administer a system where the State agency needs to 
exclude payments from gross income to come up with an adjusted gross 
income and then add it back in to determine the earned income 
deduction. They felt this two tier approach was complex and error 
prone. Some also addressed concern regarding time and cost factors 
associated with system implementation.
    One commenter proposed an example of a household with a monthly 
gross income of $1,000 who has $400 in child support payments excluded. 
The commenter asked if the rule intends to take 20 percent of the total 
gross income prior to the exclusion ($1,000) or 20 percent of the 
countable gross income ($600) in calculating the earned income 
deduction. The answer to this question is that when a State agency 
utilizes the child support exclusion, the State agency shall take 20 
percent of the total gross income ($1,000) prior to the exclusion to 
calculate the earned income deduction.
    According to the State Options Report, published by FNS in June 
2009, thirteen (13) States are complying with the rule and have 
effectively added legally obligated child support to their list of 
exclusions. The remaining States have opted to treat child support 
payments as an income deduction rather than an exclusion. Most of the 
State agencies that apply child support as an exclusion have programmed 
their computer system to handle this calculation. The caseworker simply 
types in the data for the amount of child support paid by the applicant 
and the system performs the computation for the caseworker. Most State 
agencies have not had to provide any extensive training to eligibility 
workers about this calculation because it is performed by their 
computer system. Although State agencies and other commenters have 
expressed concern over the complexity of this formula, the Department 
adopts the amendment as proposed. Most State agencies are computerized 
so they can program their systems to handle the calculation.
    One commenter noted that the purpose of choosing the exclusion over 
the deduction is to help a family become eligible for food stamps by 
reducing their countable income. They felt that it was inequitable to 
allow an earned income deduction on one type of excluded income but not 
on other types. The Department has considered this comment but adopts 
the change as proposed because it is consistent with Congress's intent 
in the implementation of this option in the FSRIA.

3. State Option To Simplify the 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 proposed 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 proposed option would only be available in the cases of households 
that pay their child support through their State CSE agency.
    The Department received a number of comments expressing concern 
with this proposed amendment. Most of the comments involved the 
reliance by State agencies on information received from the State CSE 
agency and the method for obtaining this information. Some commenters 
did not completely understand the fact that the provision only applied 
to households who pay their child support through their State CSE 
agency. They were concerned that the Department's use of the word 
``solely'' would disadvantage individuals with legal obligations who 
make payments outside of the CSE system. However, the Department notes 
that the rule clearly states that this provision only applies to those 
households who make payments through the State CSE agency.
    Other commenters noted that the use of the word ``solely'' could be 
limiting for individuals who make payments through the State CSE agency 
but who either contest the information provided by the CSE agency or 
need time to accommodate for the lapse between the date of the order 
and the time it is recorded into the State CSE system. Commenters 
requested that the final rule allow for a corroboration of sources. One 
commenter also asked for clarification regarding procedures for an 
obligor who has multiple child support cases and for child support 
cases that cross State boundaries.
    The Department has considered these comments and the final rule 
modifies the proposed language so that State agencies will not rely on 
this information as their sole source of verification. The final rule 
gives State agencies the opportunity to rely on this information but it 
will not have to be the sole source of verification for households who 
participate in the State CSE system. Additionally, the final rule 
contains language that will provide

[[Page 4924]]

households with the opportunity to challenge information provided by 
the State CSE agency.
    If an obligor has multiple child support cases, the payments from 
these cases should be combined to determine the total obligation of the 
household. The removal of the requirement for State agencies to rely 
solely on information received from the State CSE agency should 
eliminate any complication that could arise from cases that cross State 
boundaries. However, under the regulations governing the Office of 
Child Support Enforcement (OCSE) at 45 CFR 303.7(a), State CSE agencies 
must establish an interstate central registry responsible for 
receiving, distributing and responding to inquiries on all incoming 
interstate CSE cases. Therefore, any problems arising from interstate 
cases should be minimal and do not need to be addressed in regulatory 
form for Food Stamp Program participants.
    Several commenters stated that the FSRIA suggests that the 
Department develop a number of approaches to simplified reporting of a 
household's child support obligation. They felt that the single 
proposed approach, the use of CSE, was insufficient to satisfy the 
mandate of Congress. In the proposed rule, the Department asked for 
suggestions as to other simplified methods State agencies could employ 
to determine the amount of legally obligated child support payments 
made by households. A detailed discussion of the proposals made by 
commenters is provided below.
    In order to allow the State's CSE agency to share information with 
the Food Stamp Program, the proposed rule would have required State 
agencies following this procedure to have households eligible for the 
exclusion or deduction sign a statement authorizing the release of the 
household's child support payment records to the State agency. Several 
commenters opposed this proposed procedure saying that it was 
unnecessary and burdensome. Some State agencies already have a system 
in place allowing local offices access to CSE records without any 
authorization. They asked the Department to omit this requirement and 
leave the accessibility of this information to be worked out between 
the local food stamp office and CSE. One commenter suggested that 
getting a signature might not be enough if there is no agreement 
between the food stamp office and CSE.
    The Department proposed the provision in this manner because under 
the Child Support Enforcement Act and the regulations governing the 
OCSE, the State's computerized child support enforcement system must 
provide security to prevent unauthorized access to, or use of, the data 
in the system. Both the Child Support Enforcement Act (42 U.S.C. 
654a(f)(3)) and the regulations governing the OCSE (45 CFR 307.13(a)) 
limit the accessibility of the Child Support Enforcement data to 
agencies that are necessary to perform the duties under the Child 
Support Enforcement Act, the TANF program and the Medicaid program. 
Therefore, legally, the State agencies administering the Food Stamp 
Program will have to obtain authorization for the use of the data in 
the State CSE system. The Department adopts this requirement as 
proposed. For those State agencies who are having difficulties in 
working with their counterparts in the State CSE agency, the Department 
is willing to work with DHHS or OCSE to assist any State that wants to 
take up this option and requests such assistance.
    Commenters asked the Department to address what procedures a State 
agency should follow when a non-custodial parent declines to authorize 
the release of CSE information to the local food stamp office. As 
stated above, the removal of the requirement for States to rely solely 
on information provided by the State CSE agency should clarify any 
issues that may arise for individuals who make payments through the CSE 
agency but wish to provide alternative verification. The information 
provided by the individual must satisfy program verification 
requirements. The language in the proposed rule would have required 
State agencies that chose this option to include a statement indicating 
that they have implemented the option in their State plan of operation. 
The Department adopts this change as proposed since no comments 
regarding this requirement were received. The Department also proposed 
to make conforming amendments to 7 CFR 273.2(f)(8)(i)(A), and 7 CFR 
273.12(a)(1)(vi) and (a)(4). The Department did not propose 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.
    In the proposed rule, the Department asked State agencies 
interested in implementing this proposed provision whether there are 
any additional issues that the Department needs to address by 
regulation in order to make this an effective option for States. 
Commenters pointed out that issues may arise in instances of 
reunification or change in custody. They asked for clarification from 
the Department about how to handle these situations. They felt that it 
would be egregious to disregard a deduction or exclusion because the 
payment is being made to a household member and also require the 
household to report the payment as income.
    The proposed rule refers parties to the final rule implementing the 
child support deduction, published on October 17, 1996, at 61 FR 54282 
to find information on what qualifies as a child support payment for 
purposes of the income deduction and exclusion. That rule amended 7 CFR 
273.9(d)(5) to allow a deduction for child support payments to or for a 
non-household member. The rule does not permit a deduction if a child 
support payment is made to a household member. However, if the child 
and the payor move into the same household but the payor is still 
obligated to make payments to a non-household member due to an 
arrearage or other circumstance, the payor is still allowed a deduction 
or exclusion. The proposed rule reflected this in the language that 
allowed a deduction, and now exclusion, ``to or for a non-household 
member'' and for ``amounts paid toward child support arrearages.'' The 
proposed language addressed the concerns of the commenters so there is 
no need for further clarification. The Department adopts this amendment 
as proposed.
    The Department also asked for 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. In addition to the suggestions discussed above, commenters 
suggested taking the opportunity to conform the treatment of outgoing 
child support payments to that of deductible dependent care or medical 
costs. This would make them an optional change reporting item. They 
proposed the deletion, rather than the amendment, of 7 CFR 
273.12(a)(1)(vi). Some commenters proposed the codification of a 
provision of a question and answer policy memorandum that the 
Department issued following the passage of the FSRIA. That memorandum 
addressed the issue of a household's responsibility to report a change 
in their child support obligation. The memorandum clarifies that the 
requirement to report a change depends on the household's reporting 
requirements. It provides general guidance for procedures a State 
agency can utilize in setting forth these requirements. The guidance 
gives an example of a procedure that a State agency could use to 
address this issue.

[[Page 4925]]

The alternative approach listed in the memorandum states that an 
eligibility worker would provide each household with a reporting 
threshold. This threshold would include the sum of the monthly gross 
income limit for the household and its child support exclusion amount 
and then direct the household to report when its income exceeds this 
limit. The memorandum also highlights that there are other alternatives 
for reporting a change but does not go into details about these 
alternatives. Commenters felt that any other approach subjects child 
support to less favorable treatment than other deductible expenses, 
contrary to the intent of the FSRIA.
    While the FSRIA permits the Department to develop simplified 
procedures for State agencies to determine the amount of a household's 
child support obligation, it does not speak to reporting changes in 
this obligation. In general, child support obligations change due to an 
unanticipated change in circumstances that may occur during the 
certification period. Given the small number of households claiming 
this deduction, and the fact that changes in the amount of the 
obligation do not have to be reported under simplified reporting, there 
should be little or no cost attributable to making this an optional 
change reporting item. Therefore, the Department will make reporting 
changes in a household's child support obligation an optional change 
reporting item. The final rule amends the language in newly 
redesignated 7 CFR 273.12(a)(6) and other sections of the rule to 
reflect this change.
    Finally, commenters noted a numbering problem in the proposed rule. 
The rule proposed to insert new material on child support in 7 CFR 
273.12(a)(4). The proposed rule did not take into consideration the 
redesignation of 7 CFR 273.12(a)(4) as 7 CFR 273.12(a)(5) in the final 
change reporting regulation. The Department appreciates the commenters 
calling this error to our attention. The final rule adopts the changes 
proposed for 7 CFR 273.12(a)(4) but inserts them into 7 CFR 
273.12(a)(5) instead. Other provisions of the final rule are renumbered 
accordingly.

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. 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 for its household size, except for household sizes 
greater than six, which will receive the same standard deduction as a 
6-person household. Section 4103 also requires that the standard 
deduction for any household not fall below the standard deduction in 
effect for FY 2002.
    To implement Section 4103, the Department adjusts 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. If 0.5 or higher, the amount is rounded up to the 
next highest dollar; if 0.49 or lower, the amount is rounded 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 proposed rule 
contains a chart illustrating how the standard deduction for FY 2003 
was calculated for the 48 contiguous States and the District of 
Columbia.
    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. The same rules for households over six and 
the minimum deduction amount indicated above apply to applicants and 
current recipients in Guam.
    Although some commenters felt that final rule should maintain the 
proposed rounding rules for the standard deduction, others pointed out 
that the rounding rules could lead to a calculation that is 
fractionally less than 8.31 percent of the net income limit. They noted 
that FSRIA requires that households receive a standard deduction equal 
to 8.31 percent of the program's net income limit. The provision in the 
proposed rule that called for the Department to round down where the 
number of odd cents in the exact figure is less than 0.50, would lead 
to a standard that is fractionally less than 8.31 percent. Therefore, 
commenters are requesting that the Department round up all fractional 
results to ensure that no household is denied a standard deduction 
``equal to'' 8.31 percent of the net income limits.
    The Department finds the comment has merit and simplifies program 
administration. Therefore, the final rule automatically rounds up the 
8.31 percent calculation to the nearest whole dollar. This ensures that 
households are not denied a standard deduction ``equal to'' 8.31 
percent. For example, if 8.31 percent of the monthly net income limit 
equals $146.34, the figure would be rounded up to a standard deduction 
of $147.
    The Department also proposed that ineligible and disqualified 
members would not be included when determining the household's size for 
the purpose of assigning a standard deduction to the household. This 
would be consistent with other regulatory provisions that do not 
include ineligible and disqualified members in their calculations, 
including assigning a benefit amount.
    While some commenters agreed that keeping this provision consistent 
with other eligibility provisions that look at household composition 
would help in achieving the goal of program simplification, others felt 
that treating some households as smaller than they actually are is 
inconsistent with the FSRIA's recognition that larger households have 
larger, inescapable costs. Additionally, commenters noted that Section 
3(i) of the Food Stamp Act (7 U.S.C. 2012(i)) defines a household in 
terms of food purchasing and preparation patterns, family 
relationships, and living arrangements. Under that definition, an 
individual could be considered a member of the household whether or not 
they are eligible to receive food stamps. These commenters felt that 
the Department had no reason to deny households with ineligible members 
the full standard deduction, especially when it would unfairly reduce a 
household's food stamp allotment.
    The Department has considered these comments but we continue to 
believe that only eligible household members should be included in the 
calculation for the standard deduction. Only eligible household members 
should be receiving the benefit; for that reason they are the only ones 
considered in determining the standard deduction amount. Therefore, the 
Department adopts the language from the proposed rule.

[[Page 4926]]

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 per month. State agencies may make households with extremely low 
shelter costs ineligible for the deduction. 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. 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 the current rules permit State 
agencies to develop their own homeless household shelter deduction up 
to a maximum of $143 per month, whereas Section 4105 mandates that the 
homeless household shelter deduction be $143 per month.
    Commenters suggested that 7 CFR 273.2(f)(2)(iii) could be read to 
require homeless households to verify some shelter costs in order to 
receive the old and the new shelter deduction. They noted that the 
provision does not limit itself to cases where the homeless family's 
statements are questionable and the verification requirement largely 
undercuts the goal of simplification. Commenters suggested deleting 7 
CFR 273.2(f)(2)(iii). The removal of verification requirements and 
proposed deletion of 7 CFR 273.2(f)(2)(iii) originates from a concern 
that eligibility workers may take it upon themselves to require 
verification from homeless households when it is not necessary. This 
may lead to fewer households receiving the homeless shelter deduction.
    The Department has considered these comments. The final rule 
relocates 7 CFR 273.2(f)(2)(iii) from the provision about verification 
of questionable information to 7 CFR 273.2(f)(4) which addresses 
sources of verification. The final rule contains language to reflect 
that these sources of verification are for households who seek to claim 
actual expenses or if the State agency determines that households with 
extremely low shelter costs are ineligible for the deduction. It is 
necessary for the final rule to retain the provision about verification 
because households can still claim actual costs and amended Section 
5(e) of the Act still makes it permissible for State agencies to make 
households with extremely low shelter costs ineligible for this 
deduction. However, current regulations clearly allow the State worker 
to give the deduction solely on the basis of the applicant's statement.
    Commenters suggested that the Department has the latitude to allow 
States to assume that all homeless households have shelter expenses and 
wants the Department to provide the homeless shelter deduction simply 
based on a household's meeting the program definition of being 
homeless. One commenter noted that some States do not require 
verification of expenses for households to qualify for the standard 
homeless shelter deduction. They felt that this provides simple 
administration for the State and substantial benefit to households. 
Although this is a good point, other households are required to provide 
some evidence of shelter costs so the Department believes that State 
agencies should be provided with the latitude to ensure that households 
have some shelter costs before making a deduction. However, as stated 
above, the final rule relocates and amends the language of the 
provision to discourage State agencies from requiring verification from 
homeless households when it is not necessary.
    Although Section 4105 only addresses the homeless household shelter 
deduction, the Conference Report (H.R. Conf. Rep. No. 107-424, at 537-
538 (2002)) in its discussion of Section 4105, directs the Department 
to review current rules regarding allowable shelter costs and determine 
if, within existing statutory authority, the Department could make the 
rules less complicated and error prone for food stamp participants and 
eligibility workers. In response to this directive, the Department 
asked commenters to identify ways to further simplify existing 
procedures for determining eligible shelter expenses. The reason that 
the Department asked for recommendations and suggestions for 
simplification was to help identify program complexities so they could 
be addressed in future rulemaking. However, very few commenters 
provided suggestions that would be feasible under the current law.
    One commenter suggested that States should be given the option to 
allow shelter expenses based on a standard such as project area or 
household size instead of the current dollar for dollar deduction. This 
option would be similar to the Standard Utility Allowance (SUA) that is 
revised annually based on current costs for residents.
    The Department cannot establish a standard shelter deduction 
because the Food Stamp Act does not authorize the Department to develop 
such a deduction. Under Section 5(e)(6) of the Food Stamp Act, a 
household can only obtain a shelter deduction if their monthly shelter 
costs exceed 50 percent of their monthly income. In order for a 
caseworker to determine if the household's shelter costs meet this 
requirement those costs need to be assessed. Therefore, a standard 
deduction cannot be used in determining whether or not a household 
qualifies for a shelter deduction.
    Another commenter suggested that the Department should have taken 
this opportunity to review the desk guide for eligibility workers and 
its underlying regulations to identify other complexities in the 
deduction that do not serve important purposes and can be eliminated 
without violating Congressional prohibitions. Commenters also urged the 
Department to further simplify the process to support low-wage workers' 
ability to obtain assistance but failed to identify ways to simplify 
existing procedures other than the proposed development of a standard 
shelter deduction. As stated above, the purpose of this request was to 
address issues that had rulemaking authority and ask for specific 
suggestions, not issue overall directives for the Department. Since 
commenters did not provide this information to the Department, the 
final rule adopts this section as proposed.

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 a 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 7 CFR 273.9(d)(6)(ii)(C) include 
the costs of heating and cooling; electricity or fuel used for purposes 
other than heating and cooling; water; sewerage; well and septic tank 
installation and maintenance; garbage collection; and telephone. State 
agencies may establish

[[Page 4927]]

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. 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 a SUA that includes 
heating and 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 the living 
quarters with others. Therefore, if the State agency mandates the 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.
    The Department proposed to amend current regulations at 7 CFR 
273.9(d)(6)(iii) to incorporate the new requirements. Several State 
agencies commented that they have implemented this option and it has 
simplified policy significantly. No one opposed the implementation of 
this provision. However, one commenter noted that current regulations 
require States to update their SUAs annually to reflect changes in 
energy costs. That commenter wanted the final rule to clarify that this 
requirement applies to mandatory as well as non-mandatory SUAs.
    The requirement for States to update their SUAs is based upon 
changes in energy costs, not on whether the SUA is mandatory. The 
regulations already clarify that State agencies must review their 
standards annually and make adjustments to reflect changes in energy 
costs. Therefore, the Department does not need to amend the current 
regulation regarding updating the SUA and adopts this section of the 
proposed rule as written.
    The proposed rule also addressed two SUA-related issues. First, the 
Department proposed 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 proposed to amend 7 CFR 273.9(d)(6) to 
restore the proper title. We did not receive any comments on this 
change; therefore, the final rule restores the proper title to 7 CFR 
273.9(d)(6).
    Under the current rule, State agencies follow different procedures 
for prorating the SUA when the household includes an ineligible member. 
Some follow the rule at 7 CFR 273.11(c)(2)(iii) which requires the 
proration of shelter expenses if the ineligible member is billed for or 
pays the expense; others follow the rule at 7 CFR 273.9(d)(6)(iii)(F) 
which prohibits the proration of the SUA when the household shares the 
expense with an ineligible household 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.
    To resolve any confusion related to prorating the SUA when 
ineligible members are present in the household, the Department 
proposed two alternative procedures and asked for comments on which 
procedure commenters prefer. The Department said it would incorporate 
the procedure that gets the most support into the final rule.
    The first option allows State agencies to implement the 
Department's original intention and not prorate the SUA when a 
household contains an ineligible member. The second option requires 
State agencies to prorate the SUA when the ineligible member pays 
either part or all of the expenses included in the SUA. Under the 
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.
    A significant majority of the commenters believed that the SUA 
should not be prorated for households with ineligible members for 
program simplification and benefit maximization. Field workers have a 
much better understanding of the SUA procedures when the full SUA is 
always allowed. Therefore, allowing the full SUA decreases the error 
rate for State agencies. One commenter stated that the regulations and 
Department policy made it clear that States must not prorate the SUA so 
there was no need for this clarification and if the Department decided 
to change this policy that it would be burdensome for the States, 
detrimental to recipients, and decrease participation rates. Based on 
the support for the first option, which does not allow States to 
prorate the SUA for households with ineligible members, the Department 
incorporates this option into this final rule.
    One commenter noted that the proposed rule does not mention 
ineligible students. That commenter asserted that it is confusing to 
allow the entire utility allowance for all ineligible members except 
students. Ineligible members should include all individuals who reside 
in the household and purchase and prepare meals together but are 
excluded from participation based on regulations governing the Food 
Stamp Program. Under the current regulations, students are not included 
as household members; therefore the Department did not have to 
specifically mention them in the proposed rule.
    One commenter proposed a third option, to allow the full SUA when 
the ineligible person pays only a portion of the utility bill and to 
prorate the SUA when the ineligible person pays the entire bill or is 
responsible for all expenses even if they are not paid. This same 
commenter suggested that the Department incorporate all three options 
into the final rule and allow States to select the option that they 
want to implement, giving States maximum flexibility. Due to the 
overwhelming support of the first option and the fact that this 
provision is meant to simplify the program, the final rule does not 
incorporate this third option.
    Although the proposed rule did not address the issue of the LUA or 
propose any changes to the provision in the current regulations 
governing this allowance, the Department received a significant number 
of comments asking the Department to allow States to use the SUA for 
households that pay for only one utility. They noted that the proposed 
rule would continue to prohibit States from using a LUA for households 
that do not pay for heating or cooling and pay only one other utility 
bill. States have to collect information on actual expenses instead. 
Therefore, States have to keep questions about actual expenses on the 
application which undermines the purpose of the new law in simplifying 
the SUA. These commenters asked the Department to eliminate this 
complexity and allow States to use the SUA for households that pay for 
only one utility.
    One commenter noted that the legislative history for the FSRIA 
suggests that it was the intent of

[[Page 4928]]

Congress to give States the option of providing a utility allowance to 
households with only one utility bill so more eligible families would 
find it easier to get the help they need. That commenter suggested that 
to deny the LUA to households who pay only one utility bill would be 
contrary to the intent of Congress and should be corrected.
    The Department notes that the current regulations allow States to 
develop an individual standard for each type of utility expense. About 
fifteen States currently have single utility standards in place for 
certain utilities including non-heat electric, cooking fuel, water/
sewer and garbage. Since there is already a provision in the current 
regulations that allow States to develop single standards, there is no 
need to amend the current rule.

