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[Federal Register: November 21, 2000 (Volume 65, Number 225)]
[Rules and Regulations]               
[Page 70133-70212]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr21no00-17]                         

[[Page 70133]]

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Part III

Department of Agriculture

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

Food and Nutrition Service

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

7 CFR Part 272 et al.

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

[[Page 70134]]

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DEPARTMENT OF AGRICULTURE

Food and Nutrition Service

7 CFR Parts 272, 273, 274, and 277

[Amendment No. 388]
RIN 0584-AC40

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

AGENCY: Food and Nutrition Service, USDA.

ACTION: Final rule.

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

SUMMARY: This rule finalizes a proposed rule published February 29, 
2000, amending Food Stamp Program (Program) regulations to implement 
several provisions of the Personal Responsibility and Work Opportunity 
Reconciliation Act of 1996 (PRWORA), and subsequent amendments to these 
provisions made by the Omnibus Consolidated Appropriations Act of 1996 
(OCAA), the Balanced Budget Act of 1997 (BBA), and the Agricultural 
Research, Extension, and Education Reform Act of 1998 (AREERA). This 
action finalizes options related to matching activities, fair hearings 
and recipient services. This action finalizes provisions which would 
increase State agency flexibility in processing applications for the 
Program and allow greater use of standard amounts for determining 
deductions and self-employment expenses. This action also finalizes 
revisions to the requirements for determining alien eligibility and the 
eligibility and benefits of sponsored aliens, and requires certain 
transitional housing payments and most State and local energy 
assistance to be counted as income, excludes the earnings of students 
under age 18 from income, and requires proration of benefits following 
any break in certification.
    Other provisions of this final action establish ground rules for 
implementing the Simplified Food Stamp Program, allow State agencies 
options to issue partial allotments for households in treatment 
centers, count all, part, or, in some cases, none of the income of an 
ineligible alien in determining the benefits of the rest of the 
household, issue combined allotments to certain expedited service 
households, and certify elderly or disabled households up to 24 months 
and other households up to 12 months. The action also finalizes several 
changes to existing regulations in response to the President's reform 
initiative to remove overly prescriptive, outdated, and unnecessary 
regulatory provisions.
    The rule also makes final the proposals to add vehicles to the 
assets which may be covered under the inaccessible resources provisions 
of the Food Stamp Act of 1977, clarifies the procedures for shortening 
or lengthening a certification period, and makes a change to exclude 
from income on-the-job training payments received under the Summer 
Youth Employment and Training Program as required by Section 702 of the 
Workforce Investment Act (Pub. L. 102-367, originally known as the Job 
Training Reform Amendments of 1992).

DATES: Effective Date: This final rule is effective January 20, 2001, 
except for the amendment to Sec. 273.2(b)(4)(iv) which is effective 
August 1, 2001, and the amendments specified in items 2 and 3 below 
which are not effective until Office of Management and Budget (OMB) 
approval of an associated information collection burden. The Food and 
Nutrition Service will publish a document in the Federal Register 
announcing the effective date of these amendments after approval of the 
information collection requirements by OMB.
    Implementation Dates: 
    1. State agencies may implement the following amendments at their 
discretion at any time on or after the effective date: Sec. 272.8; 
Sec. 272.11(a); Sec. 273.2(f)(9)(i); Sec. 273.2(f)(10); 
Sec. 273.2(j)(2)(ii); Sec. 273.9(d)(6)(i); Sec. 273.9(d)(6)(iii)(E); 
Sec. 273.11(a)(3)(v); Sec. 273.12(a)(1)(vii); Sec. 273.25; and 
Sec. 277.4(b).
    2. State agencies may implement the following amendment at their 
discretion at any time on or after the effective date established by 
OMB approval of the associated information collection burden: 
Sec. 273.12(f)(4).
    3. State agencies must implement the following amendments no later 
than 180 days after the effective date established by OMB approval of 
the associated information collection burden for all households newly 
applying for Program benefits. State agencies must convert current 
caseloads no later than the next recertification following the 
implementation date: Sec. 273.2(c)(2)(i), Sec. 273.2(e)(1), 
Sec. 273.2(e)(2)(i), Sec. 273.2(e)(2)(ii), Sec. 273.2(e)(3), 
Sec. 273.4(c)(3)(iv); and Sec. 273.12(c)(3).
    4. State agencies must implement the amendment to 
Sec. 273.2(b)(4)(iv) no later than August 1, 2001, for all households 
newly applying for Program benefits.
    5. State agencies must implement all other amendments no later than 
June 1, 2001, for all households newly applying for Program benefits. 
State agencies must convert current caseloads no later than the next 
recertification following the implementation date.

