[Federal Register Volume 85, Number 214 (Wednesday, November 4, 2020)]
[Rules and Regulations]
[Pages 70043-70050]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-24303]



 ========================================================================
 Rules and Regulations
                                                 Federal Register
 ________________________________________________________________________
 
 This section of the FEDERAL REGISTER contains regulatory documents 
 having general applicability and legal effect, most of which are keyed 
 to and codified in the Code of Federal Regulations, which is published 
 under 50 titles pursuant to 44 U.S.C. 1510.
 
 The Code of Federal Regulations is sold by the Superintendent of Documents. 
 
 ========================================================================
 

  Federal Register / Vol. 85, No. 214 / Wednesday, November 4, 2020 / 
Rules and Regulations  

[[Page 70043]]



DEPARTMENT OF AGRICULTURE

Food and Nutrition Service

7 CFR Part 284

[FNS-2020-0028]
RIN 0584-AE80


Supplemental Nutrition Assistance Program: Pandemic Electronic 
Benefits Transfer (P-EBT) Integrity

AGENCY: Food and Nutrition Service (FNS), Agriculture Department 
(USDA).

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: The Food and Nutrition Service (FNS or the Agency), an agency 
of the U.S Department of Agriculture (USDA or the Department), is 
issuing a final rule to add regulations that will ensure the integrity 
of the supplemental allotments created by Section 1101 of the Families 
First Coronavirus Response Act (FFCRA), as amended by the Continuing 
Appropriations Act, 2021 and Other Extensions Act (CR) for households 
with children who would have otherwise received free or reduced price 
school meals under the Richard B. Russell National School Lunch Act, 
but for school closures or reduction in the number of days or hours 
that students attend school in response to the ongoing and national 
Coronavirus Disease 2019 (COVID-19) Public Health Emergency. Such 
allotments are referred to as Pandemic Electronic Benefits Transfer (P-
EBT) benefits. The CR extended the authority for P-EBT through Fiscal 
Year (FY) 2021, and also authorized P-EBT for households with at least 
one child enrolled in a covered child care facility (as defined by 
Section 1101(i)(1) of the FFCRA, as amended) and the supplemental 
nutrition assistance program (SNAP) when the covered child care 
facility is closed or has reduced attendance or hours or one or more 
schools in the area of the covered child care facility are closed or 
have reduced attendance or hours. This final rule would also safeguard 
the integrity of SNAP, as P-EBT operates within the SNAP 
infrastructure. USDA FNS is responsible for administering P-EBT and 
SNAP at the Federal level.

DATES: Effective Date: This final rule is effective on November 4, 
2020.
    Notice Date: Within 10 calendar days of November 4, 2020, SNAP 
authorized firms shall be notified of the contents of this final rule.

FOR FURTHER INFORMATION CONTACT: Andrea Gold, the SNAP Retailer Policy 
and Management Division, USDA FNS at [email protected]; 
703.305.2434.

SUPPLEMENTARY INFORMATION:

Executive Summary

Background Information

Establishment of P-EBT
    On January 31, 2020, Secretary Azar of the U.S. Department Health 
and Human Services (HHS) declared a public health emergency under 
section 319 of the Public Health Service Act (42 U.S.C. 247d), in 
response to the Coronavirus Disease 2019 (COVID-19). On March 13, 2020, 
President Trump declared the ongoing COVID-19 outbreak in the U.S. to 
be a national emergency. Due to COVID-19, many schools nationwide began 
closing in March 2020. In order to provide some financial relief to 
families, on March 18, 2020, President Trump signed into law the 
Families First Coronavirus Response Act (FFCRA; Pub. L. 116-127). 
Section 1101 of the FFCRA, as originally enacted, authorized USDA to 
approve State plans to provide federally funded food assistance to each 
household containing at least one child who would have received free or 
reduced price school meals, but for school closures lasting at least 
five consecutive days during a public health emergency declaration. The 
U.S. Department of Agriculture (USDA or the Department) refers to these 
benefits created by Section 1101 of the FFCRA as Pandemic Electronic 
Benefits Transfer (P-EBT) benefits. The Continuing Appropriations Act, 
2021 and Other Extensions Act (CR; Pub. L. 116-159) amended Section 
1101 of the FFCRA to extend the authority for P-EBT through FY 2021 
(which would cover portions of School Years 2020/2021 and 2021/2022) 
and expanded P-EBT to include: (1) Households with children whose 
schools reduce the number of days or hours that students attend school 
for at least five consecutive days during a public health emergency, 
(2) households with at least one child enrolled in a covered childcare 
facility and SNAP when the covered child care facility is closed or has 
reduced attendance or hours for at least five consecutive days during a 
public health emergency, and (3) households with at least one child 
enrolled in a covered childcare facility and SNAP when one or more 
schools in the area of the covered child care facility are closed or 
have reduced attendance or hours for at least five consecutive days 
during a public health emergency.
    The USDA's Food and Nutrition Service (FNS or the Agency) works to 
end hunger and obesity through the Federal administration of 15 Federal 
nutrition assistance programs including the National School Lunch 
Program (NSLP), which provides free and reduced price lunches to 
eligible children, and the Supplemental Nutrition Assistance Program 
(SNAP), which provides nutrition benefits to supplement the food 
budgets of needy families so they can purchase healthy food and move 
towards self-sufficiency. FNS was, therefore, charged by Congress with 
the implementation of P-EBT at the Federal level. As of November 4, 
2020, 52 States \1\ have been approved by USDA to administer P-EBT. 
Collectively, these States have been approved to provide over 30.1 
million eligible children with about $10.1 billion in food assistance 
benefits.
---------------------------------------------------------------------------

    \1\ All 50 states, the District of Columbia, the U.S. Virgin 
Islands, and Guam are referred to as ``States'' for this rule, and 
all 53 States (as defined in section 3(r) of the Food and Nutrition 
Act) were eligible to administer P-EBT under section 1101 of FFCRA 
as originally enacted. Of those 53, only 52 have requested P-EBT. 
While the CR extended the option to receive P-EBT benefits to other 
State Agencies not covered by the original FFCRA--Puerto Rico, 
American Samoa, and the Northern Mariana Islands--these territories 
manage retailer participation as a part of their block grants. 
Retailers in these territories are not currently subject to 7 CFR 
part 278 and would not be subject to 7 CFR part 284. As such, for 
purposes of this rule, they are not included in any reference to 
States or State Agencies.
---------------------------------------------------------------------------