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

    Current regulations at 7 CFR 273.12(a)(1)(vii) allow 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. 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 7 CFR 
273.12(a)(1)(i) through (a)(1)(vi). Section 4109 of FSRIA amends 
Section 6(c)(1) of the Act (7 U.S.C. 2015(c)(1)) to provide State 
agencies the option to extend simplified reporting procedures from just 
households with earnings to all 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 at least once every 6 months, but not 
more often than once a month.

1. In General

    The Department proposed to move current regulations on simplified 
reporting from 7 CFR 273.12(a)(1)(vii) to 7 CFR 273.12(a)(5). The 
Department also proposed to amend the current rules to include several 
requirements that will be discussed in detail below. In general, 
commenters expressed overall support for the concept of simplified 
reporting; indicating that by reducing the reporting burden it would 
benefit both the State agency and the participating households. One 
State agency even noted that reforms like simplified reporting, which 
alleviate the workload for caseworkers, are critical for an 
overstressed and understaffed State agency. However, this commenter was 
concerned about additional requirements imposed by the proposed rule, 
as were many commenters.
    The Department has decided to make very few major changes to the 
language contained in the proposed rule. This decision is due in part 
to the success of 50 State agencies who have implemented expanded 
simplified reporting systems with terms similar to those in the 
proposed rule. These State agencies are operating these expanded 
systems under the authority of waiver requests approved by the 
Department. These systems have addressed most of the potential adverse 
consequences proposed by commenters.
    One commentator expressed the belief that eliminating the 
requirement to report circumstances that impact a client's eligibility 
and/or benefit levels is not in the best interests of the client or the 
taxpaying public. The same commenter, a State fraud investigator, also 
expressed the belief that the rules as proposed all but eliminate the 
ability to pursue an intentional program violation and/or sanction a 
client with the exception of an instance of the client's failure to 
report having exceeded certain income thresholds. Although we 
understand the commenter's concerns, simplified reporting is based on a 
statutory mandate. Therefore, we do not have the discretion to withhold 
implementation of expanded simplified reporting or to rescind the 
current regulations that provide State agencies with the simplified 
reporting option. Additionally, the program allows State agencies to 
ensure that participants are not committing intentional program 
violations.
    Participants in a simplified reporting system are required to 
report changes at least twice a year, once during their periodic report 
and then again at recertification. At that time, the State agency has 
the opportunity to scrutinize any changes in the household 
circumstances that may go unreported, pursue any intentional program 
violations and sanction clients, if necessary. The goal of simplified 
reporting is to provide stable benefits to households with minor 
fluctuations in the benefit amount. Additionally, the simplified 
reporting option provides overall improvements in program 
administration and reduces error rates. The Department is satisfied 
that the simplified reporting system is efficient and maintains program 
integrity.
    Commenters also suggested that FNS use this opportunity to correct 
a technical error in 7 CFR 273.12(a)(1)(v). This section requires 
households to report when the value of its resources equals or exceeds 
$2,000. The commenters noted that the provision fails to mention the 
$3,000 resource limit for households with an elderly or disabled 
member. Contrary to the belief of the commenters, this was not a 
technical error. The provision was designed to give all households one 
threshold to adhere to for reporting the value of their resources. 
Therefore, the Department will not amend this provision.
    Under the proposed rule, a State agency that opts to utilize 
simplified reporting procedures would be required to 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. The Department did not receive any comments specifically 
addressing this provision so adopts the requirement as proposed.

2. Households To Include Under a Simplified Reporting System

    Under the proposed rule, a State agency could 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. The Department did not 
receive any comments regarding this specific provision. Therefore, we 
are adopting this requirement as proposed.

3. Application of Simplified Reporting to Households Exempt From 
Periodic Reporting Requirements

    Under the proposed rule, households exempt from periodic reporting 
under Section 6(c)(1)(A) of the Act, which includes homeless households 
and migrant and seasonal farm workers, would be subject to simplified 
reporting but would not be required to submit periodic reports. The 
certification periods of such households would be at least 4 months but 
not more than 6 months. Those that offered comments on this provision 
offered support. However, the FCEA provided that simplified reporting 
could be extended to all households. Therefore, in the final regulatory 
provisions on simplified reporting, we are dropping all references to 
the exclusion of elderly, disabled,

[[Page 4929]]

homeless, and migrant and seasonal farm worker households in simplified 
reporting systems in a subsequent proposed rulemaking to implement 
provisions of the FCEA. Although not included in this preamble 
discussion, we note that commenters addressed reporting issues 
involving these households, particularly the elderly and disabled 
households. Commenters asked that the final rule include an option for 
the States to extend the simplified reporting option to any participant 
in their respective food stamp program, regardless of the household's 
gross income. They felt this would allow for a more consistent approach 
for clients and workers alike. One commenter expressed the mistaken 
belief that simplified reporting was limited to households with at 
least some countable income. Under the proposed rule, all households 
would have been included in a simplified reporting system. However, as 
discussed above, it is not to the advantage of the State agency or the 
participants to include certain households in a simplified reporting 
system due to the rules governing their participation in the Food Stamp 
Program. Therefore, this final rule adopts the proposed language.

4. Periodic Reports

    Under the proposed rule, the State agency could have required most 
households subject to simplified reporting to submit periodic reports 
on their circumstances from once every 4 months up to once every 6 
months. The Department did not receive any comments that specifically 
addressed this provision.
    Under the proposed rule, the State agency would not have to require 
periodic reporting by any household certified for 6 months or less. 
However, households certified for more than 6 months would be required 
to submit a periodic report at least every 6 months. The periodic 
report form would 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 would be the sole reporting 
requirement for any information that is required to be reported on the 
form, except that households would be required to 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 7 
CFR 273.24 would be required to report whenever their work hours fall 
below 20 hours per week, averaged monthly.
    Commenters felt that the proposed language (regarding who must 
submit a periodic report and how frequently) was somewhat confusing and 
suggests that a State may impose both a periodic report and a 
recertification requirement on a household for the same month. They 
asked that final rule clarify that States may not require a periodic 
report at recertification.
    The final rule does not make this clarification because it is 
highly unlikely that State agencies would engage in such a practice. 
Requiring households to submit a periodic report at recertification 
would burden a State agency as much as a household, create confusion at 
recertification, and completely undermine the purpose of simplified 
reporting.
    Several commenters suggested that because monthly, quarterly and 
simplified reporting are forms of periodic reporting, the procedures 
for quarterly and simplified reporting should be moved from 7 CFR 
273.12 to 7 CFR 273.21. These commenters also expressed the opinion 
that the move would provide for consistent client protection for all 
forms of periodic reporting.
    Although the commenters raise a valid point, we still feel that it 
would be more appropriate to include the procedures for simplified 
reporting in 7 CFR 273.12. First, not all households subject to 
simplified reporting would be submitting periodic reports since State 
agencies would have the option of utilizing four to six-month 
certification periods rather than periodic reports. Second, certain 
households, such as homeless and migrant farmworker households, would 
be included in a simplified reporting system if they are assigned a 4- 
to 6-month certification period. Finally, 7 CFR 273.21 provides an 
alternative to the prospective budgeting system provided in the 
preceding sections with a system that provides for the use of 
retrospective information in calculating household benefits.
    Under the language in the proposed rule, if a 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 State 
agency should follow the same procedure 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 terminated. If 
the household files a complete report resulting in the 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 also proposed to subject periodic reports to the 
requirements of 7 CFR 273.12(b)(2), which currently apply only to 
quarterly reports. This provision 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 a reduction or termination of benefits.
    Several commenters felt that the proposed notice and form 
requirements for periodic reports would provide inadequate protections 
for households that participate in simplified reporting. Commenters 
noted that in the 1980s, during the Reagan Administration, FNS 
recognized that periodic reporting systems carry the risk that some 
eligible households may lose benefits for purely procedural reasons. As 
a result, the agency built into its monthly reporting regulations 
provisions to ensure that the potentially burdensome requirements of 
monthly reporting are implemented as fairly as possible. The commenters 
felt that the Congress clearly intended to extend monthly reporting 
protections to simplified reporting. They believed that Representative 
Stenholm specifically insisted that the monthly reporting protections 
would apply to simplified reporting in his floor statement on the final 
bill. In his statement, which can be found in the Congressional Record 
at 148 Cong. Rec. H2044, Representative Stenholm stated that Congress 
assumed that the Department's rules for monthly reporting would apply 
to the simplified reporting option. This would include providing 
households with the opportunity to supply missing

[[Page 4930]]

information when submitting a late or incomplete semiannual report.
    The commenters believed that the proposed rule failed to follow 
Congressional intent because it does not extend these protections to 
all forms of periodic reporting. They felt that it is critical that FNS 
extend the most important monthly reporting procedures to all other 
forms of periodic reporting. They noted that this could be accomplished 
by a reference to the appropriate sections of the monthly reporting 
regulations at 7 CFR 273.21(c), 273.21(h), 273.21(j), and 273.21(k). 
The commenters felt that the most important monthly reporting 
procedures include using: (1) Forms and processes that participants can 
understand; (2) procedures for missing or incomplete reports that do 
not penalize households that may be attempting to comply; and (3) 
procedures for issuing benefits that allow for timely issuance. The 
commenters provided a detailed list of the citations and provisions 
that they felt should be referenced.
    The Department agrees with the basic premise of these comments. The 
final rule modifies the proposed language to incorporate the procedural 
protections the Department feels are necessary to provide protections 
for households participating in simplified reporting. Several of the 
procedures applicable to a monthly reporting system are not applicable 
to simplified reporting. Additionally, several of the procedures that 
are listed in these sections are either provided under this rule or are 
contained within the current regulations in a manner that is applicable 
to the provisions of 7 CFR 273.12. For example, 7 CFR 273.12 contains 
provisions regarding processing reports, issuing notices, the timely 
issuance of benefits and consequences for incomplete filing as they 
relate to various changes. Since the rules governing periodic, 
quarterly, change and monthly reporting vary, the regulations need to 
contain provisions consistent with each type of reporting system. 
Therefore, the Department has applied those procedures that it feels 
are necessary to provide protection to participants while maintaining 
the overall principles of simplification.
    Commenters also asked that the regulations clarify that if a 
household files a report on time, its benefits may not be terminated 
simply because the State agency fails to process the report. They 
pointed out that some computer systems may automatically terminate 
benefits if an eligibility worker does not process a periodic report, 
even if the household filed the report on time and it contained all of 
the necessary information. They felt that since quality control counts 
improper issuances but not improper denials, States will set their 
systems to err on the side of caution and implement systems that 
operate in favor of automatic suspensions. The commenters felt that the 
final rule should prohibit the reduction or termination of benefits to 
a household unless an affirmative decision is made that the household 
is either ineligible or in default of its procedural obligations.
    The Department will not amend the regulations to accommodate this 
comment because a State agency will not avoid quality control or fiscal 
sanctions by suspending or terminating benefits due to the untimely 
processing of a periodic report. In assessing a case for quality 
control purposes, the reviewer conducts an analysis of all variances in 
elements of eligibility and basis of issuance. If the benefits of a 
household are suspended, the case may still be selected for quality 
control review. State agencies are expected to process reports in a 
timely manner and when they fail to accomplish this goal, they may be 
sanctioned accordingly. Benefits shall not be terminated due to an 
untimely processing of a periodic report but a suspension will help 
avoid making an overpayment or an underpayment to the household.
    One commenter noted that under the proposed rule, a State agency 
would be allowed to elect to combine a notice of a missing or 
incomplete report with a notice of termination. Should a State agency 
make this election, it is not clear how long a household has to respond 
to the notice and be reinstated. The Department proposed that if a 
household fails to complete a report by a specified filing date, the 
State agency would then 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 that notice, then the household's participation would be 
terminated. The language in the proposed rule would have allowed State 
agencies to combine the notice of a missing or incomplete report with 
the adequate notice termination. As stated above, the final rule amends 
the language in the proposed rule to include some procedural 
protections for households participating in simplified reporting.
    One commenter disagreed with the requirement that all able-bodied 
adults without dependants (ABAWDs) report as soon as their work hours 
go below 20 hours per week if they are in a simplified reporting 
system. The commenter felt that this rule needlessly complicates 
simplified reporting and is inconsistent with the current regulatory 
provision that requires an ABAWD to report changes in work hours in 
accordance with the reporting system to which he is subject. The 
commenter interpreted this provision to permit an ABAWD subject to 
simplified reporting to only report a loss of job on their interim 
report or at recertification. The commenter asked that the Department 
clarify the ABAWD reporting requirement to ensure that these 
participants only report a change in their hours as a part of the 
reporting system to which they are subjected, and no more. This same 
commenter also asked that the Department eliminate the additional ABAWD 
reporting requirement for those on quarterly reporting at 7 CFR 
273.12(a)(4)(iv). We disagree with the commenter and adopt the language 
as proposed. First, we believe that compliance with the ABAWD work 
requirement is a condition of eligibility, and, as such, must be 
reported as soon as the household member's hours of work change. 
Second, we wish to note that the language in 7 CFR 273.12(a)(5)(iii)(E) 
of the final rule (the phrase ``as part of the reporting system to 
which they are subject'') was intended to harmonize reporting 
requirements for all households containing ABAWDs. The Department 
initially added the phrase to the regulations at a time when households 
were either subject to change reporting under 7 CFR 273.12(a) or 
monthly reporting under 7 CFR 273.21. We determined that a consistent 
reporting standard should apply to these participants because the ABAWD 
work requirement is an explicit condition of eligibility and up to 6 
months may elapse before a household may be required to report a change 
in income.

5. Reporting When Income Exceeds Gross Income Limit for Household Size

    Under the language in the proposed rule, households subject to 
simplified reporting would be required to report when their monthly 
gross income exceeds the monthly gross income limit for their household 
size. Households would 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 did receive support for this provision. 
Commenters noted that under the current rules, State agencies take 
different approaches to these reporting requirements. Some agencies use 
the income limit for the household size at

[[Page 4931]]

the time of the initial certification while others use the household 
size at the time of the report. These commenters believe that the 
proposed language would resolve this confusion by requiring State 
agencies to use the income limit for the household size at the time of 
their initial certification. The commenters noted that this change is 
easier for households to understand. It allows local offices to give 
households one figure, and explain that if the household income goes 
over this set figure then the household needs to report to the local 
office.
    Although commenters provided overall support, they did have some 
issues with the proposed regulatory language. Some felt that the 
proposed regulatory language was incomplete because virtually all 
States have some participating households with a gross income in excess 
of the 130 percent threshold, including elderly and disabled households 
with earned income or households who are categorically eligible. The 
commenters asked the Department to clarify that States may use 
simplified reporting for these households and articulate that States 
may set their reporting threshold to equal the Program's gross income 
limit that triggers categorical eligibility. They felt that this 
requirement could prohibit States from extending simplified reporting 
to these households.
    The Department does not see the need to amend the proposed 
regulatory language to accommodate the few households who may fall 
under this scenario. The Department has already issued guidance that 
leaves the treatment of these households up to the States. Because 
these households are not subject to the gross income guidelines, they 
would not be subject to this income threshold. Therefore, the guidance 
issued by the Department suggests that once households report going 
over the 130 percent threshold, their reporting requirement is met and 
States need not require further reporting. This practice will be easier 
to administer than throwing off an entire system for a few households 
for whom this reporting threshold would apply.
    Commenters also stated that the proposed language for this 
requirement was confusing because the language did not specify what 
action the State agency should take. The commenters noted that by 
contrast, the proposed rule at 7 CFR 273.12(a)(5)(v)(A) would instruct 
State agencies to act in accordance with 7 CFR 273.12(c) when they 
receive information that the household was not required to report. 
Commenters felt that the final regulation should amend the proposed 
language at 7 CFR 273.12(a)(5)(v) to require State agencies to act in 
accordance with 7 CFR 273.12(c) when acting on a household report that 
its gross monthly income exceeds the gross monthly income limit for its 
household size.
    These commenters were concerned that State agencies may issue a 
Notice of Adverse Action (NOAA) to households experiencing a temporary 
increase in their income which would normally not result in 
ineligibility. This could result in a decrease or termination of 
benefits if the household fails to clarify that the increase was only 
temporary. Therefore, they asked the Department to remind States that 
it is inappropriate to routinely issue a NOAA in response to a report 
that the household's income has exceeded the gross income limit. In 
many cases, further information is needed to determine the appropriate 
course of action.
    While we agree that, in certain cases, the State agency should 
follow-up on reported changes to ensure that the household's 
eligibility would actually be affected, we fail to see why there is a 
need to elaborate on this in the regulatory language. A similar 
situation currently exists with respect to change reporting and, for 
the most part, States have not experienced problems in determining when 
a change is temporary or when it would actually affect the household's 
eligibility.
    One commenter, a State agency, expressed the opinion that requiring 
households to report when income exceeds 130 percent of the federal 
poverty level does not work well for households with an ineligible 
noncitizen. In this instance, the State agency prorates income 
according to the rules at 7 CFR 273.11(c)(3). Because determining the 
countable gross income for households with ineligible members can be 
complex, the commenter implied that it may be difficult to implement 
this reporting requirement for households with ineligible members.
    Since this income limit is applicable to most households, except 
elderly or disabled households, the final rule also includes this 
reporting requirement. Under the current rules at 7 CFR 273.11(c)(3), 
State agencies who prorate income must elect one State-wide option for 
determining the eligibility and benefit level of households with 
ineligible aliens. The State agency should continue to follow the same 
formula for determining whether the income of the household has 
exceeded the 130 percent threshold. For example, if the State agency 
excludes the ineligible members for determining household size at the 
initial eligibility determination, they will continue to do so for this 
reporting requirement.

6. Acting on Changes Outside of the Periodic Report

    The Department proposed to give the State agency 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 would be allowed to 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 public assistance or general assistance grant.
    Second, the State agency would be allowed to 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 Rule, the Department approved a number of waivers 
requesting this latter procedure. To eliminate the need to approve 
future waivers, the Department proposed to incorporate the procedure as 
an option in the regulations.
    While the proposed provision providing State agencies the option to 
act on all changes did receive support, several commenters felt that 
this option could adversely impact millions of food stamp households. 
Most of the concerns lay with the possibility that State agencies would 
act on changes reported to other benefit programs. This will be 
discussed in detail below. However, some commenters also had concerns 
because this proposed option would allow States to reduce benefits and 
limit food stamp participation which is contrary to the intent of 
simplified reporting. As stated above, the Department incorporated this 
provision into the proposed rule to further simplify reporting 
requirements. Several State agencies are currently implementing this 
option successfully under waivers with it having a minimal impact on 
limiting participation.
    Several commenters expressed the opinion that allowing State 
agencies to act on all changes will reduce the advantage of using 
simplified reporting

[[Page 4932]]

because it will not reduce the workload. While the Department 
encourages State agencies to limit the action it takes on changes 
reported in a simplified reporting system, the Department also 
understands that the Food Stamp Program is not operated in a vacuum. 
Therefore, State agencies need a common automated system to effectively 
operate all of their benefit programs. To simplify these automated 
systems, it is easier for an eligibility worker to enter a change into 
the system and allow the system to process the necessary calculations 
and issue the proper notices as a result of those calculations for all 
benefit programs rather than determine the impact of the change on each 
individual benefit program. The Department encourages State agencies to 
harmonize their systems to allow this option to reach its full 
potential. However, we cannot require State agencies to perform such an 
act and, as stated above, the success of this option for State agencies 
currently initiating it under a waiver demonstrates that it should be 
maintained in this final rule.

