[Federal Register Volume 79, Number 25 (Thursday, February 6, 2014)]
[Proposed Rules]
[Pages 7127-7136]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-02488]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Administration for Children and Families

45 CFR Parts 262 and 264

RIN 0970--AC56


Temporary Assistance for Needy Families (TANF) Program, State 
Reporting On Policies and Practices to Prevent Use of TANF Funds in 
Electronic Benefit Transfer Transactions in Specified Locations

AGENCY: Office of Family Assistance (OFA), Administration for Children 
and Families (ACF), Department of Health and Human Services (HHS).

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Administration for Children and Families (ACF) proposes to 
amend the Temporary Assistance for Needy Families (TANF) regulations to 
require states, subject to penalty, to maintain policies and practices 
that prevent TANF funded assistance from being used in any electronic 
benefit transfer transaction in specified locations. This responds to 
provisions in the Middle Class Tax Relief and Job Creation Act of 2012 
requiring states receiving TANF grants to maintain policies and 
practices as necessary to prevent assistance provided under the program 
from being used in any electronic benefit transfer transaction in any 
liquor store; any casino, gambling casino, or gaming establishment; or 
any retail establishment that provides adult-oriented entertainment in 
which performers disrobe or perform in an unclothed state for 
entertainment.

DATES: In order to be considered, comments on this proposed rule must 
be received on or before May 7, 2014.

ADDRESSES: You may submit comments, identified by docket number by any 
of the following methods:
     Federal eRulemaking Portal: http://www.regulations.gov. 
(We strongly recommend this method of submitting comments). Follow the 
instructions for submitting comments.
     Mail: Office of Family Assistance, Administration for 
Children and Families, 5th Floor East, 370 L'Enfant Promenade SW., 
Washington, DC 20024, Attention: Robert Shelbourne.
     Hand Delivery/Courier: OFA/ACF, 5th Floor East, 901 D 
Street SW., Washington, DC 20251.

FOR FURTHER INFORMATION CONTACT: Robert Shelbourne, Office of Family 
Assistance, 202-401-5150 (not a toll-free call). Deaf and hearing 
impaired individuals may call the Federal Dual Party Relay Service at 
1-800-877-8339 between 8 a.m. and 7 p.m. Eastern Time.

SUPPLEMENTARY INFORMATION:

Contents

I. Public Inspection of Comments
II. Statutory Authority
III. Background
IV. Discussion of Regulatory Provisions
Part 262--Accountability Provisions--General
Part 264--Other Accountability Provisions
V. Paperwork Reduction Act
VI. Regulatory Flexibility Analysis
VII. Regulatory Impact Analysis
VIII. Unfunded Mandates Reform Act of 1995
IX. Congressional Review
X. Assessment of Federal Regulation and Policies on Families
XI. Executive Order 13132

I. Public Inspection of Comments

    All comments received, including any personal information provided, 
will be made available for public inspection Monday through Friday 8:30 
a.m. to 5 p.m. at 370 L'Enfant Promenade SW., Washington, DC.

II. Statutory Authority

    This proposed regulation is being issued under the authority 
granted to the Secretary of Health and Human Services (HHS) by the 
Middle Class Tax Relief and Job Creation Act of 2012 (Pub. L. 112-96), 
Section 408 of the Social Security Act (42 U.S.C. 608), Section 409 of 
the Social Security Act (42 U.S.C. 609), and Section 1102 of the Social 
Security Act (42 U.S.C. 1302), which authorizes the Secretary to make 
and publish such rules and regulations, not inconsistent with the Act, 
as may be necessary to the efficient administration of functions under 
the Act.
    The statute at 42 U.S.C. 617 limits the authority of the Federal 
government to regulate state conduct or enforce the TANF provisions of 
the Social Security Act, except as expressly provided. We have 
interpreted this provision to allow us to regulate where Congress has 
charged HHS with enforcing certain TANF provisions by assessing 
penalties. Because the legislation includes a TANF penalty, HHS has the 
authority to regulate in this instance.

III. Background

    Authorized by title IV-A of the Social Security Act, TANF is a 
block grant that provides states, territories and tribes

[[Page 7128]]