    Section 1101(d) of the FFCRA provided States the option to deliver 
P-EBT benefits via the Electronic Benefit Transfer (EBT) system 
established for SNAP benefits by Section 7 of the Food and Nutrition 
Act of 2008 (FNA; 7 U.S.C. 2016). All States, as defined by

[[Page 70044]]

this rule, that have implemented P-EBT have opted to use the EBT system 
for such delivery.
Routine Operation of SNAP Benefit Issuance and Redemption
    SNAP benefits are issued and redeemed using the EBT system. Each 
SNAP household has an account into which SNAP benefits are issued on a 
monthly basis. The SNAP benefits are accessed by a household using an 
EBT card and a personal identification number (PIN), and may only be 
used to purchase SNAP eligible food as defined in 7 CFR 271.2.
    In addition, SNAP benefits may only be redeemed at firms \2\ 
authorized by USDA to accept SNAP benefits. Per Section 9 of the FNA (7 
U.S.C. 2018) and 7 CFR 278.1(a), firms must apply to and be authorized 
by the Department to accept SNAP benefits as a form of payment. The 
Department is responsible for policy and oversight related to firm 
eligibility, authorization, and compliance. USDA oversight includes 
integrity efforts such as findings of violations on the basis of 
evidence obtained through on-site investigations, inconsistent SNAP 
redemption data, and evidence obtained through a transaction report 
under the EBT system. Per 7 CFR 278.1, 278.6, and 278.7, firms that 
violate SNAP rules may face the following:
---------------------------------------------------------------------------

    \2\ As defined at 7 CFR 271.2.
---------------------------------------------------------------------------

Adverse Administrative Actions
 Denial (a firm applying for SNAP authorization is found 
ineligible and may not reapply for a specific period)
 Withdrawal (an authorized firm is found ineligible, removed 
from the program, and may not reapply for a specific period)
 Penalties (imposed after an investigation revealed 
violations):
    [rtarr8] Warning Letter (the violations found at the firm do not 
rise to the level of a sanction, so the firm is only warned)
    [rtarr8] Sanctions (the violations found at the firm are serious, 
so the firm is subject to a sanction):
    [cir] Claim (the firm must repay illicitly obtained benefits)
    [cir] Disqualification (the firm may not participate in the program 
for a specific period)
    [cir] Civil Money Penalty (CMP; the firm must pay a fine)
    [ssquf] Hardship CMP (a firm facing a term disqualification in a 
low food access area may pay a fine and continue to participate in the 
program)
    [ssquf] Transfer of Ownership CMP (a firm is sold while serving a 
period of disqualification and must pay a fine)
    [ssquf] Trafficking CMP (a firm meeting certain criteria may pay a 
fine in lieu of permanent disqualification for trafficking)

    One of the most serious violations of SNAP rules for firms is 
trafficking. SNAP regulations at 7 CFR 271.2 currently define the 
violation of trafficking. Trafficking usually means the exchange of 
SNAP benefits for cash or other consideration and carries more serious 
sanctions for firms. The Department monitors and takes appropriate 
administrative action, including sanctions, against firms that engage 
in trafficking and other violations. USDA cannot fulfill its primary 
purpose of helping individuals and families in need afford a basic diet 
without maintaining strong program integrity. USDA takes its role as a 
steward of public funds seriously and emphasizes program integrity 
throughout all program operations, including the use of a fraud 
detection system to analyze data on EBT transactions conducted at 
firms.
Implementation of P-EBT and Interaction With SNAP
    Per Section 1101(d) of the FFCRA, P-EBT benefits may be issued 
through the same EBT system established by Section 7 of the FNA (7 
U.S.C. 2016) which is used to issue SNAP benefits. To accelerate the 
implementation of P-EBT, ease administrative burden for States, and 
more rapidly provide emergency financial relief to families, States 
generally issued P-EBT benefits onto a household's existing EBT card if 
the household was already receiving SNAP benefits (and therefore 
already possessed an EBT card).
    Initially, the Department planned to implement P-EBT using a model 
similar to that used for certain Child Nutrition Summer EBT 
demonstration projects (Summer EBT for Children or SEBTC) as authorized 
by the Agriculture, Rural Development, Food and Drug Administration, 
and Related Agencies Appropriations Act, 2010 (Pub. L. 111-80). In this 
SEBTC model, benefits are issued to a participant's existing EBT card 
into an account distinct from SNAP, and the SEBTC benefits remain 
separate from SNAP benefits throughout the issuance and redemption 
process. However, because this SEBTC model was only ever implemented as 
a demonstration project in 7 States, most States were not already 
equipped with the infrastructure needed to implement P-EBT in the same 
manner.
    Due to the experience administering these SEBTC demonstration 
projects, USDA determined that it would take several months to modify 
SNAP State Agency eligibility and issuance systems to accommodate this 
type of model for P-EBT. In addition, due to the ongoing and national 
COVID-19 Public Health Emergency, SNAP State Agencies found themselves 
extremely short-staffed and unable implement this type of major system 
modification.
    After consultation with SNAP State Agencies, and in light of the 
urgency of the ongoing and national COVID-19 Public Health Emergency, 
USDA permitted States to issue SNAP and P-EBT benefits using 
essentially the same existing SNAP EBT mechanism every State already 
had in place. As a result of this, however, P-EBT and SNAP benefits are 
generally indistinguishable throughout the issuance and redemption 
process.
    Under the process implemented by States, P-EBT benefits were 
generally issued onto a household's existing EBT card if the household 
was already receiving SNAP benefits (and therefore already possessed an 
EBT card). Such SNAP households would have received P-EBT benefit 
issuances into their existing SNAP accounts. Once P-EBT benefits were 
issued into households' existing SNAP accounts, P-EBT benefits and SNAP 
benefits became comingled, and neither SNAP households receiving P-EBT 
benefits nor firms accepting P-EBT benefits were able to tell the 
difference between these two types of benefits. In at least one State, 
new cards were sent to all P-EBT recipient households, regardless as to 
their participation in SNAP.
    Non-SNAP households that were eligible for P-EBT benefits generally 
received EBT cards in the mail that were loaded with only P-EBT 
benefits. These cards issued to non-SNAP households functioned 
identically to the EBT cards provided to SNAP households.
    Despite using the same delivery and funding mechanism, P-EBT 
benefits are not SNAP benefits. SNAP was authorized and is governed by 
the FNA, while P-EBT was separately created and is governed by the 
FFCRA with separate appropriations for a different purpose--to provide 
supplemental allotments to households with children who would have 
otherwise received free or reduced school meals, but for school 
closures related to the ongoing and national COVID-19 Public Health 
Emergency. See Section 1101 of the FFCRA. Nevertheless, the 
aforementioned implementation mechanisms rendered P-EBT and SNAP 
benefits essentially

[[Page 70045]]

indistinguishable for benefit issuance and redemption purposes.