7. Acting on Changes That a Household Reports to Another Public 
Assistance Program

    Under the proposed rule, State agencies that choose to act on all 
reported changes would not be required to act on changes that 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 was proposed 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.
    The Department received several comments on this provision. First, 
commenters suggested that the Department prohibit State agencies from 
acting on changes reported to other programs that would result in a 
decrease in benefits if the changes are not otherwise subject to the 
simplified reporting requirements. The Department does not include this 
prohibition in the final rule because the primary purpose of the 
simplified reporting option under Section 4109 of FSRIA is to increase 
State flexibility and decrease administrative burden.
    Commenters also felt that the Department went beyond the 
Congressional intent by including an option for making adjustments 
based on reports made to other assistance programs. The commenters 
point out that the statutory language governing simplified reporting 
expressly limits reporting to circumstances in which the household's 
benefit exceeds the gross income limit. Congress did not include a 
provision for benefits to be adjusted based on information provided to 
another program.
    The reason why the Department includes this provision as an option 
is to assist State agencies that have multi-program computer systems. 
This option provides simplification to those agencies because they do 
not have to adjust their computer systems to account for changes 
reported to the Food Stamp Program and those reported to other benefit 
programs. It also assists households because they do not have to 
remember the various reporting requirements for each assistance program 
and can make one report that will impact all of their benefits.
    Additionally, commenters expressed concern with the State option to 
act on changes reported to other programs, based on the belief that the 
option would add administrative complexity to the simplified reporting 
system. One commenter pointed out that, in their State, eligibility 
workers manage several programs for the same client. In a situation 
like that, the caseworker has to first determine what program the 
client is reporting the change for, then make adjustments based on the 
impact that the change has on the other program's benefits and the 
potential change it may have on the client's food stamp benefits.
    The commenters felt that this would be very complex and time 
consuming for eligibility workers in addition to being error prone. 
They asked that the Department allow them to act on changes reported to 
another program if it is verified by the other program. Commenters also 
asked that the final rule include exemptions for follow-up requirements 
for simplified reporters who have joint benefits with another program 
that has more stringent reporting requirements.
    We wish to emphasize that allowing a State agency to utilize 
information reported to other programs is an option and we anticipate 
that only States with automated systems designed to implement changes 
in multiple programs simultaneously would utilize the option. 
Therefore, the time consuming, complex formula will be handled by a 
computer system, not the eligibility worker. Additionally, if a State 
agency needs to verify information and the other program has more 
stringent reporting requirements, the information provided for that 
program will satisfy the reporting requirements for the Food Stamp 
Program.
    As stated above, in the last several years, the Department has 
approved a number of waivers allowing States to act on all changes 
reported to other assistance programs, primarily because these States 
utilize multi-program automated systems that simultaneously implement 
changes in all of the State-administered assistance programs, including 
the Food Stamp Program. Although participating households may benefit 
from the delayed implementation of changes that would reduce their 
benefits, this benefit to a few participating households is outweighed 
by the overall increase in administrative efficiency for the State 
agencies. Additionally, households have protection because before 
making a reduction in benefits, State agencies must follow the advance 
notice procedures of 7 CFR 273.12(c)(2). These procedures enable 
households to contest their benefit reduction and continue receiving 
benefits.
    Commenters also asked the Department to define what it means to 
``trigger an action in another program.'' Apparently they were 
concerned that most changes reported to other programs would trigger an 
action in the other program. Therefore, the State agency would have to 
take action in the food stamp case for almost all of the changes 
reported to other programs.
    The intent of this provision is to give States the ability to 
develop a simplified reporting system that would meet the needs of 
their multi-program eligibility system. The Department is allowing the 
State agencies, in their policies, to define what it means to ``trigger 
an action in another program.'' State agencies are required to have 
clear, uniform rules on what changes they should act on and what 
changes they should not act on. The State agency cannot leave it up to 
the eligibility worker to determine how to define the ``triggers''; the 
policy needs to be implemented in their Statewide policies and 
procedures.

[[Page 4933]]

8. Using the Request for Contact for Verification of Changes That Are 
Not Subject to Mandatory Reporting

    In cases involving changes reported to another program, issues of 
verification arise because the requirements for the various benefit 
programs differ. Although it would be ideal for all benefit programs to 
develop similar verification requirements, State agencies do not have 
the authority to develop their own, uniform verification requirements. 
Under the current and proposed regulations, States are permitted to 
pursue clarification and verification of reported changes that may be 
unclear to the caseworker. Commenters expressed concern over the use of 
the Request for Contact (RFC), specifically it's used to obtain 
clarification of information not subject to mandatory reporting in a 
State's simplified reporting system. Under simplified reporting, most 
changes do not need to be reported between reviews or reports. As 
discussed above, if a household reports information pursuant to the 
reporting requirements in another program, such as Medicaid or TANF, 
current rules often require (and the proposed rule would require) the 
caseworker to evaluate the report for its impact on the household's 
food stamp benefits.
    Commenters felt that the most client-friendly approach would be to 
follow the existing procedures at 7 CFR 273.12(c)(1) and (c)(2). Using 
these rules, the State would send a food stamp request for verification 
if the household reports a change that would lead to an increase in 
benefits. If the household fails to respond to the request for 
verification, it would forfeit the benefit increase but would not lose 
eligibility. If the change suggests a decrease in benefits, but not 
ineligibility, the State would send a Notice of Adverse Action (NOAA) 
informing the household that benefits would be reduced unless the 
household disagrees. If the household fails to respond to this notice, 
the caseworker would reduce the benefits without terminating the 
household.
    Commenters also noted that one of the reasons for the use of the 
RFC process set out in 7 CFR 273.12(c)(3) is that it provides States 
with better quality control protection because there is no risk that a 
quality control reviewer will question the caseworker's decision to 
freeze or adjust benefits without verification. Unfortunately, if the 
household fails to respond to the RFC, it will be terminated from the 
Food Stamp Program. This is true even when the household is eligible 
for a benefit increase based on the reported change.
    Commenters felt that this outcome clearly contravenes the intent of 
simplified reporting. The system was intended to reduce paperwork and 
decrease the number of households who fall out of the Food Stamp 
Program because they do not respond to a RFC. Commenters expressed the 
belief that as the result of quality control pressure and the need to 
respond to unverified reports for other programs, simplified reporting 
has been reduced to a version of change reporting.
    Although the Department does not agree with the overall principle 
of utilizing the RFC process to obtain additional verification in a 
simplified reporting system, we need to provide the State agencies with 
the flexibility to request verification of reported information that 
they may deem questionable. Under the current regulations, State 
agencies should only resort to the RFC process to obtain information 
about changes where they cannot readily determine the effect of the 
change on the household's benefit amount. Therefore, the Department 
encourages State agencies to only resort to this process when they deem 
information to be questionable. However, as stated above, we need to 
allow States to utilize this process for information that they deem 
unclear. Therefore, we will not amend the language from the proposed 
rule to accommodate this comment and adopt this language as proposed.
    Commenters noted that the Congressional intent in crafting 
simplified reporting was to establish a 6-month benefit freeze. The 
only exception was to require households to report if their income 
exceeds 130 percent of the federal poverty limit. The commenters felt 
that by requiring States to seek additional verification from 
households that report to other programs, the Department is suggesting 
that Congress intended to single out these households who comply with 
other program requirements and subject them to additional verification 
requirements. This results in putting their case at risk. As stated 
above, the Department discourages State agencies from utilizing this 
process unless they feel that the information provided is too unclear 
for the State agency to determine the effect of the change on the 
household's benefit level.

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

    Current rules at 7 CFR 273.9(d) provide households with six income 
deductions. The deductions are subtracted from a household's non-
excluded monthly gross income to determine its monthly net income. A 
household's eligibility for and the amount of a deduction are 
established at the household's certification. Current rules require a 
participating household to report certain changes in circumstances that 
occur during the certification period. These rules vary depending on 
the reporting system utilized for the household. Some of the changes 
that must be reported may affect a household's deductions.
    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 circumstances 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 
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 requires 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.
    The Department proposed to amend current regulations at 7 CFR 
273.12(c) to comply with the provisions of Section 4106 of FSRIA 
discussed above. To provide State agencies with maximum flexibility, 
the Department proposed that State agencies be permitted to ignore 
changes that affect deductions that are reported by the household and 
changes that the State agency learns from a third party. However, the 
State agency would continue to be required to act on changes in earned 
income and changes in shelter costs arising from a change in residence.
    Commenters requested that the Department clarify that whenever the 
State recomputed the household's earned income for any reason, it 
should adjust the household's earned income deduction to be 20 percent 
of the new amount. The Department addressed this in the proposed rule 
by stating that it is retaining the current rules in the area of making 
appropriate changes to the household's deductions when there is a 
reported change in earned income. This would include adjusting the 
household's earned income deduction

[[Page 4934]]

to be 20 percent of the new amount. The Department does not believe 
that there is a need for further clarification in the final rule so 
adopts this change as proposed.
    Several commenters supported the provision in the proposed rule 
that would permit States to ignore changes that affect deductions 
because it would ease administrative burden. However, commenters asked 
the Department to clarify what procedures States should follow when a 
household reports a change in address but does not report or verify the 
shelter costs associated with the new residence. The commenters 
believed that if a State opts to ignore changes that affect deductions 
and a household just reports a new address, the household has no 
obligation to report a change in shelter costs.
    Under current program guidelines, if a household reports a change 
in residence but fails to report the associated shelter costs those 
costs may be removed from the household budget. Regardless of any 
verification requirements, if a household fails to report a change in 
shelter costs and these costs have changed due to a reported change in 
residence, it is inappropriate to continue to allow a deduction for the 
former amount. With regard to any potential verification necessary for 
clarification, if a State agency has elected to verify these costs, it 
is also inappropriate to continue to allow a deduction for the former 
amount. However, if a State agency opts to verify this deductible 
expense, they need to advise the household of additional verification 
requirements and state that failure to provide verification shall 
result in a recalculation of their benefits without the deduction. This 
final rule amends the appropriate regulatory language to clarify this 
procedure.
    Additionally, commenters noted that sending a household a RFC 
requiring the household to submit shelter expense information when it 
reports a change in residence is inappropriate because the consequence 
of the household's failure to respond would be closing the case. It was 
suggested that a better approach would be for the food stamp office to 
send the household a notice stating that its allotment will be 
recalculated without the shelter deduction unless the household 
provides verification of its new shelter expenses within a specified 
period. The notice would make it clear that the household does not need 
to wait until it makes its first regular utility or rental payments to 
contact the food stamp office with verification, as alternative forms 
of verification can be accepted.
    As stated above, the Department believes that although shelter 
costs are not listed among the traditional mandatory verification 
requirements, a State agency may elect to verify this information if it 
is questionable. However, they should not close a case for failure to 
verify. Instead, they should recalculate the benefit amount without the 
deductible expense.
    Another commenter asked that the final rule make it explicit that 
State agencies are not required to change the shelter deduction of 
households with unreported changes in address to avoid inappropriate 
attribution of claims and quality control errors. The Department adopts 
the change as proposed and does not amend current regulatory language 
for two reasons. First, the regulations already require State agencies 
to change the shelter deduction for change reporting households but not 
for simplified reporting households. Second, the regulations 
specifically state that required change in shelter expenses would 
result from a reported change in residence.
    Under the proposed rule, a State agency would have 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. Commenters noted that allowing State 
agencies to disregard reported changes in deductions would avoid client 
errors, reduce paperwork and be beneficial to the local offices since 
customers would feel better served when they do not have to constantly 
report changes to the local office. However, commenters also noted that 
if a State takes the option to freeze deductions, denying households 
the deductions for which they are newly eligible could involve a much 
more radical benefit reduction than anything Congress intended. As a 
result of these comments, the final rule requires States who choose to 
freeze deductions to allow households to claim deductions for which 
they become newly eligible during their certification period.
    The State agency may also ignore changes in deductions for certain 
categories of households while acting on changes in those same 
deductions for other types of households. The Department proposed that 
a State agency cannot 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 
deduction would unfairly harm households, while acting only on changes 
that would increase a deduction would increase program costs beyond 
what was anticipated when the provision was enacted.
    Commenters supported this provision because it will simplify 
program administration. However, one commenter stated that the rigidity 
of the proposed rule in this area is not consistent with the rule's 
other provisions and the intent of FSRIA to provide State flexibility. 
The commenter asked the Department to provide State agencies the 
flexibility to act only on changes that would increase a household's 
benefit. As stated above, the Department believes such a course of 
action is untenable. The impact of this provision is so minimal and so 
few commenters opposed the provision that the Department adopts this 
proposed amendment as final based on the rationale set forth in the 
proposed rule.
    Another commenter suggested that the Department make this provision 
consistent with simplified reporting rules by requiring States to act 
on changes only if they are verified upon receipt. Under simplified 
reporting, the verified upon receipt rule applies to changes that 
decrease benefits. Since this provision differs in that we are 
discussing changes that would increase or decrease benefits, the rules 
will differ. Therefore, the Department rejects the commenter's 
suggestion and adopts the language as proposed.
    The Department also proposed to include in the final regulation one 
of two potential limitations on the provisions 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 6th month for households that are 
certified for 12 months. The Department asked for opinions on these 
restrictions in addition to suggestions for reducing their potentially 
harmful effect.
    One commenter supported the limitation of requiring State agencies 
to act on changes that affect deductions after the 6th month for 
households who are certified for 12 months. They noted that this would 
be relatively easy for a State agency to administer given the 
requirement that certain households need to file a periodic report 
after 6 months. Another commenter supported the requirement that States 
act on changes that exceed a certain dollar threshold while noting that 
they were unsure that either limitation would adequately prevent the 
potential hardship caused by freezing all

[[Page 4935]]

deductions. Other commenters were opposed to both limitations stating 
that each one would unnecessarily complicate program administration and 
defeat the purpose of simplification. It was suggested that States be 
permitted to act only on reported and verified changes that result in 
an increase in deductions. None of the commenters provided viable 
alternatives to the options listed by the Department. The Department 
has considered these comments and the final rule incorporates a 
provision that requires State agencies to act on changes that affect 
deductions after the 6th month for households who are certified for 12 
months. The Department also proposed a limitation on the State agency 
option to disregard reported changes that affect deductions for 
households assigned 24-month certification periods. Under current 
regulations 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 at least one contact every 12 months with elderly 
and disabled households certified for 24 months.
    The Department proposed 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. Most commenters 
supported this provision because it provides a good compromise between 
protecting these households from the adverse effects of an increase in 
household expenses and simplifying program administration. One 
commenter supported the provision but asked that the Department allow 
State agencies to have the option to act immediately on changes that 
would result in an increase in deductions or benefits. Another 
commenter disagreed with the proposed rule and suggested that an 
alternative approach be identified but did not offer any suggestions 
for this alternative approach. The Department has considered these 
comments and adopts the language as proposed.
    In addition to amending current rules at 7 CFR 273.12(c), the 
Department proposed to amend current regulations at 7 CFR 273.21 to 
allow the State agency to disregard 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 of reported changes in earned income and changes 
in shelter costs related to a change in residence. The Department did 
not receive any comments specific to this provision so we are adopting 
the language as proposed.
    The Department also proposed to modify current rules at 7 CFR 
273.12(b)(1) and (b)(2) and 7 CFR 273.21(h)(2) to require the State 
agency to give notice in all change, periodic, and monthly report forms 
if it intends to postpone changing deductions until the household's 
next recertification. The Department did not receive any comments 
specific to this provision, so we are adopting the change as proposed.

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

1. Transitional Benefit Program Summary

    Current regulations at 7 CFR 273.12(f)(4) provide State agencies 
the option to offer transitional food stamp benefits to households 
leaving the 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 NCEP proposed rule. Interested parties may 
refer to the preamble of the NCEP final rule and 7 CFR 273.12(f)(4) for 
a complete description of the regulatory scheme. 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. To 
accommodate changes to this option and clarify the current regulations, 
the final rule divides Part 273 into subparts. Except for the addition 
of Subpart H, this restructuring is for clarification purposes only and 
does not result in any substantive change to the current regulations. 
The final rule implements the statutory changes by removing 7 CFR 
273.12(f)(4) and restructuring the regulations to add a new Subpart H 
that contains the revised policy in 7 CFR 273.26 through 7 CFR 273.32. 
A distribution table is published at the end of the preamble of this 
final rule for reference purposes and adjustments have been made to any 
references made to this provision in other sections of the regulations.
A. Households Who Are Eligible
    The Department proposed to amend the current regulations at 7 CFR 
273.12(f)(4) by eliminating the requirement that transitional benefits 
be provided, at a minimum, to all households with earnings who leave 
TANF. In addition to households disqualified by statute, the Department 
proposed to give State agencies unqualified authority to designate the 
categories of households eligible for transitional benefits.
    The proposed rule would have given State agencies the option to 
provide transitional benefits to formerly mixed TANF households as well 
as households where all members received TANF. A mixed TANF household 
is one in which only some members were receiving TANF. Commenters 
supported this provision because it provides States with needed 
flexibility. The Department adopts this amendment as proposed.
B. Households Who Are Ineligible
    Section 4115 modified the types of households who are ineligible 
for transitional benefits. The Department proposed to amend 7 CFR 
273.12(f)(4) to update the list of households that are ineligible for 
transitional benefits to reflect the requirements of Section 4115. 
Because Section 4115 refers to ineligible households rather than 
ineligible household members, the Department interpreted this provision 
as applying only when the entire household is ineligible under Section 
6 of the Act. A household with an ineligible member would be still 
eligible for transitional benefits if the remaining members of the 
household are eligible for food stamps.
    Commenters supported the Department's judgment and agreed that it 
was Congress's intent to give States the option to provide transitional 
benefits to a household that contains members who are not in the TANF 
unit as well as those that contain ineligible members or members who 
are under a TANF sanction. Commenters asked that the Department clarify 
that when a household is under partial sanction but is still receiving 
TANF, if the assistance ends for another reason, the household may 
receive transitional benefits.
    There has been confusion among State agencies about whether 
households under a partial TANF sanction can receive transitional 
benefits if the case closes during the sanction period for another 
reason. The language in the proposed rule clearly states that the State 
agency may not provide transitional benefits when a household

[[Page 4936]]

is leaving TANF due to a TANF sanction. Therefore, a household will not 
be penalized because they were under a partial sanction; the sanction 
has to be the cause of the case closure in order for the household to 
be deemed ineligible for transitional benefits. Therefore, the 
Department adopts this amendment as proposed.

2. Administrative and Procedural Changes

A. The State Plan
    The Department proposed to require State agencies to include in 
their State plan of operation that they are providing transitional 
benefits and specify the categories of households eligible for such 
benefits and the maximum number of months for which the transitional 
benefits will be provided. The Department also proposed to add a 
provision to 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 adopts the amendment as proposed since we 
did not receive comments directly opposed to this provision.
B. The Transition Notice
    The Department proposed to maintain the existing requirement that 
the State agency issue a transition notice. However, the Department 
proposed to modify the contents of the notice. The notice would have to 
inform the household of its eligibility for transitional benefits, the 
length of the transitional period, and that it has a right to apply for 
recertification at any time during the transitional period. The 
language in the proposed rule also would have required the notice to 
explain any changes in the household's benefit amount, and that the 
household is not required to report or verify changes in household 
circumstances until the deadline established in a written RFC or at 
their recertification interview.
    The Department also proposed to remove the requirement 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. The Department proposed to remove 
this requirement to simplify program administration. However, the 
language in the proposed rule would have required that the notice 
clearly advise households to apply for recertification if they 
experience a decrease in income, an increase in expenses or an increase 
in household size during the transition period.
    Commenters asked that the Department include in the list of notice 
requirements a statement that households that apply for TANF cash 
assistance will be asked to reapply for food stamps at the same time. 
Proposed 7 CFR 273.12(f)(4)(vi)(C) states that the transition notice 
must contain 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. The Department believes that this provides 
parties the needed flexibility and notifies participants of the 
procedures they will undergo if they apply for TANF cash assistance. 
Therefore, the Department will not incorporate the commenter's 
recommendation into the final rule and adopts this amendment as 
proposed.
    Commenters also requested that the Department include a requirement 
that States inform households that they do not need to receive TANF to 
be eligible for food stamps at the end of the transitional period and 
that they are likely to remain eligible at the end of the transitional 
period if their income remains low. Additionally, commenters requested 
that the notice encourage people to reapply for food stamps. The 
Department has considered these comments and while we encourage State 
agencies to include this sort of information in their notice, it is not 
something that the Department will prescribe in regulations.

3. Increase in Transitional Period

    Section 4115 lengthens the transitional period from up to 3 months 
to up to 5 months. In view of this requirement, we proposed language 
that would permit 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 5 months of transitional 
benefits. The Department proposed to amend 7 CFR 273.12(f)(4) to change 
the length of the transitional period from up to 3 months to up to 5 
months.
    The Department did receive one comment stating that the proposed 
extension from 3 months up to 5 months is not warranted as the current 
transitional period is ample time for households to make the transition 
from TANF, bounce back from their hardship and apply for other 
benefits. This provision was mandated by the FSRIA and not something 
that the Department has the authority to modify. Therefore, we are 
adopting this amendment as proposed.