federal funds to design and operate a program to accomplish the 
purposes of TANF. The purposes are: (1) Assisting needy families so 
that children can be cared for in their own homes or homes of 
relatives; (2) reducing the dependency of needy parents by promoting 
job preparation, work and marriage; (3) preventing out-of-wedlock 
pregnancies; and (4) encouraging the formation and maintenance of two-
parent families.
    In addition to federal TANF block grant funds, each state must 
spend a certain minimum amount of non-federal funds to help eligible 
families in ways that further a TANF purpose. This is referred to as 
maintenance-of-effort (MOE).
    In general, federal TANF and state MOE funds may be expended on 
benefits and services targeted to needy families, and activities that 
aim to prevent and reduce out-of-wedlock pregnancies or encourage the 
formation and maintenance of two-parent families, as well as 
administrative expenses. Regulations under 45 CFR 260.31 define 
``assistance,'' and regulations under 45 CFR 263.2 specify what kind of 
state expenditures count toward meeting a state's MOE requirement. In 
particular, federal TANF and state MOE funds may be expended on 
``assistance,'' which includes cash payments, vouchers, and other forms 
of benefits designed to meet a family's ongoing basic needs (i.e., 
food, clothing, shelter, utilities, household goods, personal care 
items, and general incidental expenses). Assistance also includes 
supportive services such as transportation and child care provided to 
families who are not employed (see 45 CFR 260.31(a)). TANF funds also 
can be used for a wide range of benefits and services that do not fall 
within the definition of assistance; such expenditures are considered 
``nonassistance.''
    Based on the most recent information provided to us by states, 
there are currently four means that states use to provide assistance 
payments to eligible low-income families with children: Paper checks, 
Electronic Funds Transfers (EFT), Electronic Benefit Transfer (EBT) 
cards, and Electronic Payment Cards (EPC). Most states have replaced 
paper checks with one or more of the other three delivery methods in 
order to provide benefits in a timelier manner, reduce theft and fraud, 
and eliminate the need to pay check-cashing fees. For example, states 
are automatically transferring assistance payments directly into a 
recipient's own private bank account through EFT; however, this option 
is not available if a recipient does not have access to or qualify for 
a checking account. Most states load the amount of assistance on EBT 
cards or EPCs, both of which allow recipients to use a debit-like card 
to access their benefits through automated teller machines (ATMs) and 
point-of-sale (POS) devices. EPCs differ from government EBT cards in 
that they are network-branded (Visa or MasterCard) prepaid cards that 
recipients may use virtually anywhere the brand's logo is displayed. On 
the other hand, EBT cards may be used in fewer locations, as retailers 
and ATMs must be authorized to accept EBT cards.
    On February 22, 2012, President Obama signed Public Law 112-96, 
which among its provisions, requires states to maintain policies and 
practices to prevent TANF funds from being used in any electronic 
benefit transfer transaction in any liquor store; any casino, gambling 
casino, or gambling establishment; or any retail establishment which 
provides adult-oriented entertainment in which performers disrobe or 
perform in an unclothed state for entertainment.
    The legislation at Section 4004(b) also imposes a new reporting 
requirement as well as a new penalty. Each state is required to report 
to the Department of Health and Human Services (HHS) by February 22, 
2014, its implementation of policies and practices related to 
restricting recipient from using their TANF assistance in EBT 
transactions at the locations specified in the previous paragraph. HHS 
will reduce a state's block grant if the state fails to comply with 
this reporting requirement or if, based on the information that the 
state reports, HHS finds that the state has not implemented and 
maintained the required policies and practices.
    Finally, states are required to include in their state plans a 
statement outlining how they intend to implement policies and 
procedures to prevent access to assistance through electronic fund 
transactions at casinos, liquor stores, and establishments providing 
adult-oriented entertainment. The state plan also must include an 
explanation of how the state plans to ensure that (1) recipients of the 
assistance have adequate access to their cash assistance, and (2) 
recipients of assistance have access to using or withdrawing assistance 
with minimal fees or charges, including an opportunity to access 
assistance with no fee or charges, and are provided information on 
applicable fees and surcharges that apply to electronic fund 
transactions involving the assistance, and that such information is 
made publicly available.
    Before enactment of Public Law 112-96, there were no federal 
requirements to restrict a recipient's use of TANF assistance provided 
on electronic benefit cards, nor were there any provisions in the TANF 
statute or regulations precluding a state from implementing policies 
that prevent a recipient from using his or her benefit card at 
particular locations. Indeed, various states have taken measures to 
restrict access to EBT benefits at ATMs located in different types of 
establishments, such as casinos, adult entertainment establishments, 
liquor stores, bail bonds businesses, bingo halls, cruise ships, gun/
ammunition stores, psychic readers, massage parlors, and tattoo and 
piercing shops. These actions have been required through state 
executive orders, state legislation, and state agency policy 
directives.
    On April 25, 2012, HHS published in the Federal Register a Request 
for Public Comment (RFPC), which invited states and other interested 
persons to provide information that could help to inform the rulemaking 
process. State TANF agencies, others involved in implementation, and 
any stakeholders were invited to comment on: Current methods of 
assistance delivery and ability to identify transaction locations; 
mechanisms to ensure that recipients have adequate access to their cash 
assistance, including withdrawals with minimal fees and opportunities 
to access assistance with no fee; incidence of the use of TANF EBT 
transactions in restricted locations; issues and challenges states 
could face in implementing the requirements of Public Law 112-96--e.g., 
technical issues, costs, and access implications--and mechanisms for 
addressing problems identified; experience with implementing EBT 
transaction restrictions (if applicable), e.g., nature of restriction, 
specific method and procedures used, challenges to implementation and 
responses, costs, if and how approach is effective, and any concerns 
raised by businesses, electronic benefit vendors, and/or TANF 
recipients.
    As stated in the RFPC, while we do not intend to provide responses 
to specific comments, in the next section we do indicate where comments 
informed the proposed rule. In general, we received input from 45 
commenters. A majority were state or local TANF agencies, most with 
experience in implementing TANF EBT restrictions or in the process of 
considering approaches to doing so. Other commenters included welfare 
advocacy/research organizations, electronic benefit industry 
organizations/companies, and one member of the general public.

[[Page 7129]]

    Responses to the RFPC provided information on matters such as the 
processes involved with tracking EBT transactions, the information 
available in transaction records, the challenges associated with 
identifying types of locations where transactions have occurred, and 
potential options for preventing TANF EBT transactions at specified 
locations. Some states that have already implemented EBT prohibitions 
described their experiences, provided examples of definitions of the 
types of businesses subject to restrictions, identified challenges and 
costs associated with implementation, and described concerns of 
businesses, vendors, and recipients. This information helped us assess 
the feasibility and effectiveness of various approaches to identifying 
locations subject to restrictions, preventing the use of TANF 
assistance via EBT transactions at those locations, and monitoring and 
enforcing compliance. For example, options for preventing the use of 
TANF via EBT transactions in the specified locations included 
centralized electronic blocking by a state or its EBT vendor, placing 
the responsibility on business owners to block access at their 
establishments, and relying on TANF recipients to monitor their EBT use 
and imposing penalties on those who do not comply with restrictions. We 
provide further detail on the options identified in the comments later 
in this preamble in discussing potential approaches that HHS would 
accept as complying with the new statutory requirements.
    Additionally, commenters raised other concerns that they encouraged 
HHS to consider when drafting regulations. For example, commenters 
frequently highlighted that prohibiting EBT access at all of the 
locations cited in the statute would have a detrimental effect on TANF 
recipients access to cash assistance, particularly in rural areas, 
inner city neighborhoods, and Indian reservations. Commenters expressed 
that many clients do not have access to transportation, or the funds 
for transportation if ATMs in their neighborhoods are restricted and 
they are forced to travel further to obtain benefits. Another concern 
expressed in a number of comments related to the inability of states or 
their contractors/vendors to prevent TANF assistance that has been 
deposited directly in a recipient's personal banking account from being 
used or accessed in the locations identified in the legislation.
    Several states provided comments that included data about the 
incidence of the use of TANF EBT transactions in liquor stores, gaming 
establishments, and adult entertainment venues (and any other types of 
establishments on which the state chooses to place restrictions). 
States that have conducted such an analysis consistently informed us 
that they found the numbers engaged in possible misuse are very low. 
While we understand that the extent of misuse of benefits may be low, 
any inappropriate expenditure of public funds raises concerns.
    Eight states reported that they had measured the extent that TANF 
benefits were used in prohibited locations. While findings varied 
slightly among states based on which locations are included in the 
assessment, it was always less than one percent:
     California, which prohibits TANF EBT access at the 
greatest number of location types (12), found that less than one half 
of one percent of the total number of cash transactions were performed 
at these locations prior to implementing its prohibition.
     Florida's last analysis in 2010 indicated less than .01% 
of state cash benefits were being accessed at liquor stores and 
casinos.
     Indiana provided information on liquor store ATM 
transactions in its comments, stating that from October through 
December 2011 it found that fewer than 30 of the 28,000 transactions 
per month took place in restricted establishments with the letters 
``LIQ'' in the name.
     New Hampshire reviewed a six-month period of EBT card 
transactions. During this period, there were no transactions that could 
be identified as happening at a New Hampshire liquor store, a casino or 
other type of gambling establishment, or adult-oriented entertainment 
business.
     New Jersey reviewed transactions occurring at casinos from 
April-October 2011, the total number of which represented less than 1% 
of the total number Family First transactions for this period. The 
state notes that these transactions may or may not have occurred on the 
gaming floor, as any transaction on casino property was included in the 
count.
    Finally, commenters presented recommendations for HHS to consider 
as we draft proposed regulations. There was a general consensus that 
HHS should draft regulations in a manner that provides states 
flexibility when implementing these new requirements. Commenters 
generally urged that states be allowed to implement approaches that are 
cost effective and fit within the existing structure of state 
operations, yet at the same time meet the intent and requirements of 
the law. Some commenters also cautioned that the regulations should 
seek to protect recipients who inadvertently use an EBT card at 
prohibited locations, and ensure that states' policies are implemented 
in a non-discriminatory manner.