Purpose of the Final Rule

    Because P-EBT and SNAP benefits are essentially indistinguishable 
for benefit issuance and redemption purposes when the benefits are 
loaded onto the same EBT card, neither SNAP households receiving P-EBT 
benefits nor firms accepting P-EBT benefits are able to tell the 
difference between these two types of benefits. At the same time, the 
Department's SNAP fraud detection system also cannot distinguish 
between these two types of benefits.
    In addition, as discussed earlier, 7 CFR parts 271 and 278 provide 
for adverse administrative actions against firms for SNAP violations, 
such as trafficking, but those regulations govern violations involving 
SNAP benefits, not P-EBT benefits. Since P-EBT benefits are not SNAP 
benefits, existing regulations regarding the appropriate use of SNAP 
benefits and the consequences for misusing those benefits do not apply 
to P-EBT benefits, and there are currently no such provisions for the 
misuse of P-EBT benefits. However, USDA finds it appropriate and 
necessary to impose certain restrictions on the use of P-EBT benefits 
for several reasons described below.
    Congress initially authorized P-EBT as food assistance for 
households with children who lost free or reduced price school meals 
and since then, as mentioned previously, has greatly expanded P-EBT's 
scope. P-EBT benefits are not cash assistance, nor are they intended 
for misuse such as trafficking. As a type of replacement for the value 
of meals at schools or covered child care facilities,\3\ P-EBT is not 
intended for certain incongruous uses, including the purchase of 
nonfood items such as alcohol and tobacco. To safeguard the integrity 
of P-EBT (as well as SNAP), this final rule will ensure that the 
Department can hold firms accountable by aligning P-EBT with certain 
existing SNAP integrity regulations. The Department believes that 
providing an integrity scheme for P-EBT helps ensure that P-EBT 
benefits are used for their intended purpose, upholding the 
Congressional intent of both the FFCRA and the CR.
---------------------------------------------------------------------------

    \3\ As authorized by the originally enacted Section 1101(b) of 
FFCRA and explained in Pandemic EBT (P-EBT) Questions and Answers 
(April 15, 2020) (available at: https://fns-prod.azureedge.net/sites/default/files/resource-files/SNAP-COVID-PEBTQA.pdf), the 
guidelines for P-EBT benefit amounts were based on the value of the 
rates for free school meals. All States that issued P-EBT benefits 
after the original enactment of the FFCRA did so in amounts 
corresponding to the value of the rates for free school meals. The 
CR subsequently amended Section 1101(i) of the FFCRA to define 
``free rate'' separately for breakfast and lunch, based on the rates 
of those free meals under Section 4 of the Child Nutrition Act of 
1966 and the Richard B. Russell National School Lunch Act, 
respectively.
---------------------------------------------------------------------------

    The inability to impose penalties on all firms for misuse of P-EBT 
benefits undermines USDA's oversight and integrity efforts, and would 
also adversely affect SNAP oversight and integrity. For example, in FY 
2019, USDA identified and sanctioned more than one thousand firms 
engaged in the trafficking of SNAP benefits.\4\ The overwhelming 
majority of these cases were built, at least in part, using the 
Department's SNAP fraud detection system's transaction data. Since the 
Department's SNAP fraud detection system cannot distinguish between 
SNAP and P-EBT benefits in transaction data, USDA would be unable to 
use this vital data in program integrity work without considerable 
time-consuming modifications and resources, or the promulgation of this 
final rule.
---------------------------------------------------------------------------

    \4\ Data drawn from USDA's ``Fiscal Year 2019 Year End Summary'' 
(https://fns-prod.azureedge.net/sites/default/files/resource-files/2019-SNAP-Retailer-Management-Year-End-Summary.pdf).
---------------------------------------------------------------------------

    Without this final rule, USDA's ability to hold violators 
accountable would be adversely impacted. To illustrate the impact on 
USDA's oversight efforts, a 2017 report regarding trafficking 
activities from 2012 through 2014 revealed that approximately 12 
percent, or about 36,000 firms, engaged in trafficking, totaling 
approximately $1.1 billion a year or about 1.5% of all benefits 
redeemed. If USDA were unable to use EBT transaction data as is 
typically done for detecting trafficking and sanctioning trafficking 
firms, then as many as a thousand fewer firms engaging in trafficking 
would be identified and sanctioned in a year.\5\ This would mean that 
such firms would be able to continue to commit trafficking violations 
without consequence, resulting in as much as $31 million in fraud a 
year that would remain unchecked.\6\
---------------------------------------------------------------------------

    \5\ Data drawn from USDA's ``Fiscal Year 2019 Year End Summary'' 
(https://fns-prod.azureedge.net/sites/default/files/resource-files/2019-SNAP-Retailer-Management-Year-End-Summary.pdf).
    \6\ The 2012-2014 retailer trafficking study estimated that 
about 36,000 retailers engage in trafficking totaling about $1.1 
billion a year (reflecting about 1.5% of benefits redeemed). Using 
an arithmetic mean, the average trafficking retailer traffics about 
$31,000 in a year. USDA identified and sanctioned about 1,000 firms 
for trafficking in FY 2019 using EBT transaction data analysis as an 
investigative tool. If this USDA work were hampered, then these 
firms could continue trafficking activities at the same or a greater 
rate, resulting in as much as $31 million in trafficking being 
unchecked.
---------------------------------------------------------------------------