FOR FURTHER INFORMATION CONTACT: Patrick Waldron, Program Analyst, 
Certification Policy Branch, Program Development Division, Food and 
Nutrition Service, USDA, 3101 Park Center Drive, Room 800, Alexandria, 
Virginia, 22302, (703) 305-2805 or e-mail at 
Patrick.Waldron@fns.usda.gov.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

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

Executive Order 13132

Federalism Summary Impact Statement

    Executive Order 13132 requires Federal agencies to consider the 
impact of their regulatory actions on State and local governments. FNS 
has considered the impact on State agencies. For the most part, this 
rule deals with changes required by law, and implemented by law in 
1996. However, the Department has made discretionary changes to 
preserve client protections that existed in the regulations prior to 
the effective date of this rule and to facilitate the participation of 
eligible low-income households, particularly households with wage 
earners. These changes primarily affect food stamp recipients. The 
effects on State agencies are moderate. In some instances, the changes 
relieve State agencies of administrative burdens. In other instances, 
the changes result in modest increases in administrative burdens. 
However, we balanced these increases in State agency burden against the 
need to preserve and enhance Program access to eligible low-income 
families and individuals. This rule is intended to have preemptive 
effect on any State law that conflicts with its provisions or that 
would otherwise impede its full implementation. Generally, PRWORA and 
other federal statutes required many of the changes made in this rule, 
and made most of them effective on enactment and all of them effective 
prior to the publication of this rule. FNS is not aware of any case 
where the discretionary provisions of the rule would preempt State law.

Prior Consultation With State Officials

    Before drafting this rule, we received input from State agencies at 
various times. Because the Program is a State-administered, federally 
funded program,

[[Page 70135]]

our regional offices have formal and informal discussions with State 
and local officials on an ongoing basis. These discussions involve 
implementation and policy issues. This arrangement allows State 
agencies to provide feedback that forms the basis for many 
discretionary decisions in this and other Program rules. In addition, 
FNS officials attend regional, national, and professional conferences 
to discuss issues and receive feedback from State officials at all 
levels. Lastly, the comments on the proposed rule from State officials 
were carefully considered in drafting this final rule.

Regulatory Flexibility Act

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

Paperwork Reduction Act

    The information collection requirements affected by the issuance of 
this final rule are or will be contained within the following OMB 
numbers, 0584-0064, 0584-0083, and 0584-0496. Some requirements are 
already approved. There are others about which we are seeking comment. 
Those will not become effective until approved by OMB.

Current Information Burden (ICB) Approval

    The information collection requirements governing State agency 
administration and management described in the final rule at Part 272 
have been eliminated, made optional or significantly modified as a 
result of implementation of certain provisions of the PRWORA amending 
the Program. Therefore, current reporting and record keeping burden 
associated with Part 272, previously approved by OMB and assigned 
control numbers 0584-0064 and 0584-0083, either remains the same or 
there is no longer an information collection burden associated with the 
provisions discussed in the preamble to this rule. OMB 0584-0064 also 
includes information collection burden associated with Part 273.
    The information collection requirements described in Sec. 273.2, 
Sec. 273.12, Sec. 273.14(b), and Sec. 273.21 of this final rule 
governing the application, certification, and ongoing eligibility of 
food stamp households have been approved under OMB No. 0584-0064. The 
information collection requirements described in Sec. 273.9(d) and 
Sec. 273.11(b) of this final rule governing administration of the 
homeless shelter deduction, establishing and reviewing standard utility 
allowances, and establishing methodologies for offsetting the cost of 
producing self-employment income have been approved under OMB No. 0584-
0496.