IV. Discussion of Regulatory Provisions

Part 262--Accountability Provisions--General

    The proposed rule in part 262 adds new penalties for failure to 
report or adequately implement the new requirements outlined in Public 
Law 112-96, defines terms relevant to the new requirements, specifies 
when the penalty takes effect, and identifies the reporting form that 
ACF will use to determine whether a state warrants a penalty.

Section 262.1 What penalties apply to states?

    Section 4004(b) of Public Law 112-96 at Section 409(a)(16) of the 
Social Security Act (the Act) creates a new penalty. As provided in the 
statute, the penalty will be imposed if, by February 22, 2014, a state 
fails to report to HHS its implementation of the policies and practices 
to prevent assistance provided under the state program funded under 
this part from being used in any electronic benefit transfer 
transaction in: (i) Any liquor store; (ii) any casino, gambling casino, 
or gaming establishment; or (iii) any retail establishment which 
provides adult-oriented entertainment in which performers disrobe or 
perform in an unclothed state for entertainment. Furthermore, HHS may 
impose a penalty if it determines, based on the information provided in 
a state report, that the state has not implemented and maintained such 
policies and practices. If HHS determines that the state should be 
subject to a penalty, it will reduce the state family assistance grant 
by five percent or a lesser amount based on the degree of 
noncompliance. States should note that the regulations at 45 CFR 262.4 
through 262.7, concerning the processes for appealing a penalty, 
presenting a reasonable cause justification, and submitting a 
corrective compliance plan, apply to the new penalty added to 45 CFR 
262.1.
    Accordingly, we propose to add paragraph (16)(i) to Sec.  262.1(a) 
to provide that a penalty of not more than five percent of the adjusted 
SFAG will be applied for failure to report by February 22, 2014, the 
state's implementation of policies and practices related to these 
prohibited EBT transactions and to add paragraph (16)(ii) to provide 
that a penalty likewise will be applied for FY

[[Page 7130]]

2014 and each succeeding fiscal year if the state does not demonstrate 
that it has implemented and maintained such policies and practices. 
Note that if a state submits the initial report after February 22, 2014 
(or a subsequently due report after February 22 of a subsequent year), 
and also fails to demonstrate its implementation of policies and 
practices, the combined penalty will not exceed five percent of its 
adjusted SFAG. Conforming changes also are proposed in paragraph (c)(2) 
to add reference to the penalties proposed in paragraphs (a)(16)(i) and 
(ii).

Section 262.2 When do the TANF penalty provisions apply?

    We propose to amend Sec.  262.2 to add new paragraph (e) indicating 
that the penalty for failure to report on how the state is implementing 
and maintaining policies and practices to prevent assistance from being 
used in electronic benefit transfer transactions in specified locations 
will be imposed for FY 2014 and each succeeding fiscal year. Compliance 
requires the submission of an initial report by February 22, 2014, and 
annually by February 22 of each subsequent year.

Section 262.3 How will we determine if a state is subject to a penalty?

    We propose to amend Sec.  262.3 by adding a new paragraph (g) to 
specify we will use the information provided in an annual state report 
due by February 22, 2014, and annually thereafter, to determine whether 
to impose a penalty authorized by section 409(a)(16) of the Social 
Security Act. Note that this reporting requirement is distinct from the 
provisions of Public Law 112-96 related to additional state plan 
requirements (see Sec. 4004(c)).

Part 264--Other Accountability Provisions

Subpart A--What specific rules apply for other program penalties?