4. Adjusting Benefit Amount

    Currently, 7 CFR 273.12(f)(4)(ii) requires 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. The provision at 7 CFR 273.12(f)(4)(iii) 
addresses the State agency's requirement to act on changes in 
circumstances that the household reports during its transitional 
period. In addition, this provision 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 Department proposed to amend the 
regulations at 7 CFR 273.12(f)(4) to note that in addition to adjusting 
the household's food stamp benefit amount before initiating the 
transition period to account for decrease 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.
    Commenters wanted the Department to clarify that the correct 
transitional food stamp benefit amount for all purposes, including 
quality control, is the amount of food stamps received in the month 
prior to TANF case closure, adjusted for the loss of cash assistance. 
The Department's quality control guidance has followed and will 
continue to follow certification policy. Therefore, there is no need to 
place an additional provision about quality control under this section. 
Additionally, the proposed rule already contains language about how to 
calculate the

[[Page 4937]]

correct transitional benefit level. Therefore, the Department adopts 
this amendment as proposed.
    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 with the same benefit it received prior to 
termination of TANF for a fixed number of months, 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. The household is protected from being 
denied an increase in benefits by having the option of applying for 
recertification at any time during the transitional period. Therefore, 
the Department proposed to remove the requirements at 7 CFR 
273.12(f)(4)(ii) and (f)(4)(iii) regarding the State agency's 
obligation to notify the household that it may report changes during 
the transitional period and the requirement that the State agency act 
on changes reported by the household that would increase the household 
benefits. The Department did not receive any specific comments opposed 
to the deletion of these requirements so adopts the amendment as 
proposed.
    Although the Department deleted these provisions as requirements, 
the proposed rule still would have provided State agencies with the 
option to adjust the household's benefit amount in accordance with 7 
CFR 273.12(c) or make the change effective in the month following the 
last month of the transitional period. Commenters pointed out that this 
option runs contrary to subsequent program guidance that provides that 
a State cannot act on other reported changes aside from changes made 
due to information received from other programs. The Department 
considered these comments and removed this option from the final rule.
    The Department proposed that the State agency be required to act if 
a member of the household receiving transitional benefits moves out 
during the transitional period and either reapplies as a new household 
or is reported as a new member of another household. The Department 
proposed 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 State agencies 
follow in the regular program when a household member moves from one 
participating household to another.
    One commenter said that households should not be required to report 
any changes and staff should not have to act on these changes. Other 
commenters asked that the Department clarify that States must make this 
adjustment without requiring any additional information or verification 
from the household. They felt that requiring a household to report or 
verify information defeats the purpose of the benefit. Some commenters 
also noted that this provision increases the administrative burden on 
State agencies.
    While we agree with commenters that the transitional benefit is 
meant to be a frozen benefit amount for the duration of the benefit 
period, the Food Stamp Act strictly prohibits duplicate participation. 
When a household member leaves and either reapplies or becomes a member 
of a new household, that household member takes their income and 
resources with them. Consequently, the State must adjust both 
households' allotments in accordance with 7 CFR 273.12(c) to ensure 
that the individual's income and resources are accounted for 
accordingly. However, there is no need to get any additional 
information from the household to adjust the benefit amount for the 
household receiving transitional benefits. Therefore, the Department 
retains this requirement in the final rule.
    To provide maximum flexibility to State agencies, the Department 
proposed to permit State agencies 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. Commenters requested that the Department clarify the 
proposed rule in numerous places to appropriately reflect the 
Congressional intent regarding the benefit freeze. Commenters suggested 
that the Department change the language in the proposed rule to mandate 
a benefit freeze and then note exceptions to the freeze. The Department 
has considered this comment and we adopt the language as proposed as 
this is an optional provision and the exceptions to the freeze are 
noted in the final rule. Commenters also asked that the Department 
clarify that States may act on income information from another program 
either before setting the transitional benefit amount, during the 
transitional period or both. They want to ensure that States are given 
the option to adjust the amount based on information from other 
programs before freezing the benefit amount and have the option to make 
this the only time that they act on information from another program. 
They point out that there is nothing in the law to suggest that acting 
on information from other programs is an all-or-nothing option. The 
Department has considered these comments. This final rule modifies the 
proposed language to give State agencies the ultimate flexibility in 
accordance with the intent of the FSRIA.
    Several commenters had concerns regarding verification requirements 
for changes resulting from information reported to other programs. They 
asked that the final rule clarify that if States opt to act on 
information that they receive from other programs, they may not require 
any additional verification from the household. If the information 
reported to the other program is insufficient to meet food stamp 
guidelines, the State should continue the transitional benefit at its 
original level.
    The Department has considered these comments and although we 
discourage States from requiring additional verification or making 
changes at all, we cannot forbid States from requiring additional 
verification when they receive unclear information. If the verification 
provided is insufficient to meet program guidelines, we encourage 
States to maintain the benefit level throughout the transitional 
period. The State agency should inform the participant of the 
verification that is necessary to make changes in their benefit level. 
Additionally, action on changes reported to other programs is an 
option. Most States that are currently providing transitional benefits 
are not acting on these changes and prefer to provide a frozen benefit.
    Commenters asked that the final rule clarify that the transitional 
benefit level be adjusted for the automatic annual changes in the food 
stamp benefit rules. These statutory adjustments are programmed into 
most States' computers once each year and do not depend on the 
household providing any information. These commenters noted that USDA 
has required States that have implemented the transitional food stamp 
provision to make these adjustments. Therefore, they are asking the 
Department to incorporate this requirement into the final rule.
    The primary automatic annual changes are the Cost of Living 
Adjustment for the Thrifty Food Plan and the cap on the excess shelter 
cost deduction. State agencies who are currently participating in the 
transitional benefit program are dealing

[[Page 4938]]

with this adjustment in a variety of ways. While some States make the 
adjustment because it is automatically programmed into their system, 
others are providing a frozen benefit that does not account for any 
changes in circumstances. Because of the variety of methods utilized by 
State agencies in the implementation of this benefit, the final rule 
includes this as an option but not a requirement. The number of 
participants affected by a potential cost of living adjustment is so 
small that the burden of this proposed requirement would most likely 
outweigh its benefit.

5. Impact on the Household's Certification Period

    The Department proposed to remove the prohibition on extending the 
household's certification period beyond the maximum period 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 5 months in order to provide the 
household with up to a full 5 months of transitional benefits. 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.
    The Department proposed to amend the current regulations to allow 
State agencies the option of shortening the household's certification 
period and assign the household a new certification period that 
conforms with the transitional period. All recertification requirements 
that would normally apply when the household's certification period has 
ended would be postponed to the end of the new certification period. 
The State agency would not have to issue a NOAA 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. Commenters suggested revising 7 CFR 273.10(f)(4) 
to reflect the policy in the proposed 7 CFR 273.12(f)(4)(iv). The 
Department has considered this comment and made the necessary 
amendments to provide consistency in the final rule.

6. Applying for Recertification During the Transitional Period

    Section 4115 provides the household with the option of applying for 
recertification at anytime 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 the transitional benefits, assign the household a new 
certification period and begin issuing new benefits to the household. 
The Department, in its proposed revision of 7 CFR 273.12(f)(4), 
proposed to add a new 7 CFR 273.12(f)(4)(v) to include the provision 
that a household may apply for recertification at any time during the 
transitional period.
    The Department proposed therein a procedural scheme for the State 
agency to observe when a household submits a request for 
recertification prior to the last month of its transitional benefit 
period. The procedural scheme would have required the State agency to 
schedule an interview, provide the household with a notice of required 
verification, and give them 10 days to provide verification. Should the 
household fail to comply with these requirements or be ineligible for 
participation, the State agency would deny the application and continue 
the household's transitional benefits until the end of the period. 
Should the household be eligible, the new certification period would 
begin the first day of the month following the month in which the 
household submitted the application. Should the new benefit amount be 
lower than the transitional benefit amount, the State agency would be 
required to encourage the household to withdraw the application.
    While some commenters supported the proposed procedures, especially 
since its provision were favorable to households whose benefits would 
be reduced or terminated after the end of the transitional period, 
several offered criticism and proposed changes.
    Commenters noted that proposed 7 CFR 273.12(f)(4)(v) mentions a few 
parts of the general application processing regulation at 7 CFR 273.2, 
but not all of it. The commenters believe that some State agencies may 
infer that the other parts of 7 CFR 273.2 do not apply. Therefore, they 
asked that the final rule state that except as otherwise specified, the 
provisions of 7 CFR 273.2 should apply to reapplication during the 
transitional benefit period. The final rule provides references to the 
paragraphs of 7 CFR 273.2 that are applicable to the general 
recertification process. It would be too cumbersome to include either a 
reference to all of 7 CFR 273.2 or a list of those paragraphs that do 
or do not specifically apply. Therefore, the Department adopts this 
amendment as proposed.
    The proposed rule stated that if the household chooses not to 
withdraw an application filed during the transitional benefit period 
that results in a lower benefit amount, the State agency must complete 
the recertification process and issue the lower benefit effective the 
first month of the new certification period. Commenters asked that the 
final rule provide that if the household chooses to not to withdraw 
their application but instead to receive the lower benefit amount, the 
transitional benefit amount is the correct amount for the first month 
of the new certification period, there shall be no over-issuance, and 
the new benefit amount will be effective the following month.
    The Department has considered these comments. The modification 
recommended by the commenters is inconsistent with the procedures 
followed for an application that results in an increase in benefits. An 
application that results in an increase in benefits is effective the 
first month of the new certification period, and if the State agency 
has already issued the transitional benefit they need to issue a 
supplement. The procedure proposed by the Department provides 
participants and administrators with a clean break, and is a consistent 
policy for applicants whose benefit amount either increases or 
decreases. The Department is seeking to simplify the administration of 
the program. Providing two different standards for applications filed 
during the transitional benefit period is too complex and does not 
adhere to the goal of simplification. Therefore, the final rule does 
not include this suggested modification.
    Instead, the final rule provides State agencies with an alternative 
to issuing a lower benefit amount. This alternative, which was proposed 
by a commenter, provides State agencies with the option to deny an 
application and allow the transitional benefit period to run its course 
if the benefit amount decreases when a household recertifies. If a 
State agency incorporates this option into their State plan, they would 
avoid having to collect overpayments made to households who were 
already issued their transitional benefit for the first month of their 
new certification period. Just as a State agency needs to issue a 
household a supplement, if the benefit amount decreases the household 
may be subject to an overpayment. This is why the Department is 
encouraging State agencies to implement an alternative such as denying 
these applications. If a State agency elects to adopt this option, they 
must state this in their State plan of operation.
    One commenter pointed out that if an application for 
recertification is made toward the end of the month, this would require 
a decrease in benefits without

[[Page 4939]]

advanced notice. They asked that either States be allowed to follow 
current notice requirements or the Department should establish quality 
control protections for State agencies. The Department agrees with the 
commenter that, depending on the timing of the recertification 
application, the State agency may or may not be able to provide the 
household with advance notice of their decrease in benefits. However, 
under the current rules, a NOAA is required for changes made during the 
certification period. Because this change will initiate a new 
certification period, there is no requirement for the State to issue a 
NOAA. The Department will not amend the current regulations to 
accommodate this comment and adopts the applicable language as 
proposed.
    The proposed rule would have required that applications for 
recertification submitted in the final month of the transitional period 
to be processed in accordance with current regulations at 7 CFR 273.14. 
Comments related to this provision are discussed below.

7. Households Who Return to TANF During the Transitional Period

    The Department proposed that when a household returns to TANF 
during the transitional benefit period, the State agency would 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 would 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 would 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 NOAA rather than a notice of 
expiration, which the State agency may issue when the household reaches 
the end of its transitional period. To eliminate the delay associated 
with issuing a NOAA 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 proposed that the State agency be required to 
include in the transition notice a statement to the effect that if the 
household reaches the end of its transitional period, the State agency 
would either reevaluate the household's food stamp case or shorten the 
household's certification period and require it to undergo a 
recertification.
    Commenters asked the Department to establish a process to allow for 
joint TANF-Food Stamp applications for families who reapply for both 
programs. They recommended a 30-day processing standard to ensure that 
these applications are processed together, noting that allowing a 30-
day standard provides simplicity. The Department has considered this 
recommendation. We agree. Therefore, the final rule includes a 
provision for implementing a 30-day processing standard for households 
re-applying for TANF before the end of their transition period.
    Commenters believed that the proposed rule did not provide adequate 
guidance to States on what procedures to use when a household reapplies 
for TANF during its transitional benefit period. They pointed out that 
many of the States that had implemented the transitional benefit 
program by late 2003 reported that a substantial number of the 
households that receive transitional benefits reapply for TANF before 
the expiration of their transitional benefit period. Proposed 7 CFR 
273.12(f)(4)(ix) informs State agencies about the procedures they would 
need to follow if a household receiving transitional benefits returns 
to TANF during the transitional period. Therefore, the Department does 
not agree with this comment and adopts the language as proposed.
    Commenters suggested that the final regulation delete the 
requirement that States must first approve a TANF application and then 
seek more information from the family to redetermine food stamp 
eligibility and benefit levels. Instead, they want the Department to 
establish a process that allows food stamp households to shift from the 
transitional period back to the regular program based on a joint TANF-
Food Stamp application. One way to do this would be to treat the TANF 
application as a joint TANF-Food Stamp application and apply the new 
protections related to food stamp reapplication during a transitional 
benefit period. As suggested above, the processing time for these 
applications would be 30 days. The commenters pointed out that 
households who are reapplying for TANF are likely to have very limited 
resources so the final regulation should aim to deliver the appropriate 
benefit amount as quickly and seamlessly as possible.
    The Department has considered these comments. However, because the 
TANF program and the Food Stamp Program are administered by different 
federal agencies, the Department does not have the authority to 
regulate the TANF program. However, State agencies may choose to 
conform their application process so long as they work within the 
guidelines of each program.
    One commenter said that their State continues the transitional 
benefits even if the household returns to TANF, for payment accuracy. 
State agencies that proceed in this manner are not implementing 
transitional benefits properly. The transitional benefit program was 
intended to be implemented as a benefit that assists families who are 
making the transition from the TANF program. Households who return to 
TANF no longer need a transitional benefit because they are no longer 
in transition from TANF to the workforce, and the State agency now has 
information about current family circumstances. These households will 
likely qualify for the regular program. Therefore, the State agency 
should terminate the transitional case and enroll the household in the 
traditional Food Stamp Program.
    One commenter noted that in their State, the eligibility and 
payment cycle for TANF is different from the Food Stamp Program. 
Additionally, the TANF program is operated by private agencies and the 
Food Stamp Program by public agencies. Therefore, requiring 
recertification for the food stamp program when a TANF case reopens 
increases hardship on households because they have to satisfy 
requirements for both programs and make multiple applications. The 
commenter believes that the proposed language will create a barrier to 
continued nutritional assistance.
    The transitional program is just that, transitional. It suspends 
gathering household information when the household has separated from 
the TANF program. Once the household rejoins the TANF program and new 
information is gathered, it is appropriate to act on this new 
information. Therefore, at some point, households will have to 
recertify for the Food Stamp Program. The final rule allows State 
agencies the flexibility to develop a transitional benefit program that 
will work with their State TANF program. The transitional benefit 
program is an option provided by the Department that may not work in 
all States due to administrative circumstances such as those noted by 
this commenter. The Department cannot create a rule that will 
accommodate all circumstances.

[[Page 4940]]

Therefore, States need to work with TANF administrators in their State 
to develop ways to accommodate Food Stamp Program participants.
    One commenter suggested that if a household returns to TANF before 
the end of the transitional period, the final rule should: (1) Allow 
the household to continue to receive transitional benefits during the 
TANF application process; (2) require the household to attend only one 
interview for the TANF and food stamp application; (3) require the 
State agency to determine TANF and Food Stamp Program eligibility at 
the same time; and (4) if the TANF application is accepted, give notice 
to the household that the transitional benefit period is ended and that 
the household is eligible for ongoing food stamp benefits. For the 
reasons stated in the preceding paragraph, the Department cannot impose 
these requirements on the TANF application process. However, a 
household is still eligible for the transitional benefit program until 
they are accepted into the TANF program. Therefore, it is not necessary 
to amend the proposed language to impose these requirements.

8. Moving Out of the Transitional Period

    The Department proposed 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 would be able to 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). 
Alternatively, in accordance with Section 4115, the State agency would 
be able to recertify the household in accordance with 7 CFR 273.14. 
Under the second option, the State agency would be able to shorten the 
household's prior certification period in order to recertify the 
household. In shortening the certification period, the State agency 
would be required to send the household a notice of expiration in 
accordance with 7 CFR 273.14(b). The Department does not believe that a 
NOAA is necessary to shorten the certification period because Section 
4115 authorizes State agencies to shorten a household's certification 
period in the final month of the transitional benefit period.
    Commenters noted that for the transitional benefit program to fully 
realize its purpose as a transitional benefit, the households that 
remain eligible for food stamps after the transitional period will have 
to stay connected to the regular Food Stamp Program. They believed that 
the proposed rule would have treated the end of the transitional period 
the same as the end of any other certification period. They encouraged 
the Department to adopt final rule language that would require States 
to provide more complete information that will encourage families to 
reapply for food stamps and stay connected to the program.
    Commenters asked that the final rule require State agencies to 
issue notices that explicitly state that most people leaving cash 
assistance programs with low earnings remain eligible for food stamps 
and that there is a high likelihood that complying with recertification 
requirements will result in a substantial food stamp allotment. The 
commenters felt that individuals who received transitional Medicaid 
benefits may become confused and just disregard the notice about the 
termination of their transitional food stamps because the transitional 
period is over.
    While the Department agrees that this is a valid point, and the 
Department encourages State agencies to include this information in 
their notices, it is not appropriate to regulate under this section. 
The Department believes that the best way to encourage the successful 
utilization of this option is to afford States broad latitude on how to 
implement the option. Moreover, this final rule details six items that 
must be included in the notice and the Department is not receptive to 
adding further detail. The Department adopts this amendment as 
proposed.
    In a recent review of notices utilized by current State agencies 
who offer transitional benefits, the Department discovered that most 
State agencies provide information that goes beyond the regulatory 
requirements. For example, most States include information in the 
initial notice about the need to reapply toward the end of the 
transitional period in order to continue receiving food stamp benefits. 
Arizona, Oregon and Pennsylvania provided the Department with copies of 
fact sheets that they have created for the program. These facts sheets 
are in plain language and provide participants with a general 
understanding of the program and the requirements for participation. 
Finally, New York and Massachusetts provided the Department with copies 
of transitional benefit notices that include information about other 
programs, including transitional child care. The Department has 
provided copies of these notices to State agencies to utilize if they 
decide to implement this option.

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 amendments to 7 CFR 
273.4(a)(6)(ii)(H), 7 CFR 273.8(b), and 7 CFR 273.9(d)(1) were to be 
implemented October 1, 2002. These provisions restored food stamp 
eligibility to qualified aliens who are otherwise eligible and who are 
receiving disability benefits regardless of date of entry, extended the 
higher resource limit to households with a disabled member, and 
replaced the current, fixed standard deduction with a deduction that 
varies according to household size. The amendments to 7 CFR 
273.4(a)(6)(ii)(B) through (a)(6)(ii)(F) and 273.4(a)(6)(iii) were to 
be implemented on April 1, 2003. These provisions restored 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. The amendments to, 7 CFR 273.4(a)(6)(ii)(J), and 7 CFR 
273.4(c)(3)(vi) were to be implemented on October 1, 2003. These 
provisions restored food stamp eligibility to qualified aliens who are 
otherwise eligible and who are under 18 regardless of date of entry and 
the provisions eliminating the sponsor deeming requirements for 
immigrant children. State agencies must implement the provisions of 7 
CFR 273.4(c)(2)(v), 7 CFR 273.4(c)(3)(iv), 7 CFR 273.4(c)(3)(vii), 7 
CFR 273.9(b)(1)(vii), and 7 CFR 273.9(c)(3)(ii)(A) no later than August 
1, 2010: State agencies may implement all other amendments on or after 
the effective date of this rule. States that implemented discretionary 
provisions, either under existing regulations or policy guidance issued 
by the Department, prior to the publication of this final rule have 
until August 1, 2010 to amend their policies to conform to the final 
rule requirements.