Results From 60 Day Comment Period

    FNS has submitted the above-noted ICB packages to OMB for renewal 
and they will remain in effect until further notice. We received no 
comments on the ICB mentioned in the proposed rule. As discussed below, 
the final rule contains additional reporting burden which must receive 
OMB approval before the regulatory amendments become effective. The 
associated amendments are Sec. 273.2(c)(2)(i), Sec. 273.2(e)(1), 
Sec. 273.2(e)(2)(i), Sec. 273.2(e)(2)(ii), Sec. 273.2(e)(3), 
Sec. 273.4(c)(3)(iv); Sec. 273.12(c)(3), and Sec. 273.12(f)(4).

Additional Burden

    As a result of the numerous public comments on the proposed rule, 
proposals to Part 273 in the rule were either modified or withdrawn. 
These changes affect the ICB approved under OMB No. 0584-0064 and add 
new collection burdens not previously published. The additional ICB 
identified as a result of this final rule includes: (1) Notice of 
Missed Interview; (2) the determination of indigence for eligible 
sponsored aliens subject to deeming of sponsor income; (3) the 
notification of households about face-to-face interview waivers; (4) 
notifications to households that apply to both food stamps and TANF 
that (A) time limits of other programs do not apply to the Food Stamp 
Program; and (B) households are encouraged to continue the food stamp 
application process even if the application for TANF benefits is 
withdrawn; (5) the State agency's responsibility to forward misfiled 
applications; (6) the Transition Notice for use in States electing to 
provide the Transitional Benefits Alternative; and (7) the Request for 
Contact. The number of initial food stamp applications and 
recertifications received in 1999 according to the FNS National 
Databank (8,139,774 and 9,992,025 respectively) will be used for these 
estimates. The combined total of the received applications is therefore 
18,131,799 for 1999.
    In accordance with the Paperwork Reduction Act of 1995, FNS is 
submitting for public comment the change in the ICB that results from 
the adoption of the rule associated with the application, 
certification, and ongoing eligibility of food stamp households. FNS is 
incorporating the additional data collection activities governing the 
application, certification, and ongoing eligibility of food stamp 
households in OMB No. 0584-0064.
    We invite comments on: (a) Whether the collection of information is 
necessary for the proper performance of the functions of the agency, 
including whether the information will have practical utility; (b) the 
accuracy of the agency's estimate of the burden of the collection of 
information including the validity of the methodology and the 
information to be collected; and (c) ways to minimize the burden of the 
collection of information on those who are to respond, including 
through the use of appropriate automated, electronic, mechanical, or 
other technological collection techniques or other forms of information 
technology.
    Send one copy of comments and/or request for copies of this 
information collection to: Patrick Waldron, Program Analyst, 
Certification Policy Branch, Program Development Division, Food and 
Nutrition Service, 3101 Park Center Drive, Alexandria, VA 22302-1594, 
703.305-2805. Comments may also be faxed to Mr. Waldron at 
703.305.2486. FNS prefers to receive comments in the electronic medium. 
Our Internet address is FSPHQ-WEB@fns.usda.gov. In the subject box, 
please indicate ``NCEP ICB comments''. Only comments received prior to 
5:00 p.m. EST on January 19, 2001, will be given consideration.
    Title: Notice of Missed Interview.
    OMB Number: 0584-0064.
    Expiration Date: Three (3) years from date of approval.
    Type of request: New data collection.
    Abstract: Current rules require State agencies to reschedule missed 
interviews. We are removing the requirement that the State agency 
reschedule a missed interview. However, we are adding a requirement to 
Sec. 273.2(e)(3) that the State agency must send a notice to a 
household that misses its interview appointment indicating that it 
missed the scheduled interview and informing the household that it is 
responsible for rescheduling the interview.
    Number of Additional Respondents: We are asking that States provide 
reasonable estimates regarding the number of missed interviews in any 
given time frame. Our initial inclination was to suggest that 25 
percent of all initial applications and recertifications miss an 
interview. Comments and/or