    The proposed rule in part 264 explains in further detail what HHS 
expects of states when implementing the new requirements of Public Law 
112-96 by specifying the policies and procedures required, providing 
relevant definitions and addressing consequences if a state fails to 
meet the requirement.
Section 264.0 What definitions apply to this part?
    In order to clarify the types of locations where states are 
required to block the use of TANF assistance via electronic benefit 
transfer transactions and to ensure that the policies and practices are 
applied consistently between states, we propose to amend section 
264.0(b).
    We will incorporate the statutory definition of ``electronic 
benefit transfer transaction,'' which is ``the use of a credit or debit 
card service at an automated teller machine, point-of-sales terminal, 
or access to an online system for the withdrawal of funds or the 
processing of a payment for merchandise or service.'' The statutory 
language is broad and questions have been raised as to whether the 
definition includes TANF funds directly deposited into a recipient's 
private bank account, and whether it is feasible for states and banks 
to implement such a requirement, particularly if the recipient also 
maintains non-TANF funds in the same account. Accordingly, we encourage 
commenters to address the question of whether states and banks have, or 
reasonably could have, the capacity to apply the EBT transaction 
restrictions to assistance funds deposited in private bank accounts and 
to monitor whether recipients use such funds in a prohibited manner.
    As provided in the statute, in proposed paragraph (b), the term 
``liquor store'' refers to any retail establishment which sells 
exclusively or primarily intoxicating liquor, and does not include a 
grocery store which sells both intoxicating liquor and groceries 
including staple foods.
    The statute provides exclusions to the phrase ``casino, gambling 
casino, or gaming establishment,'' but does not provide a further 
definition. We propose to interpret the statutory reference to 
``casino, gambling casino, or gaming establishment'' to mean an 
establishment with a primary purpose of accommodating the wagering of 
money. Under the statutory definition provided in proposed paragraph 
(b), this would not include a grocery store which also offers, or is 
located within the same building or complex as casino, gambling or 
gaming activities or other establishments where such activities are 
incidental to the principal purpose of the business.
    The statute is silent of the definition of ``retail establishment 
which provides adult-oriented entertainment in which performers disrobe 
or perform in an unclothed state to entertainment.'' To clarify the 
intended locations to which restrictions apply, we add to proposed 
paragraph (b) that this term means ``such an establishment that 
prohibits the entrance of minors under the age specified by state 
law.'' Therefore, a theater or cinema whose primary purpose is not to 
provide adult-oriented entertainment, but may, for instance, 
occasionally feature an unrated or X-rated movie, would be excluded 
from this definition because minors are generally allowed to enter such 
an establishment (though not permitted to attend the unrated or X-rated 
film).
Section 264.60 What policies and procedures must a state implement to 
prevent assistance use in electronic benefit transfer transaction in 
locations prohibited by the Social Security Act?
    We propose to add a new section 264.60 under subpart A. Under the 
proposed paragraph, states are required to implement policies and 
procedures to prevent assistance (defined at Sec.  260.31(a)) provided 
with federal TANF or state TANF MOE funds from being used in any 
electronic benefit transfer transaction in any: (a) Liquor store, (b) 
casino, gambling casino or gaming establishment, (c) retail 
establishment which provides adult-oriented entertainment in which 
performers disrobe or perform in an unclothed state for entertainment. 
As states consider the appropriate policies and practices that they 
will implement to comply with the new requirements of Public Law 112-
96, we advise them to be mindful of the goals of the legislation. The 
new requirements not only aim to ensure that cash assistance is used in 
a manner consistent with the purposes of TANF, but also serve to 
promote the integrity of the program and the responsible stewardship of 
public funds. When HHS reviews state reports that outline their 
policies and procedures, we will accept any reasonable approaches that 
further these goals and comply with the statutory and regulatory 
requirements. We note that a state has flexibility in determining 
appropriate policies and practices to prevent the use of TANF 
assistance in electronic benefit transfer transactions at specified 
locations. At the same time, states' policies and practices must 
prevent the use of TANF funds at the specified locations, while 
ensuring reasonable access to cash assistance, as directed by Congress. 
Below, we outline examples of approaches that HHS would accept as 
complying with statutory and regulatory requirements; at the same time, 
states have the option to elect other methods to achieve the goals of 
the legislation.
    Identifying Locations: When reporting policies and practices to 
prevent the use of TANF assistance at any liquor store; casino, 
gambling casino or gaming establishment; and retail establishment which 
provides adult-oriented entertainment in which performers disrobe or 
perform in an unclothed state for entertainment, states must describe 
an initial and on-going process for identifying the establishments in 
their

[[Page 7131]]

states that are subject to the requirements. Comments responding to the 
RFPC reflected a number of challenges associated with identifying the 
locations where access to TANF assistance via EBT transaction should be 
prevented; these predominately related to inaccurate or limited 
information in transaction data, e.g., wrong addresses, missing data 
elements. Comments explained that retailers do not always send accurate 
ATM location information to the third party processors and/or third 
party processors do not consistently populate ATM data fields 
accurately. Furthermore, commenters stated that ATM location 
information can change each time an ATM is moved or there is a change 
in ownership, which also makes it difficult to ensure that ATMs have 
the restrictions applied. The Government Accountability Office's recent 
report on TANF Electronic Benefit Cards (GAO-12-535, July, 2012) 
confirms this in describing California's experience identifying 
locations where EBT access would be blocked. State officials said that 
the EBT transaction data sometimes contain addresses that are 
misspelled or refer to the address of a retailer's corporate offices 
rather than the locations where the transactions actually took place. 
GAO also found that address information was complete for only 30 
percent of transactions in Texas, but also estimate that about 70.4 
percent of those addresses could be simply standardized. Furthermore, 
while ATM transactions contain merchant category codes (MCCs), this 
information has limitations because some ATMs have an MCC that 
identifies it as a financial institution rather than referring to the 
type of establishment where the ATM is located. GAO concludes that 
``preventing unauthorized transactions can be time-intensive and is 
impaired by flaws in available transaction data and other challenges. 
Addressing the limitations we found in the transaction data that impede 
the identification and monitoring of certain locations could require 
significant resources.'' HHS understands these challenges, and we 
encourage states to explore an array of approaches aimed at identifying 
locations subject to restrictions. We would anticipate that a state's 
methodology would involve multiple actions to identify the relevant 
establishments, such as reviewing transaction records, conducting 
Internet searches (e.g., searches of specific keywords associated with 
the types of establishments identified in the statute), and other forms 
of searches a state determines to be appropriate and feasible (e.g., 
visiting establishments). When possible, we recommend that TANF 
agencies collaborate with state licensing agencies, such as a state's 
gaming commission, for whatever information licensing agencies can 
provide in efforts to develop a list of locations that are subject to 
these requirements. When seeking to identify liquor stores, a TANF 
agency may contact the state liquor authority to obtain a list of all 
establishments with a liquor license; the TANF agency can then notify 
all the merchants that they must follow procedures to prevent TANF 
assistance from being used or accessed at their place of business 
unless they notify the state agency that they do not fall within the 
definition of ``liquor store.'' Finally, states will need to develop 
on-going procedures for identifying new establishments to which the 
state's requirements apply.
    Commenters noted that while gaming authorities may have a list of 
all affected gaming establishments, and liquor authorities may have a 
listing that includes all liquor stores (though the list is likely to 
be broader than just liquor stores), there may be no entity in the 
state charged with regulating adult entertainment, and accordingly, 
there may be no readily available list of such establishments. If that 
is the case, then a state may choose to conduct internet searches using 
key words as the principal way of identifying such establishments, but 
if the state relies on such a methodology, it will be appropriate to 
provide notice to identified entities so that they can inform states of 
any misclassification.
    We received a number of comments explaining that states do not have 
the authority to block transactions that occur on sovereign tribal 
lands in the state. While Congress did not apply the requirements in 
Public Law 112-96 to tribal TANF programs, we believe it is the 
responsibility of the state to develop appropriate policies for 
preventing access to TANF cash assistance provided by state programs at 
any ``liquor store,'' ``casino, gambling casino, or gaming 
establishment'' or ``retail establishment which provides adult-oriented 
entertainment in which performers disrobe or perform in an unclothed 
state for entertainment,'' including those that are located on 
sovereign tribal land. We encourage states to work with tribes to try 
to prevent state TANF assistance use at the prohibited locations 
located on sovereign tribal land.
    We also face the question of how to address internet transactions. 
We note that the statutory definition of ``electronic benefit transfer 
transaction'' refers to ``access to an online system for the withdrawal 
of funds or the processing of a payment for merchandise or a service'' 
in the establishments identified in the statute. It has been suggested 
that the statute is only intended to apply to transactions occurring in 
the specified establishments and not to internet transactions. While we 
are mindful of the overall goals of the legislative provision, we 
recognize that there may be significant practical issues that states 
would face in any efforts to enforce restrictions on internet 
transactions. Accordingly, we invite comments in response to this 
Notice of Proposed Rulemaking on the issue of whether the restrictions 
should extend to internet transactions, and if so, what mechanisms 
might be available to states to enforce such restrictions.
    Furthermore, many commenters recommended that regulations allow 
states the flexibility to avoid imposing a restriction at an ATM or POS 
terminal if such a restriction would limit the ability of recipients in 
a geographic area to access their cash assistance. While one of the new 
state plan requirements at Section 4004(c) of Public Law 112-96 conveys 
a clear emphasis that states ensure adequate access to cash assistance 
for recipients, we do not interpret this language as providing states 
the option to avoid imposing a restriction at an ATM or POS terminal 
located in any of the three types of specified locations. Rather, it 
conveys a responsibility for states to take corrective actions to 
increase locations where TANF recipients may access their cash 
assistance if they find that there is an insufficient number of access 
points in a geographic area. Commenters provided the following examples 
of factors to take into consideration when aiming to ensure reasonable 
access by applying exceptions to restrictions: The number of recipients 
who would be affected if a location to access assistance is blocked and 
the number of ATMs available in a community (e.g., if a community 
within a defined geographic area or zip code has fewer than three 
locations to access cash assistance, none of those locations would be 
subject to any restrictions). One state TANF agency that has 
implemented blocking measures commented that it ``maintains cash access 
plans for each county in the state to ensure that recipients have 
reasonable access to benefits. These plans are reviewed on an annual or 
as-need basis. The plans were reviewed prior to and after the 
deactivation of certain ATMs and it has been determined that sufficient 
cash access continues to be maintained.''