[[Page 4941]]



        Distribution Table--The Transitional Benefits Alternative
------------------------------------------------------------------------
             CFR                  Proposed rule          Final rule
------------------------------------------------------------------------
                                                    General eligibility
                                                     guidelines.
273.12(f)(4)................  273.12(f)(4)(i).....  273.26.
                              273.12(f)(4)(i)(A)..  273.26(a).
                              273.12(f)(4)(i)(B)..  273.26(b).
                              273.12(f)(4)(i)(C)..  273.26(c).
                              273.12(f)(4)(i)(C)(1  273.26(c)(1).
                               ).
                              273.12(f)(4)(i)(C)(2  273.26(c)(2).
                               ).
                              273.12(f)(4)(i)(C)(3  273.26(c)(3).
                               ).
                              273.12(f)(4)(i)(C)(4  273.26(c)(4).
                               ).
                              273.12(f)(4)(i)(C)(5  273.26(c)(5).
                               ).
                              273.12(f)(4)(i)(C)(6  273.26(c)(6).
                               ).
                              273.12(f)(4)(i)(C)(7  273.26(c)(7).
                               ).
                              273.12(f)(4)(i)(C)(8  273.26(d)(1).
                               ).
                              273.12(f)(4)(i)(C)(9  273.26(c)(8).
                               ).
                              273.12(f)(4)(i)(C)(1  273.26(c)(9).
                               0).
                              273.12(f)(4)(i)(C)(1  273.26(d)(2).
                               1).
                              273.12(f)(4)(i)(C)(1  273.26(d)(3).
                               2).
                              273.12(f)(4)(i)(C)(1  273.26(c)(10).
                               3).
273.12(f)(4)................  273.12(f)(4)(ii)....  Need to be added as
                                                     273.26(e).
                                                    General
                                                     administrative
                                                     guidelines.
273.12(f)(4)(i).............  273.12(f)(4)(iii)...  273.27(a).
                              273.12(f)(4)(iii)...  273.27(a)(1).
                              273.12(f)(4)(iii)...  273.27(a)(2).
                              273.12(f)(4)(iv)....  273.27(c).
                                                    Application for Food
                                                     Stamp Program
                                                     recertification.
273.12(f)(4)(ii)............  273.12(f)(4)(v).....  273.28.
                              273.12(f)(4)(v)(A)..  273.28(a).
                              273.12(f)(4)(v)(B)..  273.28(b).
                              273.12(f)(4)(v)(C)..  273.28(c).
                              273.12(f)(4)(v)(C)..  273.28(c)(1).
                              273.12(f)(4)(v)(C)..  273.28(c)(2).
273.12(f)(4)(iii)...........  273.12(f)(4)(v)(C)..  273.28(d).
                              273.12(f)(4)(v)(D)..  273.28(e).
                              273.12(f)(4)(v)(E)..  273.28(f).
                              273.12(f)(4)(v)(F)..  273.28(g).
                              273.12(f)(4)(v)(G)..  273.28(h).
                                                    Transitional notice
                                                     requirements.
273.12(f)(4)(iv)............  273.12(f)(4)(vi)....  273.29.
                              273.12(f)(4)(vi)(A).  273.29(a).
                              273.12(f)(4)(vi)(B).  273.29(b).
                              273.12(f)(4)(vi)(C).  273.29(c).
                              273.12(f)(4)(vi)(D).  273.29(d).
                              273.12(f)(4)(vi)(E).  273.29(e).
                              273.12(f)(4)(vi)(F).  273.29(f).
                                                    Transitional
                                                     benefits
                                                     alternative change
                                                     reporting
                                                     requirements.
                              273.12(f)(4)(vii)...  273.30.
                                                    Closing the
                                                     transitional
                                                     period.
                              273.12(f)(4)(viii)..  273.31.
                              273.12(f)(4)(viii)(A  273.31(a).
                               ).
                              273.12(f)(4)(viii)(B  273.31(b).
                               ).
                              ....................  Households who
                                                     return to TANF
                                                     during the
                                                     transitional
                                                     period.
                              273.12(f)(4)(ix)....  273.32.
------------------------------------------------------------------------

Executive Order 12866

    This final 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

    As required for all rules that have been designated as Significant 
by the Office of Management and Budget, a Regulatory Impact Analysis 
(RIA) was developed for this final rule. It follows this rule as an 
Appendix. The following summarizes the conclusions of the regulatory 
impact analysis: This action is required to implement provisions of 
FSRIA (Pub. L. 107-171), which was enacted on May 13, 2002. This 
rulemaking amends FSP regulations to implement 11 provisions of FSRIA 
that establish new eligibility and certification requirements for the 
receipt of food stamps. The Department has estimated the total FSP 
costs to the Government of the FSRIA provisions implemented in the 
final rule as $2.669 billion in FY 2010 and $13.541 billion over the 5 
years FY 2010 through FY 2014. These impacts are already incorporated 
into the President's budget baseline.

Regulatory Flexibility Act

    This rule has been reviewed with regard to the requirements of the

[[Page 4942]]

Regulatory Flexibility Act (5 U.S.C. 601-612). The Under Secretary for 
the Food, Nutrition and Consumer Services, has certified that this rule 
will not have a significant economic impact on a substantial number of 
small entities. State and local human services agencies will be the 
most affected to the extent that they administer the Food Stamp 
Program.

Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates 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, the 
Department generally must prepare a written statement, including a 
cost/benefit analysis, for proposed and final rules with Federal 
mandates that may result in expenditures to State, local, or tribal 
governments in the aggregate, or to the private sector, of $100 million 
or more in any one year. When such a statement is needed for a rule, 
section 205 of the UMRA generally requires the Department to identify 
and consider a reasonable number of regulatory alternatives and adopt 
the least costly, more cost-effective or least burdensome alternative 
that achieves the objectives of the rule.
    This rule contains no Federal mandates (under the regulatory 
provisions of Title II of the UMRA) that impose costs on State, local, 
or tribal governments or to 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 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 categories 
called for under section (6)(b)(2)(B) of Executive Order 13132.

Prior Consultation With State Officials

    Before drafting this rule, we received input from State agencies at 
various times. Because the 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 agencies to provide feedback that forms the basis for many 
discretionary decisions in this and other Program rules. In addition, 
FNS 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 State agencies that deliver food stamp services. These 
questions have helped us make the rule responsive to concerns presented 
by State agencies. Finally, we solicited comments on these amendments 
through the rulemaking process. The comment period for the Proposed 
Rule opened on April 16, 2004 and closed on June 15, 2004. The comments 
on the Proposed Rule from State officials were carefully considered in 
drafting this final rule. This preamble discusses in detail the nature 
of the concerns of the State and local officials who commented on the 
Proposed Rule, our position supporting the need to issue this final 
rule, and the extent to which the concerns expressed by the State and 
local officials have been met.

Nature of Concerns and the Need To Issue This Rule

    Results of the consultations that were held prior to the 
publication of the Proposed Rule were discussed in the preamble of that 
rule and therefore will not be discussed here. The comments that FNS 
received in response to the Proposed Rule are discussed at length later 
in this preamble.

Extent to Which We Met Those Concerns

    FNS considered comments on the Proposed Rule prior to publishing 
this final rulemaking. Our responses to these comments are discussed at 
length later in this preamble.

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 that 
conflict with its provisions or that would otherwise impede its full 
implementation. This rule is not intended to have retroactive effect 
unless so specified in the ``Effective Date'' paragraph of this 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 liabilities) or 7 CFR Part 283 (for rules related 
to quality control 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 279.

Civil Rights Impact Analysis

    FNS has reviewed this final 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 way to soften their effect on any of the protected 
classes. FNS has no discretion in implementing many of these changes. 
The changes that are required to be implemented by law have been 
implemented. All data available to FNS indicate that protected 
individuals have the same opportunity to participate in the Food Stamp 
Program as non-protected individuals. FNS specifically prohibits the 
State and local government agencies that administer the Program from 
engaging in actions that discriminate based on race, color, national 
origin, sex, religion, age, disability, marital or family status (FSP 
nondiscrimination policy can be found at 7 CFR 272.6(a)). 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

    The Paperwork Reduction Act of 1995 (44 U.S.C. Chap. 35; see 5 CFR 
part

[[Page 4943]]

1320) requires that each Federal agency establish a process to evaluate 
proposed collections of information and to reduce information 
collection burdens on the public. The Office of Management and Budget 
(OMB) must approve all collections of information by a Federal agency 
from the public before they can be implemented, and respondents are not 
required to respond to any information collection unless it displays a 
current valid OMB control number.
    This final rule changes the information collection burden 
associated with currently-approved collections OMB No. 0584-0064, No. 
0584-0496, and No. 0584-0083. Implementation of the data collection 
requirements resulting from this final rule is contingent upon OMB 
approval under the Paperwork Reduction Act of 1995.
    FNS sought public comments specific to the estimated information 
collection burden of the proposed rule and received one comment. The 
commenter suggested that FNS should consider using a checklist for 
revisions to the State Plan as means of reducing the State agency 
paperwork burden related to revision of State plans. Because the 
comment did not impact the burden on the respondents or concern the 
substantive provisions of this rule, we are deferring a decision of the 
suggestion and will consider it when we revise State plan requirements. 
Thus, the provisions contained in this final rule do not differ with 
regard to information collection burden requirements from those set 
forth in the proposed rule.
    The calculation of the information collection burden under the 
specific OMB numbers, as revised to reflect adjustments for SNAP 
participation increases and changes contained in this final rule, are 
described below. These calculations have been revised to reflect 
changes in the reporting and recordkeeping burdens resulting from new 
provisions added to the SNAP regulations by this final rule. As a 
result of this rulemaking, the overall information collection burden 
hours associated with OMB No. 0584-0064, No. 0584-0496, and No. 0584-
0083 are estimated to have decreased by about 1,150,423 hours annually 
(920,338 hours due to program changes and 230,085 hours due to 
adjustments). Of the total impact, the annual burden hours are 
estimated to have decreased by 653,958 hours for food stamp households 
(523,166 hours due to program changes and 130,792 due to adjustments) 
and by 496,465 hours for States (397,172 hours due to program changes 
and 99,293 for adjustments). The breakdown of the changes for each 
separate information collection burden is described separately below.

OMB Number: 0584-0064

    Title: Application and Certification of Food Stamp Households.
    Expiration Date: December 31, 2010.
    Type of Request: Revision of a currently approved collection.
    Abstract: Title 7, Part 273 of the 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.
    Simplified Reporting (7 CFR 273.12(a)(5)):
    The expanded use of simplified reporting allowed under FSRIA will 
greatly reduce reporting burdens for households and State agencies. To 
the extent that State agencies adopt simplified reporting, households 
will have fewer reports to file and the agency will have fewer reports 
to process.
    Household burden: The expanded use of simplified reporting allowed 
under FSRIA reduces the household reporting burden by reducing the 
number of reports certain households must file with the food stamp 
agency as a condition of their ongoing eligibility for benefits.
    Based on a 2008 survey of State choices and program data from the 
National Data Bank, out of 53 State agencies, 50 State agencies have 
implemented simplified reporting. From this, we estimate that 3,940,307 
households are newly subject to the expanded simplified reporting 
option. Of these households, we assume that without simplified 
reporting 265,577 would otherwise have been subject to quarterly 
reporting, and 3,674,730 would have been subject to change reporting 
requirements. We estimate that it takes a household 8 minutes or .1336 
burden hours to complete a semi-annual report under simplified 
reporting or a quarterly report and 5 minutes or .0835 burden hours to 
complete a change report. We expect households to submit one report 
annually under simplified semi-annual reporting; 3 reports annually 
under quarterly reporting; and an average of 3.5 reports annually under 
change reporting. Based on these estimates, households subject to the 
simplified semi-annual report have a burden of 526,425 hours (3,940,307 
semi-annual reporting households x 1 report x .1336 hours = 526,425 
hours). Under quarterly or change reporting, we estimate that these 
households would have had a burden of 1,180,383 hours [(265,577 
quarterly reporting households x 3 reports x .1336 hours = 106,443 
hours) + (3,674,730 change reporting households x 3.5 reports x .0835 
hours = 1,073,940 hours) = 1,180,383 hours]. The difference indicates a 
net decrease in expected household burden hours of 653,958 hours 
(526,425 - 1,180,383 = -653,958 hours).
    State agency burden: The expanded use of simplified reporting also 
reduces the State burden for processing reports. With the exception of 
households consisting entirely of elderly or disabled persons, which 
may be subject to a reporting requirement at an interval of up to 12 
months, simplified reporting typically requires a household to file a 
report once every 6 months, and also at any time that the household's 
gross income exceeds 130 percent of the poverty level. This means that 
States choosing the simplified reporting option will have fewer 
household reports to process. Consistent with the analysis of household 
burden, we estimate that 3,940,307 households are newly subject to the 
expanded simplified reporting option; 265,577 of which would otherwise 
have been subject to quarterly reporting, and 3,674,730 of which would 
have been subject to change reporting requirements. Under semi-annual 
reporting, all of these households will submit one report annually. We 
estimate that a State agency spends 11 minutes or .1837 hours 
processing each report for a total of 723,834 burden hours (3,940,307 
reports x .1837 hours = 723,834 hours). Quarterly reporting households 
submit 3 reports annually and change reporting households submit an 
estimated average of 3.5 reports annually. We estimate that the State 
agency spends 11 minutes or .1837 hours processing each quarterly 
report and 5 minutes or .0835 hours processing each change report. If 
simplified reporting households continued instead to submit change or 
quarterly reports, the State agency would have a burden of 1,220,299 
hours [(265,577 quarterly reporting households x 3 reports x .1837 
hours = 146,359 hours) + (3,674,730 change reporting households x 3.5 
reports x .0835 hours = 1,073,940 hours) = 1,220,299 hours]. As a 
result, the simplified reporting option results in an estimated net 
reduction of 496,465 burden hours (723,834 hours - 1,220,299 hours = -
496,465 hours) for State agencies implementing the option contained in 
the final rule.
    Transition Notices, Application Revisions Reflecting the Deduction 
Freeze During the Certification Period, and Simplifying Child Support 
Payments (7 CFR 273.29):

[[Page 4944]]

    There are small increases in the information collection burden 
expected to result from the final rule's requirements to develop 
transition notices, to notify households about freezing deductions 
during the certification period, and to simplify the determination of 
child support payments. These provisions are estimated to have resulted 
in a one-time increase in the burden for State agencies of 300 hours. 
There is also a small one-time increase in the burden associated with 
including information in the State plans related to which of the rule's 
optional provisions States adopt. This provision is expected to 
increase the overall burden by 50 hours as States amend their Plans of 
Operation after the final rule becomes effective. In addition, a small 
one-time increase in the burden already occurred in 2003 from the 
FSRIA's requirement that States post food stamp applications on State 
Web sites. We anticipate no further burden from this requirement.
    Determination of child support payments. (7 CFR 273.12(a)(1)(vi)):
    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. As a result of this change, the 
household would not have further reporting and verification 
requirements.
    State agency burden: This provision was intended to simplify the 
process by allowing State agencies to rely solely on information from 
the Child Support Enforcement (CSE) agency in determining the amount of 
child support payments made. If a State agency uses CSE data, it will 
not have to perform other verification of payments reported by the 
household. Most States already have a link to the CSE agency, and would 
experience 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 5 State 
agencies in each of the next 3 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 will also reduce the reporting 
burden for some 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 or .3173 hours in total completing an application 
for initial certification or recertification. Since only 1.5 percent of 
all SNAP households received the child support deduction in FY 2008 and 
only some of those households 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 by this change. 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 (7 CFR 273.12(b)(1), 273.12 (b)(2), and 
273.12(h)(2)): States are given the option in FSRIA to postpone acting 
on changes that would affect the amount of deductions, except for 
changes in shelter expenses due to a change in residence and changes in 
earned income. If the State adopts 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 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 assume that 5 States in each of the 
next 3 years will choose this option, resulting in a burden of 100 
hours annually (5 States x 20 hours = 100 hours).
    Household burden: This provision does not affect the burden for 
households.
    Transition notice (7 CFR 273.29):
    FSRIA amended the Act to provide for an option for States to 
provide transitional benefits to families leaving the TANF program. The 
Act amended and expanded the transitional benefit alternative provided 
pursuant to the regulatory authority. Current regulations require that 
States opting to provide transitional benefits provide a Transition 
Notice (TN) to households. The final rule also provides for a TN but 
has substantially different requirements for the notice. State agencies 
that opt to provide transitional benefits must provide families 
eligible for transitional benefits a TN that includes detailed and 
specific information about the household's transitional benefits and 
rights.
    State agency burden: The Notice of Expiration (NOE) and the TN are 
comparable notices, and the TN will replace the NOE in some cases. 
Therefore, we assume that the burden for the TN will be minimal and 
will be incorporated into the NOE burden calculations. Because of the 
substantial changes to the current TN that are required by this 
provision, we anticipate a burden of 20 hours per State agency for 
developing the TN for both States that currently provide transitional 
benefits pursuant to the regulatory authority and those States that 
have not yet provided transitional benefits. As of August 2008, 18 
States have chosen to implement the transitional benefit option. FNS 
calculated an average annual burden of 120 hours each year (6 x 20 
hours = 120 hours) based on 6 States adopting this option each year 
over a 3 year period.
    Household burden: FNS believes there is no burden to the household 
for this provision.
    Food Stamp applications on State Web sites (7 CFR 273.2(c)):
    FSRIA requires every State agency that maintains a Web site to make 
its food stamp application available on the Web site in every language 
for which a printed copy is available. State agencies are not required 
to accept applications on-line.
    State agency burden: Because States already develop applications, 
and all States already maintain Web sites, FNS does not project any 
additional ongoing reporting burden resulting from this requirement.
    Household burden: This requirement simply makes the application 
available in another manner and does not impose an additional burden 
for households.
    Start-up burden: The startup burden resulting from this requirement 
has already been incurred by State agencies. FNS estimates that each 
State agency has previously incurred a one-time burden of 1.5 hours to 
post its application(s) on the Web resulting in a total burden of 80 
hours (53 State agencies x 1.5 hours = 80 hours). There is no ongoing 
burden from this requirement.
    This rule does not affect the current recordkeeping burden involved 
with OMB 0584-0064.

OMB Number: 0584-0496

    Title: State Agency Options.
    Expiration Date: October 31, 2010.
    Type of Request: Revision of a currently approved collection.
    Abstract: Title 7, Part 273 of the CFR sets forth the Food Stamp 
Program requirements for the application, certification and continued 
eligibility

[[Page 4945]]

for food stamp benefits. This rulemaking revises the collection burden 
to account for changes required by FSRIA.
    Establishing and reviewing standard utility allowances (7 CFR 
273.9(d)(6)(iii)(B)):
    Section 273.9(d)(6)(iii)(B) of the food stamp regulations allows 
State agencies to establish standard utility allowances (SUAs) and 
requires State agencies to review and adjust established 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, utility companies or other 
sources. State agencies may make adjustments based on cost-of-living 
increases. The information is 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 standard amounts 
and methodologies to FNS when they are developed or changed.
    Estimates of burden: Currently 52 State agencies out of 53 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 each year to determine if cost of 
living increases are needed. We estimate a minimum of 2.5 hours 
annually to review and adjust the standards (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 the use of an SUA 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 must draw a sample of cases to obtain it.
    Estimates of burden: Currently, 40 State agencies have elected to 
mandate the use of SUAs. We 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 establish the 
SUA. Therefore, since there is no additional burden, the total annual 
burden associated with mandatory utility standards is zero.
    Self-employment costs (7 CFR 273.11(b)):
    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.
    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 or .1169 hours per year for the 53 State 
agencies to equal a total of 6 burden hours annually (53 x .1169 hours 
= 6 hours annual burden).

OMB Number: 0584-0083

    Title: Operating Guidelines, Forms and Waivers.
    Expiration Date: October 31, 2010.
    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 amends Part 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.
    Estimates of Burden: Out of 53 State agencies, 50 States have 
adopted simplified reporting; 18 states have adopted transitional 
benefits; 43 States have adopted simplified definition of income; 36 
States have adopted simplified definition of resources; 27 States have 
adopted the homeless household deduction; 8 States have adopted the 
option to simplify determination of deductions; and 14 states have 
chosen to treat legally obligated child support payments made to non-
household members as an income exclusion while 39 States will continue 
to count the payments as a deduction. In view of the number of States 
that have already selected the above options, we estimate that very few 
additional States will elect to adopt them in the future and that the 
additional reporting burden resulting from revising State plans will be 
minimal. 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 collection is 40 hours 
(53 respondents (State agencies) X 3 responses per year per respondent 
X .25 hours per response). There is no impact on the recordkeeping 
burden involved with OMB 0584-0083.
    An Information Collection Request (ICR) package will be submitted 
to OMB based on the provisions of this final rule to reflect the 
changes to OMB No. 0584-0064, No. 0584-0496, No. 0584-0083. These 
amended information collection requirements will not become effective 
until approved by OMB. When these information collection requirements

[[Page 4946]]

have been approved, FNS will publish separate action in the Federal 
Register announcing OMB's approval.

E-Government Act Compliance

    The Food and Nutrition Service is committed to complying with the 
E-Government Act of 2002, to promote the use of the Internet and other 
information technologies to provide increased opportunities for citizen 
access to Government information and services, and for other purposes.

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.


0
Accordingly, 7 CFR parts 272 and 273 are amended as follows:
0
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

0
2. Section 272.1 is amended by adding a new paragraph (g)(173) to read 
as follows:


Sec.  272.1  General terms and conditions.

* * * * *
    (g) * * *
    (173) Amendment No. 401. The provisions of Amendment No. 401 are 
implemented as follows:
    (i) The following amendments were to be implemented October 1, 
2002: 7 CFR 273.4(a)(6)(ii)(H), 7 CFR 273.8(b), and 7 CFR 273.9(d)(1).
    (ii) The following amendments were to be implemented April 1, 2003: 
7 CFR 273.4(a)(6)(ii)(B) through 7 CFR 273.4(a)(6)(ii)(F) and 
273.4(a)(6)(iii).
    (iii) The following amendments were to be implemented October 1, 
2003: 7 CFR 273.4 (a)(6)(ii)(J); 7 CFR 273.4(c)(3)(vi).
    (iv) State agencies must implement the following amendments no 
later than August 1, 2010: 7 CFR 273.4(c)(2)(v), 7 CFR 273.4(c)(3)(iv), 
7 CFR 273.4(c)(3)(vii), 7 CFR 273.9(b)(1)(vi), and 7 CFR 
273.9(c)(3)(ii)(A).
    (v) State agencies may implement all other amendments on or after 
the effective date.
    (vi) State agencies that implemented discretionary provisions, 
either under existing regulations or policy guidance issued by the 
Department, prior to the publication of this final rule have until 
August 1, 2010 to amend their policies to conform to the final rule 
requirements.