    The purpose of P-EBT was to provide financial relief to families in 
the midst of the ongoing national COVID-19 Public Health Emergency. 
USDA prioritized expediting the implementation of P-EBT in States that 
applied. However, while making expeditious implementation possible, the 
co-mingling of SNAP and P-EBT benefits inadvertently introduced this 
anomaly into FNS integrity efforts.
    If USDA did not promulgate this final rule, then USDA would not be 
able to efficiently and effectively address misuse by firms of P-EBT 
benefits or SNAP benefits, and both P-EBT and SNAP program integrity 
would be adversely impacted. Assuming that P-EBT benefits are 
trafficked at a rate similar to SNAP benefits, USDA estimates that $151 
million in P-EBT benefits could be trafficked.\7\ Currently, USDA 
estimates that about 3 percent of actual EBT fraud is detected through 
investigations that utilize EBT transaction data. The limited ability 
to use this data would potentially cause this fraud to go unchecked, 
which would constitute a serious integrity issue. Furthermore, because 
P-EBT benefits may remain in a household's account for months or even 
years before being expunged, USDA must address these integrity 
problems; otherwise, they could persist for months or even years after 
the issuance of P-EBT benefits.\8\ This final rule is crucial in 
allowing USDA to address trafficking in a timely manner and ensuring P-
EBT benefits, as well as SNAP benefits, are used in a manner consistent 
with Congressional intent.
---------------------------------------------------------------------------

    \7\ Total P-EBT benefit issuance is about $10.1 billion and the 
estimated 2012-2014 SNAP retailer trafficking rate is 1.5% of 
benefits redeemed.
    \8\ For administrative ease, most States chose to issue P-EBT 
benefits such that these benefits would only be expunged from 
beneficiaries' SNAP accounts after a continuous 365-day period of 
inactivity per SNAP standards at 7 CFR 274.2(h)(2) as they were when 
P-EBT State Plans were submitted. Every time a beneficiary accesses 
their benefits, this 365-day expungement clock is reset. Some 
beneficiaries may choose to conserve their P-EBT benefits, using 
them sparingly over a protracted period. Therefore, although P-EBT 
is currently authorized through September 30, 2020, P-EBT benefits 
could remain on EBT cards years after that date.
---------------------------------------------------------------------------

    This final rule allows USDA to immediately address the integrity 
issues, instead of prolonging them and allowing for bad actors to 
discover the anomaly and take advantage of it. If USDA were to notify 
the public of these integrity issues without implementing a 
comprehensive solution, then such a notice would subvert program 
integrity. By promulgating this final rule, USDA is ensuring that 
traditional mechanisms of ongoing and robust firm oversight

[[Page 70046]]

and enforcement are maintained to protect the integrity of both P-EBT 
and SNAP and that the current lack of P-EBT integrity regulations is 
addressed without further unnecessary and harmful delay. This will 
allow USDA to continue detecting and pursuing administrative remedies 
to ensure there is no increase in trafficking and other violations.
    Importantly, given the urgency of the issue, it is most efficient 
for P-EBT regulations to adopt the structure and meaning of SNAP 
regulations instead of crafting an entirely new regulatory scheme and 
implementing massive system changes that would accompany such a new 
regulatory scheme. Such separate undertakings solely for P-EBT are 
impractical and potentially ineffective because of the time, cost, and 
effort involved.
    For the reasons discussed, this final rule establishes integrity 
regulations (as enumerated in this final rule) for P-EBT benefits as 
detailed further below in the ``Summary of P-EBT Regulations'' section.

Summary of P-EBT Regulations

    This final rule establishes that P-EBT benefits issued pursuant to 
Section 1101 of the FFCRA, as amended by the Continuing Appropriations 
Act, 2021 and Other Extensions Act (CR; Pub. L. 116-159) or any 
subsequent legislation, are subject to integrity regulations, as 
enumerated below. This change will ensure that P-EBT (as well as SNAP) 
is administered in a manner that safeguards against fraud and abuse. 
This final rule renames the previously reserved part 284 as 
``Miscellaneous'' and creates Sec.  284.1, titled ``Pandemic Electronic 
Benefits Transfer (P-EBT),'' therein.
    The following crosswalk summarizes the provisions of this new Sec.  
284.1. The left column lists the citation for each final rule 
provision, the center column summarizes the effect of the provision, 
and the right column indicates the preexisting SNAP integrity 
regulation to which the final rule provision refers. In using phrases 
such as ``involving P-EBT benefits'', the Department means that the 
activity at issue involves P-EBT benefits as well as SNAP benefits, or 
only P-EBT benefits. Under 7 CFR 278.6, a firm that commits serious 
violations may be subject to a period of disqualification or a civil 
money penalty. Under this final rule, if a firm commits violations 
involving P-EBT benefits (e.g., trafficking only P-EBT benefits or 
trafficking a combination of P-EBT and SNAP benefits), then that firm 
shall be subject to the appropriate sanction (e.g., permanent 
disqualification or a civil money penalty in lieu of permanent 
disqualification). Firms shall not be subject to multiple sanctions for 
a single investigation that involves both P-EBT and SNAP benefits 
(i.e., firms shall not be subject to one sanction for misuse of P-EBT 
benefits and a separate sanction for misuse of SNAP benefits based on a 
single investigation).
    While this final rule promulgates provisions for P-EBT benefits 
that generally track the corresponding SNAP benefit provisions, one 
exception is the P-EBT benefits provision concerning judicial review. 
As P-EBT benefits arise from FFCRA, as amended regulations at Sec.  
284.1(g) will provide for judicial appeal rights pursuant the 
Administrative Procedure Act (5 U.S.C. 702 through 706) as opposed to 
section 14 of the FNA. Currently, judicial review requests for civil 
cases filed pursuant to the Administrative Procedure Act have a six-
year statute of limitations. See 28 U.S.C. 2401(a).