[[Page 7132]]

    Finally, we remind states of the other state plan requirement at 
Section 4004(c) of Public Law 112-96, stating that a plan must also 
include an explanation of how the state plans to ensure that recipients 
of assistance ``have access to using or withdrawing assistance with 
minimal fees or charges, including an opportunity to access assistance 
with no fee or charges, and are provided information on applicable fees 
and surcharges that apply to electronic fund transactions involving the 
assistance, and that such information is made publicly available.'' 
Therefore, as they develop plans to ensure adequate access to cash 
assistance, states must be sure to consider whether there is an 
adequate number of locations where recipients may obtain cash 
assistance at a minimal cost and at no cost. Comments conveyed that a 
reasonable cash access fee is between $0.25 and $1.00. Furthermore, 
most states offer a number of free ATM withdrawals per month, which 
would be stipulated in a state's contract with its EBT vendor. The 
Electronic Funds Transfer Association (EFTA) commented that a survey of 
electronic payment program directors revealed that ``about 93% of [23] 
responding states say that their TANF beneficiaries exhaust their 
monthly cash in no more than three transactions.'' In July of 2011, the 
median of all states' maximum monthly benefit levels for a single 
parent family of three was $428, ranging from $170 in Mississippi to 
$923 in Alaska. With an amount that is ``less than the estimated cost 
of a modest two-bedroom apartment (based on HUD Fair Market Rents or 
FMRs) in all states, and less than half of the FMR in 26 states,'' it 
is plausible that a recipient would withdraw all of his or her monthly 
benefits in few transactions (I. Finch & L. Schott, ``TANF Benefits 
Fell Further in 2011 and Are Worth Much Less Than in 1996 in Most 
States,'' Center on Budget and Policy Priorities, November 21, 2011). 
If a state TANF agency has data that indicate that a majority of its 
TANF beneficiaries withdraw all of their cash in fewer than three 
transactions, it may consider providing three free transactions so that 
most TANF beneficiaries would incur little or no cost.
    Preventing Use of TANF Assistance via EBT transactions: Once a 
state or local TANF agency has identified the businesses that are 
subject to restrictions, the agency may implement one or a combination 
of approaches that aim to prevent a recipient from accessing or using 
his or her TANF assistance in EBT transactions at those locations. For 
example, a TANF agency may choose to implement electronic or automated 
prevention measures; this may involve the reprogramming of ATMs and POS 
terminals so that they deny TANF EBT or EPC transactions in specified 
locations. A TANF agency would need to notify relevant merchants that 
they must communicate to third-party processors or ATM owners to block 
bank identification numbers (BINs) associated with TANF benefit cards. 
Alternately, if feasible, a TANF agency or its EBT vendor may choose to 
contact the third-party processors who provide the network services to 
those devices directly and request that they block the EBT BIN at 
locations subject to restrictions. Regarding EPC, one commenter 
explained that ``transaction servicers could block transactions by 
matching the terminal ID of the incoming transaction against a list of 
prohibited terminal IDs/locations provided by the State.''
    Another option that does not require electronic blocking of ATMs or 
POS terminals is to communicate to recipients and/or establishments 
that recipients are not permitted to access their TANF benefits via EBT 
transactions at the specified locations and enforce compliance with 
appropriate penalties for violations. This may involve requiring 
merchants to post signs next to terminals to inform TANF recipients of 
the restrictions, or providing a list of restricted establishments to 
recipients, which should be updated on a regular basis. However, if a 
state's policies and practices do not electronically prevent access to 
cash assistance at restricted locations, the state should consider the 
need for procedures for monitoring compliance and taking action (e.g., 
warnings, penalties) when violations are identified. States are 
encouraged to periodically evaluate the effectiveness of these policies 
to prevent the use of TANF assistance via electronic benefit transfer 
transactions at specified locations, and adjust policies as necessary. 
We note that if a state chooses to implement policies and practices 
that do not involve steps to electronically block or prevent access of 
TANF assistance via EBT transfer, we encourage them to ensure that 
recipients are informed and reminded of the restrictions on a regular 
basis.
    Monitoring: State reports of policies and practices should include 
a description of implementation activities. For example, a state agency 
may have in place procedures for auditing a certain percentage of 
recipients' transaction records to determine compliance by individuals 
and businesses; TANF agency staff or EBT/EPC vendors may review monthly 
ATM activity reports, matching them against a list of terminal IDs or 
addresses of restricted locations, to determine whether the owners and 
processors complied with the request to reprogram ATMs. A state agency 
may also conduct random site visits to establishments that are subject 
to the requirements.
    Enforcement of Compliance: In order to fulfill the goals of the 
legislation, a state should have mechanisms in place to maintain a 
state's policies to prevent TANF assistance from being used or accessed 
in restricted locations. For example, a state may choose to impose 
penalties on the parties responsible for ensuring that ATMs and POS 
terminals are reprogrammed (e.g., merchants, ATM owners or third-party 
processors) if they do not block transactions with state EBT or EPC 
cards from being processed at relevant ATMs and POS terminals. Or if a 
state chooses to implement measures that do not involve steps to 
electronically block EBT access, then the state may choose to impose 
penalties on merchants who do not post signs informing TANF recipients 
that they cannot use their EBT cards or EPC to purchase goods at that 
establishment or access funds at an ATM located on the premises. If 
authorized by state law, the state could impose financial penalties in 
relation to entities that are subject to state licensing requirements. 
If a TANF agency develops policies under which it imposes a sanction or 
penalty on a recipient who is found to have used his or her EBT or EPC 
card at a prohibited location, such action would be subject to 
applicable appeals procedures needed to meet due process requirements.
    Once a state has implemented policies and practices to comply with 
these new requirements, in addition to the four areas described above 
(i.e., identifying locations; methods to prevent use of TANF assistance 
via EBT transactions in restricted locations; monitoring; and 
enforcement of compliance), we encourage states to share any 
information they develop concerning the effectiveness of policies and 
enforcement practices (e.g., data related to the incidence of the use 
of TANF assistance via EBT transactions in restricted locations), 
whether the state was able to achieve desired outcomes, and any 
potential plans to modify policies in order to address challenges or 
improve effectiveness. This information may be useful to other states 
as they consider adjustments to their procedures over time.