0
3. Section 272.2 is amended by adding a new paragraph (d)(1)(xvi) to 
read as follows:


Sec.  272.2  Plan of operation.

* * * * *
    (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 273.26 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

0
4. The authority citation for part 273 continues to read as follows:

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

0
5. Designate Sec. Sec.  273.1 and 273.2 as Subpart A of part 273 and 
add a subpart heading to read as follows:

Subpart A--General Rules

0
6. In Sec.  273.2:
0
a. Paragraph (c)(3) is amended by adding three new sentences after the 
second sentence.
0
b. Paragraph (f)(1)(xii) is amended by adding four new sentences after 
the third sentence.
0
c. Paragraph (f)(2)(iii) is removed.
0
d. A new paragraph (f)(4)(v) is added.
0
e. Paragraph (f)(8)(i)(A) is revised.
    The additions and revision 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, Public 
Law 93-112, as amended by the Rehabilitation Act Amendments of 1974, 
Public Law 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 use information 
provided by that agency in determining a household's legal obligation 
to pay child support, the amount of its obligation and amount the 
household has actually paid. A household would not have to provide 
additional verification unless it disagrees with the data presented by 
the State CSE agency. 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 on information provided by their 
State CSE

[[Page 4947]]

agency in accordance with this paragraph (f)(1)(xii) must specify in 
their State plan of operation that they have selected this option. * * 
*
* * * * *
    (4) * * *
    (v) Homeless households. Homeless households claiming actual 
shelter expenses or those with extremely low shelter costs may provide 
verification of their shelter expenses to qualify for the homeless 
shelter deduction if the State agency has such a deduction. If a 
homeless household has difficulty in obtaining traditional types of 
verification of shelter costs, the caseworker shall use prudent 
judgment in determining if the verification obtained is adequate. For 
example, if a homeless individual claims to have incurred shelter costs 
for several nights and the costs are comparable to costs typically 
incurred by homeless people for shelter, the caseworker may decide to 
accept this information as adequate information and not require further 
verification.
* * * * *
    (8) * * *
    (i) * * *
    (A) At recertification the State agency shall verify a change in 
income if the source has changed or the amount has changed by more than 
$50. Previously unreported medical expenses, actual utility expenses 
and total recurring medical expenses which have changed by more than 
$25 shall also be verified at recertification. The State agency shall 
not verify income if the source has not changed and if the amount is 
unchanged or has changed by $50 or less, unless the information is 
incomplete, inaccurate, inconsistent or outdated. The State agency 
shall also not verify total medical expenses, or actual utility 
expenses claimed by households which are unchanged or have changed by 
$25 or less, unless the information is incomplete, inaccurate, 
inconsistent or outdated. For households eligible for the child support 
deduction or exclusion, the State agency may use 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. A household would not have to provide any additional 
verification unless they disagreed with the information provided by the 
State CSE agency. State agencies that choose to use 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. For all other households eligible for the 
child support deduction or exclusion, the State agency shall require 
the household to verify any changes in the legal obligation to pay 
child support, the obligated amount, and the amount of legally 
obligated child support a household member pays to a nonhousehold 
member. The State agency shall verify reportedly unchanged child 
support information only if the information is incomplete, inaccurate, 
inconsistent or outdated.
* * * * *

0
7. Designate Sec. Sec.  273.3 and 273.4 as Subpart B of part 273 and 
add a subpart heading to read as follows:

Subpart B--Residency and Citizenship

0
8. In Sec.  273.4:
0
a. Paragraphs (a)(5) and (a)(6) are redesignated as paragraphs (a)(6) 
and (a)(7) respectively.
0
b. A new paragraph (a)(5) is added.
0
c. Newly redesignated paragraph (a)(6) is revised.
0
d. Newly redesignated paragraph (a)(7) is amended by removing the words 
``and (a)(5)(ii)(H) through (a)(5)(ii)(J)'' and adding in their place 
``and (a)(6)(ii)(I).''
0
e. Paragraph (c)(2) introductory text is amended by removing the words 
``paragraph (a)(5)(ii)(A)'' and adding in their place ``paragraph 
(a)(6)(ii)(A)''.
0
f. Paragraph (c)(2)(v) is amended by adding a new sentence to the end 
of the paragraph.
0
g. Paragraph (c)(3)(iv) is amended by adding three 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.
0
h. A new paragraph (c)(3)(vi) is added.
0
i. A new paragraph (c)(3)(vii) is added.
    The revision and additions read as follows:


Sec.  273.4  Citizenship and alien status.

    (a) * * *
    (5) An individual who is:
    (i) An alien who has been subjected to a severe form of trafficking 
in persons and who is certified by the Department of Health and Human 
Services, to the same extent as an alien who is admitted to the United 
States as a refugee under Section 207 of the INA; or
    (ii) An alien who has been subjected to a severe form of 
trafficking in persons and who is under the age of 18, to the same 
extent as an alien who is admitted to the United States as a refugee 
under Section 207 of the INA;
    (iii) The spouse, child, parent or unmarried minor sibling of a 
victim of a severe form of trafficking in persons under 21 years of 
age, and who has received a derivative T visa, to the same extent as an 
alien who is admitted to the United States as a refugee under Section 
207 of the INA; or
    (iv) The spouse or child of a victim of a severe form of 
trafficking in persons 21 years of age or older, and who has received a 
derivative T visa, to the same extent as an alien who is admitted to 
the United States as a refugee under Section 207 of the INA; or
    (6) An individual who is both a qualified alien as defined in 
paragraph (a)(6)(i) of this section and an eligible alien as defined in 
paragraph (a)(6)(ii) or (a)(6)(iii) of this section.
    (i) A qualified alien is:
    (A) An alien who is lawfully admitted for permanent residence under 
the INA;
    (B) An alien who is granted asylum under section 208 of the INA;
    (C) A refugee who is admitted to the United States under section 
207 of the INA;
    (D) An alien who is paroled into the U.S. under section 212(d)(5) 
of the INA for a period of at least 1 year;
    (E) An alien whose deportation is being withheld under section 
243(h) of the INA as in effect prior to April 1, 1997, or whose removal 
is withheld under section 241(b)(3) of the INA;
    (F) An alien who is granted conditional entry pursuant to section 
203(a)(7) of the INA as in effect prior to April 1, 1980;
    (G) An alien who has been battered or subjected to extreme cruelty 
in the U.S. by a spouse or a parent or by a member of the spouse or 
parent's family residing in the same household as the alien at the time 
of the abuse, an alien whose child has been battered or subjected to 
battery or cruelty, or an alien child whose parent has been battered; 
\2\ or
---------------------------------------------------------------------------

    \2\ For guidance, see Exhibit B to Attachment 5 of the DOJ 
Interim Guidance published at 62 FR 61344 on November 17, 1997.
---------------------------------------------------------------------------

    (H) An alien who is a Cuban or Haitian entrant, as defined in 
section 501(e) of the Refugee Education Assistance Act of 1980.
    (ii) A qualified alien, as defined in paragraph (a)(6)(i) of this 
section, is eligible to receive food stamps and is not subject to the 
requirement to be in qualified status for 5 years as set forth in 
paragraph (a)(6)(iii) of this section, if such individual meets at 
least one of the criteria of this paragraph (a)(6)(ii):
    (A) An alien age 18 or older lawfully admitted for permanent 
residence under

[[Page 4948]]

the INA who has 40 qualifying quarters as determined under Title II of 
the SSA, including qualifying quarters of work not covered by Title II 
of the SSA, based on the sum of: quarters the alien worked; quarters 
credited from the work of a parent of the alien before the alien became 
18 (including quarters worked before the alien was born or adopted); 
and quarters credited from the work of a spouse of the alien during 
their marriage if they are still married or the spouse is deceased.
    (1) A spouse may not get credit for quarters of a spouse when the 
couple divorces prior to a determination of food stamp eligibility. 
However, if the State agency determines eligibility of an alien based 
on the quarters of coverage of the spouse, and then the couple 
divorces, the alien's eligibility continues until the next 
recertification. At that time, the State agency must determine the 
alien's eligibility without crediting the alien with the former 
spouse's quarters of coverage.
    (2) After December 31, 1996, a quarter in which the alien actually 
received any Federal means-tested public benefit, as defined by the 
agency providing the benefit, or actually received food stamps is not 
creditable toward the 40-quarter total. Likewise, a parent's or 
spouse's quarter is not creditable if the parent or spouse actually 
received any Federal means-tested public benefit or actually received 
food stamps in that quarter. The State agency must evaluate quarters of 
coverage and receipt of Federal means-tested public benefits on a 
calendar year basis. The State agency must first determine the number 
of quarters creditable in a calendar year, then identify those quarters 
in which the alien (or the parent(s) or spouse of the alien) received 
Federal means-tested public benefits and then remove those quarters 
from the number of quarters of coverage earned or credited to the alien 
in that calendar year. However, if the alien earns the 40th quarter of 
coverage prior to applying for food stamps or any other Federal means-
tested public benefit in that same quarter, the State agency must allow 
that quarter toward the 40 qualifying quarters total;
    (B) An alien admitted as a refugee under section 207 of the INA;
    (C) An alien granted asylum under section 208 of the INA;
    (D) An alien whose deportation is withheld under section 243(h) of 
the INA as in effect prior to April 1, 1997, or whose removal is 
withheld under section 241(b)(3) or the INA;
    (E) An alien granted status as a Cuban or Haitian entrant (as 
defined in section 501(e) of the Refugee Education Assistance Act of 
1980);
    (F) An Amerasian admitted pursuant to section 584 of Public Law 
100-202, as amended by Public Law 100-461;
    (G) An alien with one of the following military connections:
    (1) A veteran who was honorably discharged for reasons other than 
alien status, who fulfills the minimum active-duty service requirements 
of 38 U.S.C. 5303A(d), including an individual who died in active 
military, naval or air service. The definition of veteran includes an 
individual who served before July 1, 1946, in the organized military 
forces of the Government of the Commonwealth of the Philippines while 
such forces were in the service of the Armed Forces of the U.S. or in 
the Philippine Scouts, as described in 38 U.S.C. 107;
    (2) An individual on active duty in the Armed Forces of the U.S. 
(other than for training); or
    (3) The spouse and unmarried dependent children of a person 
described in paragraphs (a)(6)(ii)(G)(1) or (a)(6)(ii)(G)(2) of this 
section, including the spouse of a deceased veteran, provided the 
marriage fulfilled the requirements of 38 U.S.C. 1304, and the spouse 
has not remarried. An unmarried dependent child for purposes of this 
paragraph (a)(6)(ii)(G)(3) is: a child who is under the age of 18 or, 
if a full-time student, under the age of 22; such unmarried dependent 
child of a deceased veteran provided such child was dependent upon the 
veteran at the time of the veteran's death; or an unmarried disabled 
child age 18 or older if the child was disabled and dependent on the 
veteran prior to the child's 18th birthday. For purposes of this 
paragraph (a)(6)(ii)(G)(3), child means the legally adopted or 
biological child of the person described in paragraph (a)(6)(ii)(G)(1) 
or (a)(6)(ii)(G)(2) of this section.
    (H) An individual who is receiving benefits or assistance for 
blindness or disability (as specified in Sec.  271.2 of this chapter).
    (I) An individual who on August 22, 1996, was lawfully residing in 
the U.S., and was born on or before August 22, 1931; or
    (J) An individual who is under 18 years of age.
    (iii) The following qualified aliens, as defined in paragraph 
(a)(6)(i) of this section, must be in a qualified status for 5 years 
before being eligible to receive food stamps. The 5 years in qualified 
status may be either consecutive or nonconsecutive. Temporary absences 
of less than 6 months from the United States with no intention of 
abandoning U.S. residency do not terminate or interrupt the 
individual's period of U.S. residency. If the resident is absent for 
more than 6 months, the agency shall presume that U.S. residency was 
interrupted unless the alien presents evidence of his or her intent to 
resume U.S. residency. In determining whether an alien with an 
interrupted period of U.S. residency has resided in the United States 
for 5 years, the agency shall consider all months of residency in the 
United States, including any months of residency before the 
interruption:
    (A) An alien age 18 or older lawfully admitted for permanent 
residence under the INA.
    (B) An alien who is paroled into the U.S. under section 212(d)(5) 
of the INA for a period of at least 1 year;
    (C) An alien who has been battered or subjected to extreme cruelty 
in the U.S. by a spouse or a parent or by a member of the spouse or 
parent's family residing in the same household as the alien at the time 
of the abuse, an alien whose child has been battered or subjected to 
battery or cruelty, or an alien child whose parent has been battered;
    (D) An alien who is granted conditional entry pursuant to section 
203(a)(7) of the INA as in effect prior to April 1, 1980.
    (iv) Each category of eligible alien status stands alone for 
purposes of determining eligibility. Subsequent adjustment to a more 
limited status does not override eligibility based on an earlier less 
rigorous status. Likewise, if eligibility expires under one eligible 
status, the State agency must determine if eligibility exists under 
another status.
* * * * *
    (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 or a citizen child of a sponsored alien who is exempt 
from deeming in accordance with paragraphs (c)(3)(vi) or (c)(3)(vii) 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 
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. The State agency must inform the sponsored alien of the 
consequences of refusing

[[Page 4949]]

this determination. * * * 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) A sponsored alien child under 18 years of age of a sponsored 
alien.
    (vii) A citizen child under age 18 of a sponsored alien.
* * * * *

0
9. Designate Sec. Sec.  273.5, 273.6, and 273.7 as Subpart C of part 
273 and add a subpart heading to read as follows:

Subpart C--Education and Employment

0
10. Designate Sec. Sec.  273.8, 273.9, 273.10, and 273.11 as Subpart D 
of part 273 and add a subpart heading to read as follows:

Subpart D--Eligibility and Benefit Levels

0
11. Section 273.8 is amended in paragraph (b) after the words ``for 
households including'' by adding ``one or more disabled members or'' 
and by adding a new paragraph (e)(19) 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 TANF cash 
assistance, as defined by 45 CFR 260.31 (a)(1) and (a)(2), or medical 
assistance under Section 1931 of the SSA. Resource exclusions under 
TANF and Section 1931 programs that do not evaluate the financial 
circumstances of adults in the household and programs grandfathered 
under Section 404(a)(2) of the SSA shall not be excluded under this 
paragraph (e)(19). Additionally, licensed vehicles not excluded under 
Section 5(g)(2)(C) or (D) of the Food Stamp Act of 1977, as amended (7 
U.S.C. 2014(g)(2)(C) or (D)), 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 shall also not be excluded. The term ``readily 
available'' applies to resources that the owner can simply withdraw 
from a financial institution. State agencies may exclude deposits in 
individual development accounts (IDAs). 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.
* * * * *

0
12. In Sec.  273.9:
0
a. Paragraph (b)(1)(vi) is amended by adding a new sentence to the end 
of the paragraph.
0
b. Paragraph (c)(3)(ii) is amended by redesignating paragraphs 
(c)(3)(ii)(A) and (c)(3)(ii)(B) as paragraphs (c)(3)(ii)(B) and 
(c)(3)(ii)(C), respectively and adding a new paragraph (c)(3)(ii)(A).
0
c. Paragraph (c)(3)(iii), first sentence is amended by removing the 
reference ``paragraph (c)(3)(ii)(B)'' and adding in its place the 
reference ``paragraph (c)(3)(ii)(C)''.
0
d. A new paragraph (c)(3)(v) is added.
0
e. New paragraphs (c)(17), (c)(18) and (c)(19) are added.
0
f. Paragraph (d)(1) is revised.
0
g. Paragraph (d)(2) is amended by revising the second sentence.
0
h. Paragraph (d)(5) is revised.
0
i. Paragraph (d)(6) is amended by revising the paragraph heading.
0
j. Paragraph (d)(6)(i) is amended by revising the first sentence and 
adding a new sentence at the end of the paragraph.
0
k. Paragraph (d)(6)(iii)(C) is amended by adding at the end of the 
third sentence the words ``unless the State agency mandates the use of 
standard utility allowances in accordance with paragraph (d)(6)(iii)(E) 
of this section''.
0
l. Paragraph (d)(6)(iii)(E) is amended by removing the fifth sentence 
and adding four new sentences after the second sentence.
0
m. 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 and capitalizing the next word, ``The''.
    The additions and revisions read as follows:


Sec.  273.9   Income and deductions.

* * * * *
    (b) * * *
    (1) * * *
    (vi) * * * Earned income from work study programs that are funded 
under section 20 U.S.C. 1087uu of the Higher Education Act is excluded.
* * * * *
    (c) * * *
    (3) * * *
    (ii) * * *
    (A) Received under 20 CFR 1087uu. This exemption includes student 
assistance received under part E of subchapter IV of Chapter 28 of 
title 20 and part C of subchapter I of chapter 34 of title 42, or under 
Bureau of Indian Affairs student assistance programs.
* * * * *
    (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 SSA for a program funded under 
Title XIX of the SSA. 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 TANF 
cash assistance as defined by 45 CFR 260.31(a)(1) and (a)(2), or 
medical assistance under Section 1931 of the SSA, (but not for programs 
that do not evaluate the financial circumstances of adults in the 
household and programs grandfathered under Section 404(a)(2) of the 
SSA). The State agency must exclude for food stamp purposes the same 
amount of income it excludes for TANF or

[[Page 4950]]

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. The State agency shall not exclude:
    (i) Wages or salaries;
    (ii) Gross income from a self-employment enterprise, including the 
types of income referenced in paragraph (b)(1)(ii) of this section. 
Determining monthly income from self-employment must be calculated in 
accordance with Sec.  273.11(a)(2);
    (iii) Benefits under Title I, II, IV, X, XIV or XVI of the SSA, 
including supplemental security income (SSI) benefits, TANF benefits, 
and foster care and adoption payments from a government source;.
    (iv) Regular payments from a government source. Payments or 
allowances a household receives from an intermediary that are funded 
from a government source are considered payments from a government 
source;
    (v) Worker's compensation;
    (vi) Child support payments, support or alimony payments made to 
the household from a nonhousehold member;
    (vii) Annuities, pensions, retirement benefits;
    (viii) Disability benefits or old age or survivor benefits; and
    (ix) Monies withdrawn or dividends received by a household from 
trust funds considered to be excludable resources under Sec.  
273.8(e)(8).
    (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 
eligibility standard for each household size established under 
paragraph (a)(2) of this section rounded up 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 eligibility standard for each 
household size for the 48 States and the District of Columbia 
established under paragraph (a)(2) of this section rounded up 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) * * * 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 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. * * *

0
13. In Sec.  273.10:
0
a. The introductory text of paragraph (d) is revised.
0
b. Paragraph (d)(8) is revised.
0
c. Paragraph (e)(1)(i)(B) is amended by adding a new sentence to the 
end of the paragraph.
0
d. Paragraph (e)(1)(i)(F) is revised.
0
e. The introductory text of paragraph (f) is revised.
0
f. Paragraph (f)(4) is revised.
    The revisions and addition read as follows:


Sec.  273.10  Determining household eligibility and benefit levels.

* * * * *
    (d) Determining deductions. 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 an income deduction rather than an income 
exclusion for legally obligated child support payments in accordance 
with Sec.  273.9(d)(5), the State agency may budget such payments 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) * * *

[[Page 4951]]

    (i) * * *
    (B) * * * If the State agency has chosen to treat legally obligated 
child support payments as an income exclusion in accordance with Sec.  
273.9(c)(17), multiply the excluded earnings used to pay child support 
by 20 percent 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) Certification periods. The State agency must certify each 
eligible household for a definite period of time. State agencies must 
assign the longest certification period possible based on the 
predictability of the household's circumstances. The first month of the 
certification period will be the first month for which the household is 
eligible to participate. The certification period cannot exceed 12 
months except to accommodate a household's transitional benefit period 
and as specified in paragraphs (f)(1) and (f)(2) of this section.
* * * * *
    (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 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 Subpart H, 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.  273.28(b). 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 but shall 
specify in the transitional notice required under Sec.  273.29 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.
* * * * *

0
14. In Sec.  273.11:
0
a. Paragraph (c)(1)(ii) is amended by redesignating paragraphs 
(c)(1)(ii)(B) and (c)(1)(ii)(C) as paragraphs (c)(1)(ii)(C) and 
(c)(1)(ii)(D), respectively, and adding a new paragraph (c)(1)(ii)(B).
0
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;
* * * * *

0
15. Designate Sec. Sec.  273.12, 273.13, and 273.14 as Subpart E of 
part 273 and add a subpart heading to read as follows:

Subpart E--Continuing Participation

0
16. In Sec.  273.12:
0
a. The heading is revised;
0
b. Paragraph (a)(1) introductory text is amended by adding a sentence 
after the second sentence;
0
c. Paragraph (a)(1)(vi) is amended by adding a new sentence to the end 
of the paragraph;
0
d. Paragraph (a)(1)(vii) is removed and paragraph (a)(1)(viii) is 
redesignated as paragraph (a)(1)(vii);
0
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;
0
f. Newly redesignated paragraph (a)(6) introductory text is amended by 
removing the first sentence and by adding four new sentences to the 
beginning of the paragraph;
0
g. A new paragraph (b)(1)(vi) is added;
0
h. Paragraph (b)(2) is revised;
0
i. The introductory text of paragraph (c) is amended by:
0
1. Removing the word ``shall'' in the second sentence and adding in its 
place the word ``may'';
0
2. Removing the word ``However,'' at the beginning of the fourth 
sentence and capitalizing the next word, ``During''; and
0
3. Adding one new sentence after the first sentence.
0
j. A new paragraph (c)(4) is added;
0
k. Paragraph (f)(4) is removed.
    The additions and revisions read as follows:


Sec.  273.12  Reporting requirements.