[[Page 70136]]

data regarding this estimated percentage are encouraged.
    Estimated Number of Responses per Respondent: We are asking that 
States provide reasonable estimates regarding this burden estimate. We 
also assume that the same 25 percent receive one response per 
respondent per year.
    Estimate of Burden: Household burden--It is difficult to estimate 
the burden to the household, since the manner in which the household 
responds to the notice will vary considerably. The household may call 
the local food stamp office to reschedule, arrive in person at the 
office to reschedule, write a reply or send an e-mail. The amount of 
burden time on the household depends on the manner in which the 
household responds and the manner in which the State will accept 
responses to the Notice of Missed Interview (NOMI). Therefore, we 
estimated the household burden at approximately 10 minutes per notice. 
In addition, some households will not respond to the notice of a missed 
interview. We estimate that 25 percent will not respond to the notice. 
We request that States provide information regarding the approximate 
number of missed interviews per month or per year. State burden--due to 
the automation of most State agencies, we assume the estimated burden 
to issue a NOMI will be 15 seconds per notice plus a one-time 
adjustment of forms, which is estimated at 20 hours per form.
    Estimated Total Annual Burden on Respondents: Household burden--We 
estimate that the total annual burden will be 75,575 hours (1,813,799 
total applications  x  0.25  x  10 min/60 min = 75,575 hours). State 
burden--Since we do not know the estimated number of missed interviews 
per State, we are requesting comments from the State agencies to 
provide a better picture of the burden such a notice will cause. To 
issue a notice, we are calculating the 10 seconds to equal 0.00277 
hours. (10 seconds = 10 sec/60 sec per min = 0.16667 min/60 min per 
hour = 0.00277 hours). The estimated total annual burden on the States 
would be 1,256 hours (1,813,799 total applications  x  0.25  x  0.00277 
hours = 1,256 hours).
    In addition, we anticipate a one-time adjustment of forms for the 
State agencies. Due to computerized systems, we anticipate each State 
agency will require an additional 20 work hours to revise the forms. 
The total burden would then be 1060 hours (20 hours  x  53 State 
agencies = 1,060 hours).
    The anticipated total burden on the State agencies would then be 
2,316 hours (1,256 + 1,060 = 2,316).