[[Page 7133]]

Section 264.61 What happens if a state fails to report or implement and 
maintain policies and practices required in Section 264.60 of this 
Subpart?
    We propose to add a new section 264.61 to address the penalty 
associated with the new requirements. Under paragraph (a), HHS will 
impose a penalty of not more than five percent of a state's adjusted 
SFAG for failure to submit by February 22, 2014 a report demonstrating 
the state's implementation of policies and practices to prevent EBT use 
in the locations specified in Public Law 112-96. Under paragraph (b), 
HHS will impose a penalty of not more than five percent of a state's 
adjusted SFAG each fiscal year succeeding FY 2014 in which the state 
does not demonstrate it has implemented and maintained the required 
policies and practices. In order to meet this requirement, states' 
reports must fully explain the policies and practices that are being 
implemented and maintained; reports should address each of the 
following four areas: Identifying locations; methods to prevent use of 
TANF assistance via EBT transactions in restricted locations; 
monitoring; and enforcement of compliance. Note that if a state submits 
a report after February 22 and also fails to demonstrate its 
implementation of policies and practices, the combined penalty will not 
exceed five percent of its adjusted SFAG.
    All penalties will be imposed in accordance with 45 CFR Part 262, 
which provides states with procedures for appealing a penalty, and 
submitting a reasonable cause justification or corrective compliance. 
Furthermore, Section 409(a)(16)(C) of the Act, as amended by Section 
4004(b) of Public Law 112-96 provides HHS the discretion to reduce the 
penalty amount based on the degree of noncompliance of the state.
    Section 409(a)(16)(C) of the Act, as amended by Section 4004(b) of 
Public Law 112-96, also specifies that ``Fraudulent activity by any 
individual in an attempt to circumvent the policies and practices 
required by Section 408(a)(12) shall not trigger a state penalty under 
subparagraph (A);'' as such, HHS will not base any penalty on such 
information.

V. Paperwork Reduction Act

    This proposed rule establishes new information collection 
requirements in Sec.  262.3(g). As required by the Paperwork Reduction 
Act of 1995, codified at 44 U.S.C. 3507, the Administration for 
Children and Families will submit a copy of these sections to the 
Office of Management and Budget (OMB) for review and they will not be 
effective until they have been approved and assigned a clearance 
number.

----------------------------------------------------------------------------------------------------------------
                                                                                      Average
                                                     Number of        Yearly        burden per     Total burden
                   Requirement                      respondents     submittals      respondent         hours
                                                                                      (hours)
----------------------------------------------------------------------------------------------------------------
Annual reporting on policies and practices to                 54               1              40           2,160
 prevent TANF assistance from being used in
 electronic benefit transfer transactions in
 liquor stores; casinos, gambling casinos, or
 gaming establishments; or any retail
 establishment which provides adult-oriented
 entertainment in which performers disrobe or
 perform in an unclothed state for entertainment
----------------------------------------------------------------------------------------------------------------

    We estimate the costs of implementing these proposed requirements 
would be approximately $108,000 annually. We calculated this estimate 
by multiplying 2,160 hours by $50 (average cost per hour).
    With respect to these provisions, the Administration for Children 
and Families will consider comment by the public on this collection of 
information in the following areas:
     Evaluating whether the proposed collection is necessary 
for the proper performance of the functions of ACF, including whether 
the information will have practical utility;
     Evaluating the accuracy of ACF's estimate of the proposed 
collection of information, including the validity of the methodology 
and the assumptions used;
     Enhancing the quality, usefulness, and clarify of the 
information to be collected; and
     Minimizing the burden of the collection of information on 
those who are to respond, including through the use of appropriate 
automated, electronic, mechanical, or other technology, e.g., 
permitting electronic submission of responses.
    OMB is required to make a decision concerning the collection of 
information contained in this proposed regulation between 30 and 60 
days after publication of this document in the Federal Register. 
Therefore, a comment is best assured of having its full effect if OMB 
receives it within 30 days of publication. This does not affect the 
deadline for the public to comment to the Department on the 
regulations. Written comments to OMB for the proposed collection of 
information should be sent directly to the following: Office of 
Management and Budget, either by fax to 202-395-6974 or by email to 
OIRA at [email protected]. Please mark faxes and emails to the 
attention of the desk officer for ACF.