    (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 use 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).
* * * * *
    (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.
    (ii) Notification of simplified reporting requirement. At the 
initial certification, recertification and when the State agency 
transfers the households to simplified reporting, the State agency 
shall provide the household with the following:
    (A) A written and oral explanation of how simplified reporting 
works;
    (B) A written and oral explanation of the reporting requirements 
including:
    (1) What needs to be reported and verified;
    (2) When the report is due;
    (3) How to obtain assistance; and
    (4) The consequences of failing to file a report.
    (C) Special assistance in completing and filing periodic reports to

[[Page 4952]]

households whose adult members are all either mentally or physically 
handicapped or are non-English speaking or otherwise lacking in reading 
and writing skills such that they cannot complete and file the required 
report; and
    (D) A telephone number (toll-free number or a number where collect 
calls will be accepted outside the local calling area) which the 
household may call to ask questions or to obtain help in completing the 
periodic report.
    (iii) Periodic report. (A) The State agency may require a household 
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, except for households in 
which all adults are elderly or disabled with no earned income, a 
household certified for more than 6 months must submit a periodic 
report at least once every 6 months. Households in which all adults are 
elderly or disabled with no earned income must not be required to 
submit periodic reports more frequently than once a year.
    (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 and conform to 
the requirements of paragraph (b)(2) 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 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)(v) 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) Processing periodic reports. In selecting a due date for the 
periodic report, the State agency must provide itself sufficient time 
to process reports so that households will receive adequate notice of 
action on the report in the first month of the new reporting period.
    (v) 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). The household shall use the monthly gross income limit for 
the household size that existed at the time of its most recent 
certification or recertification, regardless of any subsequent changes 
in its household size.
    (vi) 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).
    (vii) 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) 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 use 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. A household would not have to provide any 
additional verification unless they disagreed with the information 
provided by the State CSE agency. State agencies that choose to utilize 
information provided by their State CSE agency in accordance with this 
paragraph (a)(6) must specify in their State plan of operation that 
they have selected this option. If the State agency chooses not to 
utilize information provided by its State CSE agency, the State agency 
may make reporting child support payments an optional change reporting 
item in accordance with paragraph (a)(5) of this section. * * *
* * * * *
    (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)(5)(ii) of this 
section, must:
    (i) Be written in clear, simple language;
    (ii) Meet the bilingual requirements described in Sec.  272.4(b) of 
this chapter;
    (iii) Specify the date by which the agency must receive the form;

[[Page 4953]]

    (iv) Specify the consequences of submitting a late or incomplete 
form including whether the State agency shall delay payment if the form 
is not received by a specified date;
    (v) Specify the verification the household must submit with the 
form;
    (vi) Inform the household where to call for help in completing the 
form;
    (vii) Include a statement to be signed by a member of the household 
indicating his or her understanding that the information provided may 
result in a reduction or termination of benefits;
    (viii) Include a brief description of the Food Stamp Program fraud 
penalties;
    (ix) Include a statement explaining that the State agency will not 
change certain deductions until the household's next recertification 
and identify those deductions if the State agency has chosen to 
disregard reported changes that affect certain deductions in accordance 
with paragraph (c) of this section;
    (x) If the form requests Social Security numbers, include a 
statement of the State agency's authority to require Social Security 
numbers (including the statutory citation, the title of the statute, 
and the fact that providing Social Security numbers is mandatory), the 
purpose of requiring Social Security numbers, the routine uses for 
Social Security numbers, and the effect of not providing Social 
Security numbers. This statement may be on the form itself or included 
as an attachment to the form.
* * * * *
    (c) * * * However, the State agency has the option to disregard a 
reported change to an established deduction in accordance with 
paragraph (c)(4) of this section. * * *
* * * * *
    (4) State agency option for processing changes in deductible 
expenses. (i) If the household reports a change to an established 
deduction amount during the first six months of the certification 
period, other than a change in earnings or residence, that would affect 
the household's eligibility for, or amount of, the 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 
or after the sixth month for households certified for 12 months. When a 
household reports a change in residence, the State agency must 
investigate and take action on potential changes in shelter costs 
arising from this reported change. However, if a household fails to 
provide information regarding the associated changes in shelter costs 
within 10 days of the report, the State agency should send a notice to 
the household that their allotment will be recalculated without the 
deduction. The notice will make it clear that the household does not 
need to await its first regular utility or rental payments to contact 
the food stamp office. Alternative forms of verification can be 
accepted, if necessary.
    (ii) 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.
    (iii) 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.
    (iv) 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 new deductions, changes in earned income or 
changes in shelter costs arising from a reported change in residence 
until the household's next recertification or after the sixth month of 
a 12-month certification period but must act on those reports in 
accordance with paragraphs (c)(1) and (c)(2) of this section. When a 
household reports a change in residence, the State agency must 
investigate and take action on potential changes in shelter costs 
arising from this reported change. However, if a household fails to 
provide information regarding the associated changes in shelter costs 
within 10 days of the report, the State agency should send a notice to 
the household that their allotment will be recalculated without the 
deduction. The notice will make it clear that the household does not 
need to await its first regular utility or rental payments to contact 
the food stamp office. Alternative forms of verification can be 
accepted, if necessary.
    (v) 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.
* * * * *

0
17. Designate Sec. Sec.  273.15, 273.16, 273.17, 273.18, and 273.19 as 
Subpart F of part 273 and add a subpart heading to read as follows:

Subpart F--Disqualification and Claims

0
18. Designate Sec. Sec.  273.20, 273.21, 273.22, 273.23, 273.24, and 
273.25 as Subpart G of part 273 and add a subpart heading to read as 
follows:

Subpart G--Program Alternatives

0
19. Add Subpart H to read as follows:
Subpart H--The Transitional Benefits Alternative
Sec.
273.26 General eligibility guidelines.
273.27 General administrative guidelines.
273.28 Application for Food Stamp Program recertification.
273.29 Transitional notice requirements.
273.30 Transitional benefit alternative change reporting 
requirements.
273.31 Closing the transitional period.
273.32 Households who return to TANF during the transitional period.

Subpart H--The Transitional Benefits Alternative


Sec.  273.26  General eligibility guidelines.

    The State agency may elect to provide households leaving TANF with 
transitional food stamp benefits as provided in this section. 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, the maximum 
number of months for which transitional benefits will be provided and 
any other items required to be included under this subpart H. 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;
    (c) All household members are ineligible to receive food stamps 
because they are:

[[Page 4954]]

    (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) Receiving SSI in a cash-out State in accordance with Sec.  
273.20;
    (4) Ineligible students in accordance with Sec.  273.5;
    (5) Ineligible aliens in accordance with Sec.  273.4;
    (6) Disqualified for failing to provide information necessary for 
making a 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) Disqualified for knowingly transferring resources for the 
purpose of qualifying or attempting to qualify for the program as 
provided at Sec.  273.8(h);
    (8) Disqualified for receipt of multiple food stamps;
    (9) Disqualified for being a fleeing felon in accordance with Sec.  
273.11(n); or
    (10) Able-bodied adults without dependents who fail to comply with 
the requirements of Sec.  273.24;
    (d) The State agency has the option to exclude households where all 
household members are ineligible to receive food stamps because they 
are:
    (1) Disqualified 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);
    (2) Ineligible for failing to cooperate with child support agencies 
in accordance with Sec.  273.11(o) and (p); or
    (3) Ineligible for being delinquent in court-ordered child support 
in accordance with Sec.  273.11(q).
    (e) The State agency must use procedures at Sec.  273.12(f)(3) to 
determine the continued eligibility and benefit level of households 
denied transitional benefits under this section 273.26.


Sec.  273.27  General administrative guidelines.

    (a) 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 transitional 
period. 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). Before initiating the transitional 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 to account 
for:
    (1) Changes in household circumstances that it learns about from 
another State or Federal means-tested assistance program in which the 
household participates; or
    (2) Automatic annual changes in the food stamp benefit rules, such 
as the annual cost of living adjustment.
    (b) The State agency must include in its State plan of operation 
whether it has elected to make these changes:
    (1) At the beginning of the transitional period; or
    (2) Both at the beginning and during the transitional period.
    (c) 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 
transitional 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 Sec.  273.29 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.


Sec.  273.28  Application for Food Stamp Program recertification.

    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 
in accordance with Sec.  273.2(f).
    (c) Households that have met all of the required application 
procedures shall be notified of their eligibility or ineligibility as 
soon as possible, but no later than 30 calendar days following the date 
the application was filed.
    (1) If the State agency does not determine a household's 
eligibility and provide an opportunity to participate within 30 days 
following the date the application was filed, the State agency shall 
continue processing the application while continuing the household's 
transitional benefits.
    (2) If the application process cannot be completed due to State 
agency fault, the State agency must continue to process the application 
and provide a full month's allotment for the first month of the new 
certification period. The State agency shall determine cause for any 
delay in processing a recertification application in accordance with 
the provisions of Sec.  273.2(h)(1).
    (d) If the application process cannot be completed because the 
household failed to take a required action, the State agency may deny 
the application at that time or at the end of the 30 days. If 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 a RFC in accordance with Sec.  273.31;
    (e) 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 has the option to deny the application and allow the 
transitional period to run its course, or complete the recertification 
process and issue the household the lower benefit amount beginning with 
the first month of the new certification period.
    (f) 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 5-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.
    (g) 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,

[[Page 4955]]

the State agency must issue the household a supplement.
    (h) Applications for recertification submitted in the final month 
of the transitional period must be processed in accordance with Sec.  
273.14.


Sec.  273.29  Transitional notice requirements.

    The State agency must issue a transitional 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, the State agency must, 
at the end of the transitional period, 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 Sec.  273.27(c), 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 Sec.  
273.12(c)(3) 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 Sec.  273.29(e) 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.


Sec.  273.30   Transitional benefit alternative change reporting 
requirements.

    If the household does report changes in its circumstances during 
the transitional period, the State agency may make the change effective 
the month following the last month of the transitional period or invite 
the household to reapply and be certified to receive benefits. 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. Moreover, the State 
agency must remove any income, resources and deductible expenses 
clearly attributable to the departing member.


Sec.  273.31  Closing the transitional period.

    In the final month of the transitional benefit period, the State 
agency must do one of the following:
    (a) Issue the RFC specified in Sec.  273.12(c)(3) and act on any 
information it has about the household's new circumstances in 
accordance with Sec.  273.12(c)(3). 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 
Sec.  273.27(a); 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).


Sec.  273.32  Households who return to TANF during the transitional 
period.

    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 Sec.  
273.31 to determine the household's continued eligibility and benefits 
for the Food Stamp Program. This includes processing the application 
within 30 days. However, for a household assigned a new certification 
period in accordance with Sec.  273.27(c), the household must be 
recertified if it returns to TANF during its transitional period.

    Dated: January 11, 2010.
Kevin Concannon,
Under Secretary, Food, Nutrition, and Consumer Services.

    Note: The following attachment will not appear in the Code of 
Federal Regulations.

Regulatory Impact Analysis--Sections 4101 through 4401

    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 amends Food Stamp 
Program (FSP) regulations to implement 11 provisions of FSRIA that 
establish new eligibility and certification requirements for the 
receipt of food stamps. The Department has estimated the total FSP 
costs to the Government of the FSRIA provisions implemented in the 
final rule as $2.669 billion in fiscal year (FY) 2010 and $13.541 
billion over the 5 years FY 2010 through FY 2014. These impacts are 
already incorporated into the President's budget baseline.

Encouragement of Payment of Child Support--Section 4101

    Discussion: 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 non-household member. 
This provision gives State agencies the option of treating such 
payments as either an income exclusion or an income deduction. The rule 
provides that: (1) A household can receive an exclusion or deduction 
only for legally obligated child support payments paid by a household 
member to or for a non-household member, including payments made to a 
third party on behalf of the non-household member (vendor payments); 
(2) no exclusion or deduction is allowed for any amounts the household 
member is not legally obligated to pay; (3) State agencies may 
determine what constitutes a legal obligation to pay child support 
under State law; (4) an exclusion or deduction is allowed for amounts 
paid toward child support arrearages; (5) if the State agency opts to 
provide households a deduction for legally obligated child support 
payments rather than an exclusion, the deduction must be determined 
before computation of the excess shelter deduction; and (6) State 
agencies may, in determining a household's legal obligation to pay 
child support, the amount of its obligation, and amounts the household 
has actually paid, rely solely on information provided through its 
State's Child

[[Page 4956]]

Support Enforcement agency and not require further reporting or 
verification by the household.
    Effect on Low-Income Families: The effect of this provision on low-
income families will depend on their State of residence. Families that 
live in States that choose to treat child support payments as a 
deduction from income will see no change in their eligibility or 
benefit. Some families that live in States that elect to exclude child 
support payments from countable income may become eligible if the 
exclusion lowers their gross income below 130 percent of the poverty 
guidelines.
    Cost Impact: The cost to the Government of this provision is 
minimal (less than $1 million) in FY 2010 and over the 5 years FY 2010 
through FY 2014. These impacts are already incorporated into the 
President's budget baseline.
    To estimate the effect of this provision, we used a micro-
simulation model and data from the U.S. Census Bureau's Survey of 
Income and Program Participation (SIPP) which includes information on 
household income and expenses. We simulated the impact of excluding all 
child support payments, rather than deducting these payments, when 
determining household FSP eligibility and benefit levels. Among current 
participants, there is no impact; the effect of treating the payment as 
an income exclusion or as a deduction is the same in the benefit 
calculation. However, this provision could make some families newly 
eligible if their gross income is above 130 percent of the poverty 
guidelines when the child support payment is counted as income and less 
than 130 percent when the payment is excluded. Some of these newly 
eligible families may choose to participate in the FSP, potentially 
increasing program costs. In our analysis, we found a very small number 
of un-weighted cases in the SIPP data, affected by this provision. 
Estimates based on so few un-weighted cases are unreliable, but 
suggests that the number of affected households is minimal. In 
addition, the cost impact depends on the number of States that elect to 
exclude, rather than deduct, child support. As of November 2007, only 
fourteen States had made this election. Therefore, it is estimated that 
this provision will have a minimal impact on FSP costs.
    Participation Impacts: Very few households will be affected by this 
provision.
    Uncertainty: There is a moderate level of uncertainty associated 
with this estimate. While the estimate is based on a large national 
dataset, the small number of un-weighted cases affected by this 
provision introduces substantial uncertainty. However, the small number 
of affected cases indicates that the cost to the Government of this 
provision is likely to be small.

Simplified Definition of Income--Section 4102

    Discussion: This provision adds three new categories of income 
that, at the option of the State agency, may be excluded from household 
income in determining a household's eligibility for FSP and its benefit 
levels. The three categories of income are:
    (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 as well 
as student financial assistance received under 20 U.S.C. 1087uu of the 
Higher Education Act; (2) State complementary assistance program 
payments excluded for the purpose of determining eligibility for 
Medicaid under section 1931 of the SSA; 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 Medicaid under 
section 1931. However, the statute provides an extensive list of income 
types that may not be excluded and gives the Secretary authority to 
propose other income types that may not be excluded. As a result, the 
rule provides that a State agency may not exclude the following types 
of income: 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), X (Grants to States for Aid to the Blind), 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 SSA; wages and salaries; regular payments from 
a government source (such as unemployment benefits and general 
assistance); worker's compensation; or legally obligated child support 
payments made to the household. This rule also allows States to include 
certain income as earned income if the household is receiving TANF cash 
assistance or Medicaid.
    Discretion was given to USDA to mandate what other types of income 
could not be excluded by States implementing this option. Of the types 
of income not explicitly included in the FSRIA, FNS is adding alimony, 
self-employment income, annuities, and pensions and retirement 
benefits. FNS could have allowed States to exclude these types of 
income but decided that they ought to be counted as income because they 
are very similar to other types of income we count (for example, 
earnings other than self-employment or child support income).
    Effect on Low-Income Families: This provision will reduce reporting 
burdens and increase benefits for low-income families that have these 
sources of income to the extent they live in States that take this 
State option.
    Cost Impact: The cost to the Government of this provision is $13 
million in FY 2010, and $65 million over the 5 years FY 2010 through FY 
2014. These impacts are already incorporated into the President's 
budget baseline.
    As stated above, there are three components of this provision. The 
first excludes education assistance excluded under the SSA Title XIX 
(Medicaid) and 20 U.S.C. 1087uu of the Higher Education Act. Relatively 
few current FSP households have income from these sources. Excluding 
this income would increase total FSP benefits by $12.5 million (0.02 
percent of projected benefit costs in fiscal year 2010) if all States 
adopted the option.
    The second component of this estimate is to exclude State 
Complementary Assistance Programs. Because there is little information 
on the State programs that fit into this category and the number of 
people who receive assistance, the provision will have an unknown, but 
we presume, minimal impact.
    The third component is the option to allow States to exclude some 
types of income excluded in their cash assistance and Medicaid 
programs. The Congressional Budget Office estimates this provision 
would cost $2 million a year; USDA has concurred with this estimate.
    Each of the estimates shown above represents full-year national 
costs if all States adopt all options. Since passage of the FSRIA, 29 
States have implemented one or more of the options, representing 90.6 
percent of total issuance in fiscal year 2006. We therefore take only 
90.6 percent of the estimated costs of each provision. Therefore the 
total impact of this provision is $13 million in FY 2010 and $65 
million over the 5 years FY 2010 through FY 2014.
    Participation Impacts: We expect minimal effects of these 
provisions on participation. None of the optional income exclusions are 
likely to make many more households eligible. Some unknown but small 
number of current

[[Page 4957]]

participants will receive somewhat higher benefits.
    Uncertainty: There is a moderate level of uncertainty associated 
with this estimate. While part of the estimate is based on a large 
national dataset, the small number of un-weighted cases affected by 
these provisions introduces substantial uncertainty. However, the small 
number of affected cases indicates that the cost to the Government of 
this provision is likely to be small.
    Alternatives: FNS considered whether or not to allow States to 
exclude alimony, self-employment income, annuities, and pensions and 
retirement benefits from household income. The final rule does not 
allow States to exclude these types of income because they are believed 
to be very similar to other types of income that are counted.

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 FSP's monthly net income limit for 
household sizes up to six; (2) for Guam, the standard deduction will be 
equal to 8.31 percent of twice the FSP's monthly net income limit 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 FSP benefit by 
allowing them to claim a larger standard deduction and to obtain higher 
FSP 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 $424 million in FY 2010 and $2.510 billion over the 5 
years, FY 2010 through FY 2014. These impacts are already incorporated 
into the President's 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 U.S. 
Department of Health and Human Services (DHHS) and used for FSP 
eligibility standards. The poverty guidelines used for setting the FY 
2010 FSP net income limits were published on January 23, 2009. The 
poverty threshold values for use in FY 2011 and beyond were calculated 
by inflating the FY 2010 values by the Consumer Price Index for All 
Urban Consumers as forecasted in the Office of Management and Budget's 
economic assumptions. For each household size and for each year, these 
values were multiplied by 8.31 percent. Comments received on the 
proposed rule suggested that the result be rounded up to the nearest 
whole dollar to ensure that no household be given a standard deduction 
less than 8.31 percent. This comment is incorporated into the final 
rule. Therefore, beginning in FY 2008, the result was rounded up to the 
nearest whole dollar. The rounded product was then compared to the 
current standard deduction value of $134, the higher of which was 
adopted as the new standard deduction for each household size. (For 
example, the monthly poverty threshold for a five-person household is 
$2,149 in FY 2010. Multiplying this value by 8.31 percent and rounding 
up yields a product of $179, which is larger than the standard 
deduction value of $134. The new standard deduction value for these 
households is $179.