----------------------------------------------------------------------------------------------------------------
                                                                                       Reference to preexisting
     Citation in this final rule              Purpose of final rule provision                 regulation
----------------------------------------------------------------------------------------------------------------
7 CFR 284.1(a)......................  background on P-EBT and the function of this    n/a.
                                       section.
7 CFR 284.1(b)(1)...................  definition of trafficking applies to            7 CFR 271.2.
                                       activities described in such definition
                                       involving P-EBT benefits.
7 CFR 284.1(b)(2)...................  definition of firm's practice applies to        7 CFR 271.2.
                                       activities described in such definition
                                       involving P-EBT benefits.
7 CFR 284.1(b)(3)...................  definition of involving P-EBT benefits or       n/a.
                                       involve P-EBT benefits means activities
                                       involving P-EBT benefits as well as SNAP
                                       benefits, or only P-EBT benefits.
7 CFR 284.1(c)......................  requirements and restrictions on the            7 CFR 278.2, 278.3, and
                                       participation of retail food stores and         278.4.
                                       wholesale food concerns and the redemption of
                                       coupons apply to activities involving P-EBT
                                       benefits, including the restriction that P-
                                       EBT benefits may only be accepted by an
                                       authorized firm and only in exchange for
                                       eligible food.
7 CFR 284.1(d)......................  a firm may be subject to denial or withdrawal   7 CFR 278.1.
                                       for any violations involving P-EBT benefits
                                       as specified in the subparagraphs.
7 CFR 284.1(d)(1)...................  firms with certain sanctions for violations     7 CFR 278.1(b)(4).
                                       involving P-EBT benefits must submit a
                                       collateral bond or irrevocable letter or
                                       credit as a condition of authorization; the
                                       calculation of the value of such collateral
                                       bonds or irrevocable letters or credit shall
                                       also include the amount of P-EBT redemptions.
7 CFR 284.1(d)(2)...................  authorization will be denied or withdrawn for   7 CFR 278.1(b)(3), (k)(3)
                                       activities indicating a lack of necessary       and (6), and (l)(1)(iv).
                                       business integrity and reputation, including
                                       activities involving P-EBT benefits.
7 CFR 284.1(d)(3)...................  authorization will be denied or withdrawn for   7 CFR 278.1(k)(7) and
                                       failure to pay fines, penalties, and claims     (l)(1)(v) and (vi).
                                       imposed for violations involving P-EBT
                                       benefits.
7 CFR 284.1(e)......................  a firm may be subject to disqualification,      7 CFR 278.6.
                                       monetary penalties, and/or fines for any
                                       violations that include activities involving
                                       P-EBT benefits as specified in the
                                       subparagraphs.
7 CFR 284.1(e)(1)...................  permanent disqualification or civil monetary    7 CFR 278.6(e)(1)(i) and
                                       penalty in lieu of permanent disqualification   (i).
                                       for trafficking applies to trafficking that
                                       involves P-EBT benefits.
7 CFR 284.1(e)(2)...................  permanent disqualification for violations       7 CFR 278.6(e)(1)(ii).
                                       involving P-EBT benefits, such as the sale of
                                       ineligible items, when the firm had already
                                       been sanctioned at least twice.
7 CFR 284.1(e)(3)...................  sanctions for unauthorized acceptance apply to  7 CFR 278.6(e)(2)(v),
                                       transactions involving P-EBT benefits.          (e)(3)(iv), and (m).

[[Page 70047]]

 
7 CFR 284.1(e)(4)...................  5-year disqualification for certain firms when  7 CFR 278.6(e)(2)(ii),
                                       collective redemptions exceed food sales in a   (iii), and (iv).
                                       certain time period; the amount of
                                       redemptions shall also include the amount of
                                       P-EBT redemptions.
7 CFR 284.1(e)(5)...................  3-year disqualification for any of the          7 CFR 278.6(e)(3)(ii).
                                       violations described in Sec.   278.6(e)(2)
                                       when FNS had not previously advised the firm
                                       of the possibility that violations were
                                       occurring and of the possible consequences of
                                       violating the regulations, when those
                                       violations involve P-EBT benefits.
7 CFR 284.1(e)(6)...................  1-year disqualification for transactions        7 CFR 278.6(e)(4)(ii) and
                                       involving P-EBT benefits where retailer         278.2(f).
                                       accepted benefits in payment for items sold
                                       on credit.
7 CFR 284.1(e)(7)...................  disqualifications for sale of ineligible foods  7 CFR 278.6(e)(2)(i),
                                       applies to transactions involving P-EBT         (e)(3)(i), (e)(4)(i), and
                                       benefits.                                       (e)(5).
7 CFR 284.1(e)(8)...................  periods of disqualification imposed against     7 CFR 278.6(e)(6).
                                       firms will be doubled when such firms have
                                       been sanctioned for committing violations
                                       involving P-EBT benefits.
7 CFR 284.1(e)(9)...................  warning letters shall be issued to firms when   7 CFR 278.6(e)(7).
                                       such firms commit violations involving P-EBT
                                       benefits, which are too limited to warrant a
                                       period of disqualification.
7 CFR 284.1(e)(10)..................  calculation of hardship and transfer of         7 CFR 278.6(g).
                                       ownership civil money penalties includes
                                       consideration of the firm's average monthly
                                       redemption of P-EBT benefits.
7 CFR 284.1(e)(11)..................  calculation of trafficking civil money          7 CFR 278.6(j).
                                       penalties includes consideration of the
                                       firm's average monthly redemption of P-EBT
                                       benefits.
7 CFR 284.1(f)......................  standards regarding the determination and       7 CFR 278.7.
                                       disposition of claims apply to claims based
                                       on P-EBT benefits.
7 CFR 284.1(g)......................  firms aggrieved by administrative action under  7 CFR part 279.
                                       Sec.   284.1(d), (e), and (f) may request
                                       administrative review in accordance with part
                                       279, subpart A. Firms aggrieved by the
                                       determination of such an administrative
                                       review may seek judicial review under 5
                                       U.S.C. 702 through 706.
----------------------------------------------------------------------------------------------------------------

Procedural Matters

Administrative Procedure Act (APA) Statement

    The Administrative Procedure Act of 1946, as amended (APA; 5 U.S.C. 
553), generally requires that agencies go through notice-and-comment 
rulemaking before finalizing regulations and have a 30-day delayed 
effective date for final rules. The APA, however, allows for exemptions 
to these requirements. This final rule is being promulgated under one 
of these exemptions, as described below.
APA Exemption for Rules Pertaining to Benefits
    The APA provides that the notice-and-comment and 30-day delay in 
the effective date provisions do not apply when a rule concerns ``a 
matter relating to agency management or personnel or to public 
property, loans, grants, benefits, or contracts.'' 5 U.S.C. 553(a)(2). 
P-EBT is a food assistance benefit created by the FFCRA and, therefore, 
USDA has the authority under FFCRA to issue a final rule pertaining to 
P-EBT without notice-and-comment or a delayed effective date.\9\
---------------------------------------------------------------------------