VI. Regulatory Flexibility Analysis

    The Secretary certifies under 5 U.S.C. 605(b), as enacted by the 
Regulatory Flexibility Act (Pub. L. 96-354), that this proposed 
regulation will not result in a significant impact on a substantial 
number of small entities. We note that any impact on businesses 
emanates from statutory mandate and the policies that states adopt in 
implementing the statutory requirement. HHS sought information related 
to concerns of businesses resulting from restrictions on TANF EBT 
access when we released a Request for Public Comment on April 25, 2012. 
A limited number of commenters addressed this issue, and most conveyed 
that they are not aware of any concerns at this time. In fact, the 
Western Center on Law and Poverty stated that in California, which 
prohibits TANF EBT access to 12 location types, many banned businesses 
expressed support for the policy. One commenter, the Electronic Funds 
Transfer Association (EFTA), did however summarize concerns of EBT 
vendors, such as Xerox and J.P. Morgan. EFTA stated that EBT vendors 
have expressed concerns over the expense of implementing the new 
requirements and notes that any system modifications that may be 
required would be extra[hyphen]contractual for the processors and their 
states; despite the financial opportunity this presents, EBT vendors 
say that such modifications are not cost beneficial for either them or 
the states.
    In order to address these concerns, HHS has drafted the proposed 
regulations in a manner that minimizes the impact on businesses, 
including

[[Page 7134]]

small businesses, by providing states flexibility when implementing 
policies and practices that comply with the new requirements. In 
particular, states have the flexibility to implement approaches that do 
not place significant burden or impose large costs on its EBT vendor, 
small businesses, or any one particular party. Therefore any costs 
resulting from policies under which states require action by small 
entities, including small businesses, are the result of choices states 
make when implementing the statutory requirements.
    The primary impact of this proposed regulation is on state 
governments. State governments are not considered small entities under 
the Act.

VII. Regulatory Impact Analysis

    Executive Orders 12866 and 13563 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if the 
regulation is necessary, to select the regulatory approaches that 
maximize net benefits (including potential economic, environmental, 
public health and safety effects, distributive impacts, and equity). 
Executive Order 13563 emphasizes the importance of quantifying both 
costs and benefits, of reducing costs, of harmonizing rules, and of 
promoting flexibility. These proposed rules meet the criteria for a 
significant regulatory action under E.O. 12866. Therefore, the Office 
of Management and Budget has reviewed this rule.

Need for the Regulation

    These regulations incorporate statutory changes to the TANF program 
enacted in the Middle Class Tax Relief and Job Creation Act of 2012. 
These proposed regulations are limited to the penalty provisions of 
Section 4004 of Public Law 112-96. Because states have a range of 
systems for disbursement of assistance, and a number of questions have 
arisen regarding the applicability and requirements of the statutory 
language, the proposed regulations are being released in order to 
clarify for states the information they should submit in order to avoid 
a penalty.
    ACF does not believe there would be a significant economic impact 
from this proposed regulatory action. The regulatory requirement is to 
implement, maintain, and report on policies and practices that prevent 
the use or withdrawal of TANF assistance in any electronic benefit 
transfer transactions in the three specified locations. The costs 
associated with implementation, and the parties that bear these costs, 
largely depend on the policies and practices a state chooses to in 
order to comply with the statutory requirements. For example, if a 
state chooses to take on a centralized oversight role, it will face 
additional resources at the agency-level; at the same time, if it 
chooses to place the responsibility to prevent assistance from being 
used in restricted locations via EBT transactions on its EBT service 
provider, additional contract costs will need to be negotiated. Or if a 
state chooses to direct ATM and business owners to take the necessary 
steps to reprogram ATM and POS terminals within the restricted 
establishments, then costs are passed on to these parties.
    At the same time, states have flexibility in policies and practices 
they choose to implement in order to comply with the statutory 
requirements that prevent assistance (defined at Sec.  260.31(a)) 
provided with federal TANF or state TANF MOE funds from being used in 
any electronic benefit transfer transaction in any liquor store; 
casino, gambling casino or gaming establishment; and retail 
establishment which provides adult-oriented entertainment in which 
performers disrobe or perform in an unclothed state for entertainment. 
States may develop approaches that are cost effective and fit within 
the existing structure of state operations, yet at the same time meet 
the requirements of the law.
    Nevertheless, regardless of the approach a state may take when 
implementing policies in order to comply with the statute and 
regulations, there will be, at a minimum, administrative costs for the 
state agency responsible for administering the TANF benefits. We 
believe that states will spend funds on the following types of costs to 
implement the changes in order to complete the annual progress report 
to ACF:
     Costs for identifying the prohibited locations;
     Costs to modify existing tracking of recipient use of 
electronic benefits and/or electronic banking;
     Costs to monitor recipient use of electronic benefit 
transfers;
     Costs to investigate and follow up on violations of 
electronic benefit transfers;
     Cost of processing and responding to appeals.
    With regards to the reporting requirement, based on our estimate 
described under the Paperwork Reduction Act section of this preamble, 
the total costs for all states to comply with this requirement would 
fall well below the $100 million threshold.
    The statutory requirements and proposed regulations also provide 
potential benefits that coincide with goal of financial responsibility. 
For example, the policies and practices that state implement may result 
in reductions in inappropriate expenditures of government funds, and 
provide opportunities to educate recipients on budgeting (emphasizing 
to recipients that they should ensure assistance is spent only on basic 
needs) and ways to minimize access fees.

VIII. Unfunded Mandates Reform Act of 1995

    Section 202 of the Unfunded Mandates Reform Act of 1995 requires 
that a covered agency prepare a budgetary impact statement before 
promulgating a rule that includes any federal mandate that may result 
in the expenditure by state, tribal and local governments, in the 
aggregate, or by the private sector, of $100 million or more in any one 
year. ACF has determined that this proposed rule would not result in 
the expenditure by state, local and tribal governments, in the 
aggregate, or by the private sector, of more than $100 million in any 
one year.

IX. Congressional Review

    This regulation is not a major rule as defined in 5 U.S.C. Chapter 
8.

X. Assessment of Federal Regulation and Policies on Families

    Section 654 of The Treasury and General Government Appropriations 
Act of 1999 (Pub. L. 105-277) requires federal agencies to determine 
whether a proposed policy or regulation may negatively affect family 
well-being. If the agency's determination is affirmative, then the 
agency must prepare an impact assessment addressing seven criteria 
specified in the law.
    This regulation will not have an impact on family well-being as 
defined in the legislation.

XI. Executive Order 13132

    Executive Order 13132, Federalism, prohibits an agency from 
publishing any rule that has Federalism implications if the rule either 
imposes substantial direct compliance costs on state and local 
governments and is not required by statute, or the rule preempts state 
law, unless the agency meets the consultation and funding requirements 
of section 6 of the Executive Order. We do not believe the regulation 
has Federalism implications as defined in the Executive Order. However, 
consistent with Executive Order 13132, the Department specifically 
solicits and welcomes comments from state and local government 
officials on this proposed rule.

[[Page 7135]]

List of Subjects in 45 CFR Parts 262 and 264

    Administrative practice and procedures, Day care, Employment, Grant 
programs-social programs, Loan programs-social programs, Manpower 
training programs, Penalties, Public assistance programs, Reporting and 
recordkeeping requirements, Vocational education.