   Expected Dollar Increase in the FSP Standard Deduction by Household Size and Fiscal Years 2010 Through 2014
----------------------------------------------------------------------------------------------------------------
         Household size                2010            2011            2012            2013            2014
----------------------------------------------------------------------------------------------------------------
1 person........................               0               0               0               0               0
2 persons.......................               0               0               0               0               0
3 persons.......................               0               0               0               1               4
4 persons.......................              19              22              25              28              32
5 persons.......................              45              48              52              56              60
6+ persons......................              71              74              79              83              88
----------------------------------------------------------------------------------------------------------------

    Second, the number of households affected for each household size 
and in each year was estimated based on participation projections from 
the President's budget baseline. The projections were adjusted based on 
data on the proportion of households of each size not receiving the 
maximum allotment, from Characteristics of Food Stamp Households: 
Fiscal Year 2007. Households already receiving the maximum allotment 
are excluded because their benefits cannot increase even though the 
larger standard deduction decreases their net income. [For example, 5.3 
percent of all households included five members in 2007, 18.5 percent 
of which received the maximum benefit. The projected total number of 
FSP households in 2010 is 15,896,000. Thus, the number of five-person 
households affected by the provision in FY 2010 was calculated as 
15,896,000 households times 5.3 percent (in five-person households) 
times 81.5 percent (not receiving the maximum benefit)--equal to 
687,000 five-person households.]
    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 for each household size, the number of households 
affected, 12 months, and a benefit reduction rate of 39 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 can 
change the shelter deduction for some households. In 2007, about 60 
percent of food stamp households claimed 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 40 percent of food stamp households did not claim a shelter 
deduction or already receive the maximum shelter deduction allowable. 
Among these households, the benefit reduction rate is 30 percent. 
Taking the weighted average of these two groups yields a benefit 
reduction rate of 39

[[Page 4958]]

percent. (For five-person households in FY 2010, the cost of this 
provision was estimated as a $45 change in the standard deduction 
($179-$134), times 687,000 households, times 12 months, times 39 
percent--equal to about $144,607 million.)
    The individual costs for each household size were summed in each 
year and rounded to the nearest million dollars.
    Participation Impacts: While we do not expect this provision to 
significantly increase FSP 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 
2010, households with four or more persons will be affected by this 
provision. 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 households affected, times the number 
of persons per households, summed across household sizes. In FY 2010, 
we expect almost 11.9 million persons to receive an average of $3.57 
more per month in food stamp benefits as a result of this provision.
    Uncertainty: Because these estimates are largely based on recent 
quality control data, they have a high level of certainty. To the 
extent that the distribution of FSP 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.
    Alternatives: The proposed rule stated that the methodology for 
calculating the standard deduction each fiscal year would be based on 
8.31 percent of the monthly net income limits for household sizes one 
through six, rounded to the nearest whole dollar (``regular rounding 
rules''). Comments received on the proposed rule pointed out, however, 
that the regular rounding rules could lead to a calculation that is 
fractionally less than 8.31 percent of the net income limit because the 
Department would round down in cases where the number of odd cents in 
the exact figure is less than 50. As a result, the final rule will 
``round up'' all fractional results to ensure that no household is 
denied a standard deduction at least ``equal to'' 8.31 percent of the 
net income limits.

Simplified Utility Allowance--Section 4104

    Discussion: This provision simplifies current rules relating to the 
SUA when the State agency elects to make the SUA mandatory. The rule 
provides that State agencies which elect to make the SUA mandatory: (1) 
May provide a 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 a 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: Relative to current regulations, 
this provision will increase the shelter deduction and raise FSP 
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 FSP benefits among low-income households with 
utility expenses greater than the SUA to the extent that they reside in 
States that 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 $532 million in FY 2010 and $2.605 billion over the 5 
years FY 2010 through FY 2014. These impacts are already incorporated 
into the President' budget baseline.
    According to individual State SUA plans, there were 11 States with 
mandatory SUA policies in FY 2002 at the time of enactment. Based on 
participant data from the National Data Bank, those 11 States contained 
approximately 25 percent of all food stamp participants in FY 2002. By 
November 2007, the number of States with mandatory SUA policies had 
grown to 40. As a result of this provision, roughly 66 percent of FSP 
participants are now subject to mandatory SUA policies. We consider 
this provision to be fully implemented by FY 2010 and attribute the 
increase in States with mandatory SUA policies since FY 2002 to this 
provision.
    The cost impact of this provision includes three components: (1) 
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; (2) increased costs due to ending the SUA proration 
requirements; and (3) increased costs due to extending the full heating 
and cooling SUA to certain households in public housing with shared 
utility meters.
    The national savings impact of limiting households with high 
utility expenses to a mandatory SUA was estimated using a micro-
simulation model with September 2005 SIPP data and current FSP program 
rules. This model was used because SIPP contains information on 
household income and expenses, including the information about 
household utility expenses necessary to estimate changes in household 
benefits resulting from changes to their excess shelter expense 
deduction value. We used this model to substitute the mandatory SUA for 
actual utility expenses. We estimate that this substitution would 
reduce total FSP benefits by 0.248 percent. We applied this percentage 
to the baseline cost projections for each year and adjusted the product 
to reflect the proportion of FSP participants (40 percent) expected to 
be made newly subject to a mandatory SUA as a result of this provision.
    The national cost impact of ending the proration requirement of the 
heating and cooling SUA was estimated using quality control data prior 
to enactment. quality control data includes information on household 
income and expenses and allows us to identify which households received 
a prorated SUA. Using this data, we calculated the change in each 
household's benefit as a result of changing the SUA proration rules and 
estimated a national increase in benefits of 1.509 percent. This 
percentage increase was multiplied by the baseline cost projections 
from the President's 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 FSP participants subject to mandatory SUA policies. As 
outlined above, we estimate that 66 percent of FSP participants were 
subject to mandatory SUA policies in FY 2007 and beyond.
    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 2010 
budget baseline. Based on tabulations of control data prior to 
enactment, 39.2 percent of households reported positive utility 
expenses lower than their State's SUA.

[[Page 4959]]

These were generally households who were claiming actual utility 
expenses rather than the SUA when determining their excess shelter 
expense deduction and were likely to be affected by this provision. 
Their average utility expenses were estimated at $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 8 percent times 5 percent) 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 FSP 
participants subject to mandatory SUA policies, approximately 66 
percent of participants.
    The impacts of the three components were summed and rounded to the 
nearest million dollars.
    Participation Impact: In FY 2010, 384,000 persons are expected to 
gain an average of $127.92 per month in FSP benefits as a result of 
this provision. In addition, 35,000 persons are expected to lose an 
average of $139.30 per month in FSP benefits, including 27,000 persons 
who will be ineligible in 2010 as a result of this provision and not 
participate in FSP. 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 and SIPP 
data 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 2010 budget baseline, 
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 choose to adopt this option is 
quite strong, as it is based on reports from States about their policy 
choices. However, the estimate on the impact of ending pro-rationing is 
based on older QC data, because QC data from after enactment of this 
provision no longer contains the data needed to make this estimate. The 
most uncertain part of the estimate is the 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, 
the cost 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 reported 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 
FSP households. The rule provides that: (1) The State agency may 
include any household certified for at least 4 months within a 
simplified reporting system, except that the state agency may not 
include households with no earned income in which all adult members are 
elderly or disabled; (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. FNS is extending Section 4109 to homeless and 
migrant workers, with the distinctions noted above. FNS is using 
discretion here to allow States to put a homeless person into a 
simplified reporting system. Another final rule, the Non-citizen 
Eligibility, and Certification Provisions (NECP) of Public Law 104-193, 
as Amended by Public Laws 104-208, 105-33, 105-185 (the NCEP Rule) 
allowed homeless and migrant workers with earnings to be in a 
simplified reporting system identical to this provision, so for 
consistency with previous rulemaking, FNS is extending simplified 
reporting to homeless persons and migrant workers without earnings. The 
final rule allows states to act on all changes without seeking a waiver 
from FNS, which many States had done after passage of the FSRIA.
    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, which reduces the 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 2010 is 
expected to be $336 million. The 5-year total for FY 2010 through FY 
2014 is $1.644 million. These impacts are already incorporated into the 
President's FY 2010 budget baseline.

[[Page 4960]]

    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, not just earners that existed 
under regulation prior to the FSRIA. In addition, FNS implemented a 
universal quarterly reporting system via the Anticipating Income and 
Reporting Changes proposed rule for some time prior to passage of the 
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). Combined those 47 States accounted for 
90.6 percent of all benefit costs in fiscal year 2006; we assume by 
extension that they account for 90.6 percent of the cost of simplified 
reporting: 90.6 percent of the estimate equals $336 million in fiscal 
year 2010.
    Participation Impact: This provision only affects current 
participants in the States that opt to implement. All households who 
are placed in this reporting system benefit by reducing the frequency 
of reports they must submit. FY 2007 quality control data indicate that 
28.69 percent of all households are coded as being in simplified 
reporting and have no earnings. In 2010, this represents 10.033 million 
people affected by this provision. They will see about $2.79 per month 
more in benefits because of this provision in fiscal year 2010. 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. Adjustments based on quality 
control data have a high level of certainty as well. Some uncertainty 
is introduced, however, with the use of two different data sources and 
other out-of-model adjustments.
    Alternatives: For consistency with prior rulemaking, the final rule 
permits States to extend the certification periods of certain homeless 
and migrant workers to allow them to be included in a simplified 
reporting system. The costs of this alternative are thought to be 
minimal because relatively few homeless and migrants participate in the 
program.

Simplified Definition of Resources--Section 4107

    Discussion: The provision amends current rules relating to the 
FSP's resource limit. The provision increases the resource limit for 
households with a disabled person from $2,000 to $3,000. It also 
provides State agencies the option to exclude from resource 
consideration any resources that the State agency excludes when 
determining eligibility for TANF cash assistance or medical assistance 
under Section 1931 of the SSA. State agencies that choose this option 
may not exclude cash, licensed vehicles, or readily available amounts 
deposited in financial institutions when determining FSP eligibility.
    Effect on Low-Income Households: Under previous law, only 
households with elderly members were able to exclude the first $3,000 
of countable resources; all other households were subject to the $2,000 
resource limit. The provision to raise the asset limit for households 
with disabled members will bring these households in line with those 
with elderly members. Second, the provision permits States to exclude 
some resources currently counted in the FSP. By exercising this option, 
States will reduce the resource total for some households. As a result, 
both provisions will increase the number of low-income families who are 
eligible for FSP benefits by either reducing the amount of assets that 
are countable or by raising the resource limit for eligibility. These 
provisions will have no impact on those currently eligible for food 
stamps.
    Cost Impact: We estimate that the cost to the Government of the 
provision to raise the asset limit for households with disabled members 
will be $33 million in FY 2010, and $163 million over the 5 years FY 
2010 through FY 2014. The cost to the Government of the provision to 
allow States to exclude non-vehicle and non-cash assets in accordance 
with their TANF or Medicaid program rules will be $67 million in FY 
2010 and $326 million over the 5-year period. The impacts of both 
provisions are already incorporated into the President's FY 2010 budget 
baseline.
    The estimate to raise the asset limit to $3,000 for households with 
disabled members was derived using FY 2007 quality control data. 
Because the provision was fully implemented in FY 2007, the quality 
control data already included disabled households made eligible by the 
reform so we were able to estimate the impact of this provision on 
eligibility and benefits by simulating the reversal of the reform. In 
other words, we examined current quality control data to determine the 
value of benefits issued to households with non-categorically-eligible 
disabled members who had assets greater than $2,000 but less than 
$3,000. The simulation model indicated that reversing the provision 
would reduce benefits by 0.057 percent. The annual cost of raising the 
asset limit for these households was calculated as (positive) 0.057 
percent times the baseline cost projections from the President's budget 
baseline for each year.
    The estimate to allow States to exclude non-cash non-vehicle assets 
that are excluded from their TANF or Medicaid programs was derived from 
a micro-simulation model using SIPP data and FY 2009 program rules. We 
used this model because SIPP is the only national survey with detailed 
information about assets for a sample of low-income households, and 
because we were able to generate a large enough sample to generate a 
credible estimate.
    Because the only non-vehicle, non-cash asset that SIPP collects 
data on is retirement savings, our estimate is based on the impact of 
excluding IRA and Keogh retirement accounts. We simulated the effect of 
the new provision by excluding these retirement savings from countable 
assets, identifying households made newly eligible, and determining the 
value of benefits that would be issued to those newly eligible likely 
to participate. The model estimated that excluding retirement savings 
would increase total benefits by 1.71 percent. However, we made a few 
adjustments to the model results.
    First, our experience with the SIPP model is that it overestimates 
the participation rate among new eligibles in simulations of expanding 
eligibility to asset-ineligible households, who are more likely to be 
elderly or working than other households. Therefore, we adjusted the 
estimate by half. The second adjustment was to only count the impact 
among the three States that chose to exclude retirement savings--
Illinois, Ohio, and Pennsylvania after this law was implemented but 
prior to the implementation of the Food, Conservation, and Energy Act 
of 2008 (Pub. L. 110-246), which excluded retirement savings for all 
States. The three States accounted for 13.32 percent of benefits issued 
in FY 2008.
    Participation Impact: In FY 2010, 25,000 newly eligible persons 
living in households with disabled members are expected to participate 
as a result of the increase in the asset limit. Their average monthly 
FSP benefit is expected to be $110.46. An additional 31,000 newly 
eligible persons are expected to

[[Page 4961]]

participate as a result of the State option to exclude non-vehicle, 
non-cash assets in fiscal year 2010 with an average monthly FSP benefit 
of $178.95. Neither provision will have an impact on the benefit size 
for those who are currently participating.
    The participant impact of the provision to raise the asset limit 
for disabled households was estimated using the same methodology as the 
cost estimate. The simulation results using quality control data 
produced an estimated participation drop of 0.072 percent by lowering 
the asset limit to $2,000 for disabled households. Applying this 
percentage to the 2010 President's budget baseline yields a decrease of 
25,000 participants in 2010. To show the impact of the participation 
increase, we simply changed the decrease to an increase.
    The participant impact of the provision to allow States to use TANF 
or Medicaid asset rules on FSP participation was estimated using the 
same methodology as the cost estimate. The simulation results of the 
SIPP model produced participation impacts for those gaining 
eligibility. The impacts, measured as the percentage increase in FSP 
participation in the SIPP database (1.39 percent), were multiplied by 
the participation projections in the President's FY 2010 budget 
baseline and were adjusted according to the methodology outlined for 
the cost estimate.
    Uncertainty: There is a small degree of uncertainty associated with 
the estimate to raise the asset limit for disabled households. The 
estimate is based on 2007 quality control data. To the extent that 
asset values are not accurately recorded, this could affect the 
validity of the result. However, the data are fairly recent and of high 
quality.
    There is a moderate level of uncertainty associated with the 
estimate to provide States with an option to exclude non-cash and non-
vehicle assets that are excluded by States' TANF plans. The estimate is 
based on a micro-simulation model with SIPP data, and the sample size 
of newly eligible and participating households and individuals is 
rather small. Second, the only non-cash, non-vehicle assets that the 
SIPP data are able to identify are retirement savings; thus these 
assets are the only ones included in the estimate.

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

    Discussion: This provision expands the current option to provide 
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 5 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 5 months of 
transitional benefit; (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 the 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 
2010 is $191 million, and it costs $975 million over the 5 years FY 
2010 through FY 2014. These impacts are already incorporated into the 
President's budget baseline.
    This estimate uses data on the number of households receiving 
transitional benefits in the 2007 quality control data and projects it 
over the 2010-2014 period using expected FSP participation from the 
President's FY 2010 budget baseline. We assume that about 48 percent of 
TANF leavers have earnings and other financial changes that offset the 
loss of the TANF income and therefore their food stamp benefit is not 
dramatically different from their pre-transitional benefit amount. 
Therefore we score the cost of the remaining 52 percent whose FSP 
benefit is now higher due to the loss of TANF.
    We estimate that in FY 2010 there are 49,000 leavers eligible for 
the transitional benefit. The average food stamp benefit for TANF 
households in FY 2007 was about $303 a month. However, the statute 
states that the FSP benefit shall be adjusted due to the loss of TANF 
cash. The average TANF benefit was $352 a month in FY 2007. A $352 
decrease in cash assistance times an expected benefit reduction rate of 
0.3250 for households with TANF and earned income produces a $114 
increase in FSP benefits. Therefore, we assign a monthly transitional 
benefit for each leaver household of $417 in 2007. Inflating this 
benefit based on the change in the Thrifty Food Plan equals a $504 
monthly benefit in 2010. 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 5-month traditional benefit period results in 
four extra months of benefits.
    The annual cost is the monthly cost 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 FSP 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 an FSP case normally. Returners in the 
second through fifth month, however, do generate savings. Data from 
DHHS 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 
multiply the percentage returning times the cost for the year.
    Prior to the passage of the FSRIA, some States had been operating a 
three-month transitional benefit option that FNS allowed via 
regulation. We therefore reduced the cost further to avoid double 
counting what is already in the baseline. We assumed these States would 
move to the 5-month option. The full cost of the three-month option was 
subtracted from the full cost of the 5-month option to get the cost due 
to the legislative change.
    Finally, we make adjustments for the proportion of States that have 
taken up the option. In FY 2006, 17 States, which account for about 44 
percent of food stamp issuance, adopted a transitional benefit option. 
Therefore, we take 44 percent of the cost in each year.
    Participation Impact: We estimate that in FY 2010, an average of 
49,000 TANF leavers will receive the food stamp transitional benefit 
per month.
    Uncertainty: There is a moderate level of uncertainty with this 
estimate. The estimate is based on 2007 quality control data which is 
considered timely and reliable. Some uncertainty is introduced, 
however, from our assumptions about recidivism and the portion of 
transitional benefit caseload that would have otherwise participated in 
the FSP in the absence of the transitional benefit.

[[Page 4962]]

Restoration of Benefits to Legal Immigrants--Section 4401

    Discussion: This provision substantially expands eligibility for 
the FSP for legal immigrants. It restores eligibility to three groups 
of legal immigrants in three stages. Effective October 1, 2002, legal 
immigrants who receive blind or disability benefits became eligible to 
participate in the FSP. Effective April 1, 2003, legal immigrants who 
have resided for at least 5 years in the United States as a qualified 
alien 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 removes 
sponsor deeming requirements for immigrant children.
    Effect on Low-Income Households: These three provisions 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 5 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 FSP eligibility on the basis of receiving blind or disability 
benefits but 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 5 years benefited 
from the provision restoring eligibility to children effective October 
1, 2003.
    Cost Impact: The cost to the Government of all three provisions 
will be $1.073 billion in FY 2010 and $5.253 billion over the 5-year 
period of 2010 through 2014. These costs are already incorporated into 
the President's Budget baseline.
    The estimates for the provisions are based on data from the U.S. 
Census Bureau's SIPP, a large national data set which incorporates 
features that permit the simulation of changes in eligibility of 
immigrants in the FSP. The simulation substitutes new rules for 
determining the eligibility of immigrants, determines the number of 
households made eligible by the new rules, and calculates the value of 
benefits that would be issued to those newly eligible who are likely to 
participate. The simulation estimated that restoring FSP eligibility to 
legally resident noncitizen disabled, children, and adults with 5 years 
legal residency would increase program costs by 1.84 percent. The 
annual cost of this provision was estimated by multiplying this figure 
by the cost projections in the 2010 President's Budget.
    Participation Impact: We estimate that by 2010, an additional 
731,000 legal immigrants will be participating in the FSP. Some will be 
people who would have been 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 participated in the program prior to the implementation of this 
provision. Participation effects were estimated using the same 
methodology as the cost estimate. The simulation results produced a 
participation impact estimate of 2.09 percent. The impact was 
multiplied by the participation projections for the FY 2010 President's 
budget baseline.
    We estimate that another 701 million individuals already 
participating will be receiving larger benefits. These are individuals 
living in already-participating households with newly-eligible 
immigrants. These are frequently US-born children of newly-eligible 
noncitizens parents. A relatively small number of individuals will 
receive lower benefits or become ineligible. These are typically 
participating children whose noncitizens parents' income is sufficient 
to reduce the household benefit or make the household ineligible. We 
estimate that 14,000 participants will receive lower benefits and 
532,000 will become ineligible. We estimate that 1.263 million newly-
eligible immigrants will participate, for a net participation gain of 
731,000.
    Uncertainty: The estimates for restoring eligibility to the three 
groups of legal immigrants have some degree of uncertainty, because 
they rely on reported information in the SIPP. Because the SIPP does 
not collect data on immigrant status, the model has to impute immigrant 
status, based on external data on the size and characteristics of the 
undocumented immigrant and refugee populations.
    Alternatives: The proposed rule interpreted the extension of 
eligibility to any qualified alien who has resided in the United States 
for 5 years or more as a qualified alien to include aliens who were not 
qualified aliens at the time of arrival in the United States but later 
attained qualified status. As written, Section 4401 of FSRIA could be 
read to require that the alien be in a qualified status at the time of 
arrival in the United States. However, in reviewing the legislative 
history behind FSRIA, the Department concluded that it was not the 
intent of Congress to deny the benefits of the provision to those who 
were not qualified aliens at the time of arrival but later obtained the 
status.
    FNS lacks statistics on the number or percent of legal permanent 
residents who were non-immigrants or undocumented immigrants at the 
time of arrival in the United States. A large portion of this group is 
the group of formerly undocumented immigrants granted legal status 
under the Immigration Reform and Control Act of 1986. Taking the more 
narrow interpretation of this provision would significantly reduce 
costs and make many newly-eligible participants ineligible.

[FR Doc. 2010-815 Filed 1-28-10; 8:45 am]
BILLING CODE 3410-30-P