    \9\ Previously, USDA utilized APA notice-and-comment rulemaking 
procedures regardless of the APA exemption for benefits, pursuant to 
the ``Public Participation in Rule Marking: Statement of Policy'' 
(Statement of Policy), published on July 24, 1971 (36 FR 13804). 
However, this Statement of Policy was rescinded in 2013. 78 FR 64194 
(Oct. 28, 2013). Additionally, while Section 4(c) of the FNA (7 
U.S.C. 2013(c)) generally requires USDA FNS to comply with the APA 
requirements when promulgating SNAP regulations under the FNA, this 
final rule is promulgated under the FFCRA, not the FNA. Therefore, 
this final rule regarding P-EBT benefits is exempt from the APA 
notice-and-comment and 30-day delay in the effective date provisions 
under 5 U.S.C. 553(a)(2). Furthermore, while notice-and-comment 
rulemaking remains an option for matters involving benefits, USDA is 
choosing to promulgate a final rule for P-EBT benefits under the 
authority in 5 U.S.C. 553(a)(2) because the additional time to 
undergo notice-and-comment would further undermine integrity. Firms 
are already subject to certain requirements regarding the redemption 
of SNAP benefits on EBT cards; therefore, carrying over those 
requirements to P-EBT benefits that are often comingled with SNAP 
benefits on the same EBT cards does not warrant departure from 5 
U.S.C. 553(a)(2).
---------------------------------------------------------------------------

Executive Order 12866 and Executive Order 13563

    Executive Orders 12866 and 13563 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select 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 
cost and benefits, of reducing cost, of harmonizing rules, and of 
promoting flexibility.
    The Office of Management and Budget (OMB) has reviewed this final 
rule and determined that it is not significant under Executive Order 
12866 (E.O. 12866). E.O. 12866 defines a ``significant regulatory 
action'' as one that is likely to: (1) Have an annual effect on the 
economy of $100 million or more or adversely affect, in a material way, 
the economy, a sector of the economy, productivity, competition, jobs, 
the environment, public health or safety, or State, local, or Tribal 
governments or communities; (2) create a serious inconsistency or 
otherwise interfere with an action taken or planned by another agency; 
(3) materially alter the budgetary impact of entitlements, grants, user 
fees, or loan programs or the rights and obligations of recipients 
thereof; or (4) raise novel legal or policy issues arising out of legal 
mandates, the President's priorities, or the principles set forth in 
E.O. 12866. This final rule does not meet any of these criteria.
    The Department does not anticipate that this final rule will impose 
any additional costs on firms, beneficiary households, SNAP State 
Agencies, or any other stakeholders. USDA estimates that failure to 
promulgate and implement this final rule would significantly hamper the 
agency's ability to enforce regulation and law in maintaining SNAP 
integrity. USDA considered the regulatory alternatives of taking no 
action or promulgating this final rule instead as a notice of proposed 
rulemaking, but these approaches were rejected for the reasons provided 
in the preamble. As this rule was designated not significant, no 
additional regulatory impact analysis has been performed for this rule.

[[Page 70048]]

Regulatory Flexibility Act Certification

    The Regulatory Flexibility Act (RFA) generally requires that 
agencies must prepare a regulatory flexibility analysis that meets the 
requirements of the RFA and publish such an analysis in the Federal 
Register. Specifically, the RFA normally requires agencies to describe 
the impact of a rulemaking on small entities by providing a regulatory 
impact analysis. Such an analysis must address the consideration of 
regulatory options that would lessen the economic effect of the rule on 
small entities. The RFA defines a ``small entity'' as (1) a proprietary 
firm meeting the size standards of the Small Business Administration 
(SBA); (2) a nonprofit organization that is not dominant in its field; 
or (3) a small government jurisdiction with a population of less than 
50,000. Except for such small government jurisdictions, neither State 
nor local governments are ``small entities.'' Similarly, for purposes 
of the RFA, individual persons are not small entities. The requirement 
to conduct a regulatory impact analysis does not apply if the agency 
``certifies that the rule will not, if promulgated, have a significant 
economic impact on a substantial number of small entities.'' The 
Department hereby certifies that this final rule will not have a 
significant economic impact on a substantial number of small entities.

Congressional Review Act

    Pursuant to the Congressional Review Act (CRA; Pub. L. 104-121), 
OMB has designated this action as not a major rule, as defined by 5 
U.S.C. 804(2). The CRA defines a ``major rule'' as any rule that has 
resulted in or is likely to result in: an annual effect on the economy 
of $100,000,000 or more; a major increase in costs or prices for 
consumers, individual industries, Federal, State, or local government 
agencies, or geographic regions; or, significant adverse effects on 
competition, employment, investment, productivity, innovation, or on 
the ability of U.S.-based enterprises to compete with foreign-based 
enterprises in domestic and export markets.

Executive Order 13771

    Executive Order 13771 directs agencies to reduce regulation and 
control regulatory costs and provides that the cost of planned 
regulations be prudently managed and controlled through a budgeting 
process. This rule is not an E.O. 13771 regulatory action because it is 
not significant under E.O. 12866.

Executive Order 12988, Civil Justice Reform

    This final rule has been reviewed under Executive Order 12988 (E.O. 
12988), Civil Justice Reform. This rule is intended to have preemptive 
effect with respect to any State or local laws, regulations, or 
policies which conflict with its provisions or which would otherwise 
impede its full and timely implementation. This final rule is not 
intended to have retroactive effect. Prior to any judicial challenge to 
the provisions of the final rule, all applicable administrative 
procedures must be exhausted.

Executive Order 12372, Intergovernmental Review

    Executive Order 12372 (E.O. 12372) requires intergovernmental 
consultation with State and local governments that would provide non-
Federal funds for, or that would be directly affected by, proposed 
Federal financial assistance or direct Federal development. This is a 
final rule regarding benefits fully funded by the Federal Government 
and is therefore excluded from the scope of E.O. 12372.