(Catalog of Federal Domestic Assistance Program Number 93.558 
Temporary Assistance for Needy Families)


    Dated: January 13, 2014.
Mark Greenberg,
Acting Assistant Secretary for Children and Families.
    Approved: January 15, 2014.
Kathleen Sebelius,
Secretary.

    For the reasons set forth in the preamble, we propose to amend 
Parts 262 and 264 of 45 CFR as follows:

PART 262--ACCOUNTABILITY PROVISIONS-GENERAL

0
1. The authority citation for 45 CFR part 262 is revised to read as 
follows:

    Authority:  31 U.S.C. 7501 et seq.; 42 U.S.C. 606, 609 and 610; 
Pub. L. 109-171; Pub. L. 112-96.

0
2. Amend Sec.  262.1 by adding paragraph (a)(16) and revising paragraph 
(c)(2) to read as follows:


Sec.  262.1  What penalties apply to states?

    (a) * * *
* * * * *
    (16)(i) A penalty of not more than five percent of the adjusted 
SFAG (in accordance with Sec.  264.61(a)), for failure to report by 
February 22, 2014 on the state's implementation and maintenance of 
policies and practices required in Sec.  264.60 of this chapter.
    (ii) A penalty of not more than five percent of the adjusted SFAG 
(in accordance with Sec.  264.61(b)), for FY 2014 and each succeeding 
fiscal year in which the state does not demonstrate that it has 
implemented and maintained policies and practices required in Sec.  
264.60 of this chapter.
* * * * *
    (c) * * *
0
(2) We will take the penalties specified in paragraphs (a)(3), (a)(4), 
(a)(5), (a)(6), (a)(8), (a)(9), (a)(10), (a)(11), (a)(12), (a)(13), 
(a)(14), (a)(15), and (a)(16) of this section by reducing the SFAG 
payable for the fiscal year that immediately follows our final 
decision.
* * * * *
0
3. Amend Sec.  262.2 by adding paragraph (e) to read as follows:


Sec.  262.2  When do the TANF penalty provisions apply?

* * * * *
0
(e) In accordance with Sec.  264.61(a) and (b), the penalty specified 
in Sec.  262.1(a)(16) will be imposed for FY 2014 and each succeeding 
fiscal year.
0
4. Amend Sec.  262.3 by adding paragraph (g) as follows:


Sec.  262.3  How will we determine if a State is subject to a penalty?

* * * * *
    (g) To determine if a State is subject to a penalty under Sec.  
262.1(a)(16), we will use the information provided in annual state 
reports due by February 22, 2014, and annually thereafter in accordance 
with section 409(a)(16) of the Social Security Act. State reports must 
address the policies and practices that are being implemented and 
maintained with respect to each of the following: Identifying 
locations; methods to prevent use of TANF assistance via EBT 
transactions in restricted locations; monitoring; and enforcement of 
compliance.

PART 264--OTHER ACCOUNTABILITY PROVISIONS

0
5. The authority citation for 45 CFR part 264 is revised to read as 
follows:

    Authority:  31 U.S.C. 7501 et seq.; 42 U.S.C. 608, 609, 654, 
1302, 1308, and 1337.

0
6. Amend Sec.  264.0(b) to add definitions of Casino, gambling casino, 
or gaming establishment; Electronic benefit transfer transaction; 
Liquor Store; and Retail establishment which provides adult-oriented 
entertainment in which performers disrobe or perform in an unclothed 
state for entertainment in alphabetical order to read as follows:


Sec.  264.0  What definitions apply to this part?

* * * * *
    (b) * * *
    Casino, gambling casino, or gaming establishment means an 
establishment with a primary purpose of accommodating the wagering of 
money. It does not include:
    (i) A grocery store which sells groceries including staple foods 
and which also offers, or is located within the same building or 
complex as, casino, gambling, or gaming activities; or
    (ii) Any other establishment that offers casino, gambling, or 
gaming activities incidental to the principal purpose of the business.
* * * * *
    Electronic benefit transfer transaction means the use of a credit 
or debit card service, automated teller machine, point-of-sales 
terminal, or access to an online system for the withdrawal of funds or 
the processing of a payment for merchandise or a service.
* * * * *
    Liquor Store means any retail establishment which sells exclusively 
or primarily intoxicating liquor. Such term does not include a grocery 
store which sells both intoxicating liquor and groceries including 
staple foods (within the meaning of section 3(r) of the Food and 
Nutrition Act of 2008 (7 U.S.C. 2012(r))).
    Retail establishment which provides adult-oriented entertainment in 
which performers disrobe or perform in an unclothed state for 
entertainment means such an establishment that prohibits the entrance 
of minors under the age specified by state law.
* * * * *
0
7. Add Sec.  264.60 and Sec.  264.61 to subpart A to read as follows:


Sec.  264.60  What policies and practices must a state implement to 
prevent assistance use in electronic benefit transfer transactions in 
locations prohibited by the Social Security Act?

    Pursuant to section 408(a)(12) of the Act, states are required to 
implement policies and procedures to prevent assistance (defined at 
Sec.  260.31(a)) provided with federal TANF or state TANF MOE funds 
from being used in any electronic benefit transfer transaction in any:
    (a) Liquor store
    (b) Casino, gambling casino or gaming establishment
    (c) Retail establishment which provides adult-oriented 
entertainment in which performers disrobe or perform in an unclothed 
state for entertainment.


Sec.  264.61  What happens if a state fails to report or implement and 
maintain policies and practices required in Sec.  264.60 of this 
subpart?

    (a) Pursuant to section 409(a)(16) of the Act and in accordance 
with 45 CFR part 262, a penalty of not more than five percent of the 
adjusted SFAG will be imposed for failure to report by February 22, 
2014 and each succeeding fiscal year on the state's implementation of 
policies and practices required in Sec.  264.60. The penalty will be 
imposed in the succeeding fiscal year subject to Sec.  262.4(g) of this 
chapter.
    (b) Pursuant to section 409(a)(16) of the Act and in accordance 
with 45 CFR part 262, a penalty of not more than five percent of the 
adjusted SFAG will be imposed for FY 2014 and each succeeding fiscal 
year in which the state fails to demonstrate the state's implementation 
of policies and practices required in Sec.  264.60. The penalty will be 
imposed in the

[[Page 7136]]

succeeding fiscal year subject to Sec.  262.4(g) of this chapter.

[FR Doc. 2014-02488 Filed 2-4-14; 11:15 am]
BILLING CODE 4184-01-P