Executive Order 13132, Federalism

    Executive Order 13132 (E.O. 13132) requires Federal agencies to 
consider the impact of their regulatory actions on State and local 
governments. Where such actions have federalism implications, imposes 
substantial direct compliance costs on State and local government, and 
are not required by statute, 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 E.O. 13132.
    The Department has considered the impact of this final rule on 
State and local governments and has determined that this rule does not 
have federalism implications. Therefore, a federalism impact summary is 
not required.

Executive Order 13175, Consultation and Coordination With Indian Tribal 
Governments

    Executive Order 13175 (E.O. 13175) requires Federal agencies to 
consult and coordinate With Tribes on a government-to-government basis 
on policies that have Tribal implications, including regulations, 
legislative comments or proposed legislation, and other policy 
statements or actions that have substantial direct effects on one or 
more Indian Tribes, on the relationship between the Federal Government 
and Indian Tribes, or on the distribution of power and responsibilities 
between the Federal Government and Indian Tribes. The Department has 
considered the impact of this final rule on Indian Tribes and has 
determined that this rule does not have Tribal implications. Although 
Tribal consultation and coordination is not required under E.O. 13175, 
USDA commits to review of this rule at the Department's next scheduled 
Tribal listening session in case unexpected Tribal government issues or 
concerns emerge during implementation.

Paperwork Reduction Act

    The Paperwork Reduction Act of 1995 (44 U.S.C. Chap. 35; 5 CFR part 
1320) requires the Office of Management and Budget (OMB) approve 
collections of information by a Federal agency before they can be 
implemented.
    In accordance with 44 U.S.C. 3518(c)(1)(B)(ii), any information 
requests or requirements in this rule are not subject to the 
requirements of the Paperwork Reduction Act because such collections of 
information are pursuant to an administrative action or investigation 
by an agency of the United States against specific individuals or 
entities. The Secretary hereby certifies that this rule does not impose 
reporting or recordkeeping requirements subject to the approval by the 
Office of Management and Budget under the requirements of the Paperwork 
Reduction Act.

E-Government Act Compliance

    USDA is committed to the E-Government Act, which requires 
Government agencies in general to provide the public the option of 
submitting information or transacting business electronically to the 
maximum extent possible. An electronic copy of this final rule will be 
made available through the agency's website.

Unfunded Mandates Reform Act

    This final rule contains no Federal mandates (under the regulatory 
provision of title II of the Unfunded Mandates Reform Act of 1995) for 
State, local, and Tribal governments or the private sector. Therefore, 
this final rule is not subject to the requirements of section 202 and 
205 of the Unfunded Mandates Reform Act.

Civil Rights Impact Analysis

    USDA FNS has reviewed this final rule in accordance with USDA 
Regulation 4300-4, ``Civil Rights Impact Analysis,'' to identify any 
major civil rights impacts this final rule might have on SNAP or P-EBT 
participants on the basis of age, race, color, national origin, sex or 
disability. After review and

[[Page 70049]]

analysis of the final rule and available data, it has been determined 
that this final rule will neither adversely nor disproportionately 
impact any protected group. As this final rule has not been designated 
a ``significant regulatory action,'' a separate Civil Rights Impact 
Analysis (CRIA) is not required per Section 7(a) of USDA Regulation 
4300-4, ``Civil Rights Impact Analysis.''

USDA Non-Discrimination Policy

    In accordance with Federal civil rights law and USDA civil rights 
regulations and policies, the USDA, its Agencies, offices, and 
employees, and institutions participating in or administering USDA 
programs are prohibited from discriminating based on race, color, 
national origin, religion, sex, gender identity (including gender 
expression), sexual orientation, disability, age, marital status, 
family/parental status, income derived from a public assistance 
program, political beliefs, or reprisal or retaliation for prior civil 
rights activity, in any program or activity conducted or funded by USDA 
(not all bases apply to all programs). Remedies and complaint filing 
deadlines vary by program or incident.
    Persons with disabilities who require alternative means of 
communication for program information (e.g., Braille, large print, 
audiotape, American Sign Language) should contact the responsible 
Agency or USDA's TARGET Center at (202) 720-2600 (voice and TTY) or 
contact USDA through the Federal Relay Service at (800) 877-8339. 
Additionally, program information may be made available in languages 
other than English.
    To file a program discrimination complaint, complete the USDA 
Program Discrimination Complaint Form, AD-3027, found online at http://www.ascr.usda.gov/complaint_filing_cust.html and at any USDA office or 
write a letter addressed to USDA and provide in the letter all of the 
information requested in the form. To request a copy of the complaint 
form, call (866) 632-9992. Submit your completed form or letter to USDA 
by: (1) Mail: U.S. Department of Agriculture, Office of the Assistant 
Secretary for Civil Rights, 1400 Independence Avenue SW, Washington, DC 
20250-9410; (2) fax: (202) 690-7442; or (3) email: 
[email protected].
    USDA is an equal opportunity provider, employer, and lender.

List of Subjects in 7 CFR Part 284

    Administrative practice and procedure, Food stamps, Grant programs-
social programs, Pandemic, Penalties.


0
For the reasons set out in the preamble, 7 CFR part 284 is added to 
read as follows:

PART 284--MISCELLANEOUS

Sec.
284.1 Pandemic Electronic Benefits Transfer (P-EBT).
284.2 [Reserved]

    Authority:  Pub. L. 116-127, 134 Stat. 178.


Sec.  284.1   Pandemic Electronic Benefits Transfer (P-EBT).

    (a) Overview. Section 1101 of the Families First Coronavirus 
Response Act (FFCRA; Pub. L. 116-127), as amended, authorized 
supplemental allotments to certain households. These benefits shall be 
referred to as Pandemic Electronic Benefits Transfer (P-EBT) benefits 
throughout this section. This section establishes the retailer 
integrity regulations for P-EBT for retailers in any State as defined 
in Section 3(r) of the Food and Nutrition Act.
    (b) Definitions. For this section:
    (1) Trafficking means the activities described in the definition of 
trafficking at Sec.  271.2 of this chapter when such activities involve 
P-EBT benefits.
    (2) Firm's practice means the activities described in the 
definition of firm's practice at Sec.  271.2 of this chapter when such 
activities involve P-EBT benefits.
    (3) Involving P-EBT benefits or involve P-EBT benefits means 
activities involving P-EBT benefits as well as supplemental nutrition 
assistance program (SNAP) benefits, or only P-EBT benefits.
    (c) Participation of retail food stores and wholesale food 
concerns, and redemption of P-EBT benefits. Requirements and 
restrictions on the participation of retail food stores and wholesale 
food concerns and the redemption of coupons described at Sec. Sec.  
278.2, 278.3 and 278.4 of this chapter, including the acceptance of 
coupons for eligible food at authorized firms, also apply to activities 
involving P-EBT benefits.
    (d) Firm eligibility standards. A firm may be subject to the 
following actions described at Sec.  278.1 of this chapter for 
noncompliance or violations involving P-EBT benefits:
    (1) The requirements described at Sec.  278.1(b)(4) of this chapter 
regarding a collateral bond or irrevocable letter of credit for 
applicant firms with certain sanctions apply to applicant firms with 
sanctions imposed for violations involving P-EBT benefits. The amount 
of the collateral bond or irrevocable letter of credit shall be 
calculated in accordance with Sec.  278.1(b)(4)(i)(D) and shall also 
include the amount of P-EBT benefit redemptions when calculating the 
average monthly benefit redemption volume.
    (2) Authorization shall be denied or withdrawn based on a 
determination by the Food and Nutrition Service (FNS) that a firm lacks 
or fails to maintain necessary business integrity and reputation, in 
accordance with the standards and time periods described at Sec.  
278.1(b)(3), (k)(3), and (l)(1)(iv) of this chapter. When making such 
determinations, FNS shall consider the criteria referred to in Sec.  
278.1(b)(3), (k)(3), and (l)(1)(iv) where the underlying activities 
involve P-EBT benefits.
    (3) Firm authorization shall be denied or withdrawn for failure to 
pay any claims, fines, or civil money penalties in the manner described 
at Sec.  278.1(k)(7) and (l)(1)(v) and (vi) of this chapter where such 
sanctions were imposed for violations involving P-EBT benefits.
    (e) Penalties. For firms that commit certain violations described 
at Sec. Sec.  278.6 and 278.2 of this chapter where such violations 
involve P-EBT benefits, FNS shall take the corresponding action 
prescribed at Sec.  278.6 or Sec.  278.2 for that violation. For the 
purposes of assigning a period of disqualification, a warning letter 
shall not be considered to be a sanction. Specifically, FNS shall:
    (1) Disqualify a firm permanently, as described at Sec.  
278.6(e)(1)(i) of this chapter, for trafficking, as defined at Sec.  
284.1(b)(1) of this chapter, or impose a civil money penalty in lieu of 
permanent disqualification, as described at Sec.  278.6(i) of this 
chapter, where such compliance policy and program is designed to 
prevent violations of regulations of this section;
    (2) Disqualify a firm permanently, as described at Sec.  
278.6(e)(1)(ii) of this chapter, for any violation involving P-EBT 
benefits committed by a firm that had already been sanctioned at least 
twice before under this section or part 278 of this chapter;
    (3) Disqualify the firm for 5 years, as described at Sec.  
278.6(e)(2)(v) of this chapter, or for 3 years, as described at Sec.  
278.6(e)(3)(iv) of this chapter, for unauthorized acceptance violations 
involving P-EBT benefits, and impose fines, as described at Sec.  
278.6(m) of this chapter, for unauthorized acceptance violations 
involving P-EBT benefits;
    (4) Disqualify the firm for 5 years in circumstances described at 
Sec.  278.6(e)(2) of this chapter when the amount of redemptions, which 
shall also include the amount of P-EBT redemptions, exceed food sales 
for the same period of time, as described at Sec.  278.6(e)(2)(ii), 
(iii), and (iv);

[[Page 70050]]

    (5) Disqualify the firm for 3 years as described at Sec.  
278.6(e)(3)(ii) of this chapter for situations described at Sec.  
278.6(e)(2) of this chapter involving P-EBT benefits;
    (6) Disqualify the firm for 1 year for credit account violations as 
described at Sec. Sec.  278.6(e)(4)(ii) and 278.2(f) of this chapter, 
where such violations involve P-EBT benefits;
    (7) Disqualify the firm for ineligibles violations for such 
circumstances and corresponding time periods as described at Sec.  
278.6(e)(2)(i), (e)(3)(i), (e)(4)(i), and (e)(5) of this chapter, where 
such violations involve P-EBT benefits;
    (8) Double the appropriate period of disqualification for a 
violation, as described at Sec.  278.6(e)(6) of this chapter, where 
such violation involves P-EBT benefits, when the firm has once before 
been assigned a sanction under this section or part 278 of this 
chapter;
    (9) Issue a warning letter to the violative firm when violations 
are too limited to warrant a period of disqualification, as described 
at Sec.  278.6(e)(7) of this chapter, where such violations involve P-
EBT benefits;
    (10) Impose a civil money penalty for hardship or transfer of 
ownership, as described at Sec.  278.6(g) of this chapter, in amounts 
calculated using the described formula at Sec.  278.6(g), which shall 
also include the relevant amount of P-EBT redemptions when calculating 
the average monthly benefit redemptions; and
    (11) Impose a civil money penalty in lieu of permanent 
disqualification for trafficking as described at Sec.  278.6(j) of this 
chapter in an amount calculated using the described formula at Sec.  
278.6(j), which shall also include the relevant amount of P-EBT 
redemptions when calculating the average monthly benefit redemptions.
    (f) Claims. The standards for determination and disposition of 
claims described at Sec.  278.7 of this chapter apply to P-EBT 
benefits.
    (g) Administrative and Judicial review. Firms aggrieved by 
administrative action under paragraphs (d), (e), and (f) of this 
section may request administrative review of the administrative action 
with FNS in accordance with part 279, subpart A, of this chapter. Firms 
aggrieved by the determination of such an administrative review may 
seek judicial review of the determination under 5 U.S.C. 702 through 
706.


Sec.  284.2   [Reserved]

Pamilyn Miller,
Administrator, Food and Nutrition Service.
[FR Doc. 2020-24303 Filed 11-3-20; 8:45 am]
BILLING CODE 3410-30-P