    Title: Determination of Indigence.
    OMB Number: 0584-0064.
    Expiration Date: Three (3) years from date of approval.
    Type of request: New data collection.
    Abstract: Under the final rule, Sec. 273.4(c)(3)(iv) exempts 
certain eligible sponsored aliens from the provisions requiring deeming 
of sponsor income and resources if the sponsored alien is indigent. 
Under the final rule, an eligible sponsored alien is indigent if the 
sum of all the sponsored alien's household's income and any assistance 
the sponsor or others provide (cash or in-kind) is less than or equal 
to 130 percent of the poverty income guideline. To comply with the 
statute, and unlike a normal determination of income for food stamp 
eligibility purposes, the indigence determination includes an 
estimation of the value of in-kind assistance the sponsor and others 
provide. The State agency would determine the amount of income and 
other in-kind assistance provided in the month of application. Each 
indigence determination is good for 12 months and is renewable for 
additional 12-month periods. If the sponsored alien is indigent, then 
the normal food stamp budgeting process would begin. The State agency 
counts in the food stamp budget whatever actual cash contributions the 
sponsor and others provide.
    Number of Additional Respondents: We are asking that States provide 
reasonable estimates regarding the number of indigent sponsored aliens 
in any given time frame. The Department believes this is a small group 
and data have not been collected to determine the exact number of 
individuals involved. We believe that only eligible lawful permanent 
residents who are Hmong or Highland Laotians or individuals who have a 
U.S. military connection are potentially subject to the sponsor deeming 
provisions of the Program. In as much as the provision applies only to 
sponsored aliens who are sponsored by an individual, and not an 
organization, and for whom an affidavit of support was executed on or 
after December 19, 1997, we believe there may be less than 500 
individuals who are subject to this provision and who are food stamp 
eligible.
    Estimated Number of Responses per Respondent: We anticipate only 
one response per respondent per year.
    Estimate of Burden: Household burden--We believe that the burden on 
the household will not change. State burden--We estimate the burden on 
the State to be approximately 10 minutes for collecting additional 
information to determine the value of in-kind assistance provided by 
the sponsor and/or others and to determine the indigence of the 
applicant household.
    Estimated Total Annual Burden on Respondents: Household burden--We 
believe no additional burden is added to the household. State burden--
We estimate the total burden to be (10 min/60 min  x  500  x  1/year) 
83 additional burden hours per year. Comments and/or data regarding 
this estimated percentage are encouraged.
    Title: The Notification of Households About Face-to-Face Interview 
Waivers.
    OMB Number: 0584-0064.
    Expiration Date: Three (3) years from date of approval.
    Type of request: One time requirement to modify forms.
    Abstract: Under the final rule the eligibility worker must advise 
each applicant of the possibility waiving a face-to-face interview for 
a telephone interview. Under the previous rule, applicant households 
had to request information on the possibility of waiving the face-to-
face interview.
    Number of Additional Respondents: We are asking that States provide 
reasonable estimates regarding this burden. Comments and/or data 
regarding this estimated percentage are encouraged. We are initially 
estimating that each household that applies for food stamps or applies 
for recertification will be affected. In 1999, there were 8,139,774 
initial applications and 9,992,025 recertification applications. 
Combined, the total number of applications in 1999 was 18,131,799. 
Therefore, our initial estimate in the number of respondents affected 
is 18,131,799.
    Estimated Number of Responses per Respondent: We estimate one 
response per application, for a total estimate of 18,131,799 per year.
    Estimate of Burden: Household burden--We believe this does not 
affect the burden on the household. State burden: We estimate 10 
seconds to notify each applicant household.
    Estimated Total Annual Burden on Respondents: Household burden:--We 
believe this will not affect the burden on the applying households. 
State burden--This totals to 50,366 hours per year for the States [(10 
seconds/60)/60  x  18,131,799].

    Title: Notification of Households That Apply for Both Food Stamp 
Benefits and TANF That: Time Limits of Other Programs do not Apply to 
the Food Stamp Program; and the Encouragement of Households To Continue 
the Food Stamp Application Process Despite Requirements for Other 
Programs and/or Actions of Other Programs.
    OMB Number: 0584-0064.

[[Page 70137]]

    Expiration Date: Three (3) years from approval date.
    Type of request: New data collection.
    Abstract: Time limits--The final rule requires the State agency to 
inform households that receiving food stamps will have no bearing on 
any other program's time limits. The interviewer must advise households 
that are also applying for or receiving PA benefits that time limits 
and other requirements that apply to the receipt of PA benefits do not 
apply to the receipt of food stamp benefits; and that households which 
cease receiving PA benefits because they have reached a time limit, 
have begun working, or for other reasons, may still qualify for food 
stamp benefits. Encouragement--The final rule provides that if the 
State agency attempts to discourage households from applying for cash 
assistance, it shall make clear that the disadvantages and requirements 
of applying for cash assistance do not apply to food stamps. In 
addition, it shall encourage applicants to continue with their 
application for food stamps. The State agency shall in no way try to 
discourage households from applying for food stamps. The State agency 
shall inform households that receiving food stamps will have no bearing 
on any other program's time limits that may apply to the household.
    Number of Additional Respondents: This provision applies only to 
applicants who apply for both TANF and food stamps.
    Estimated Number of Responses per Respondent: We estimate one 
response per household that applies for both Food Stamp benefits and 
TANF.
    Estimate of Burden: Household burden--We believe there is no burden 
to the household for this provision. State burden--We estimate 10 
seconds to notify of the two issues to each applicant household that 
has applied to both TANF and food stamps.
    Estimated Total Annual Burden on Respondents: Household burden--We 
believe there is no burden to the household in this provision. State 
burden--We are requesting comments from the State agencies on the 
burden this provision imposes on the State agencies. The National 
Databank indicated 2.8 million households were receiving food stamp 
benefits and PA benefits in January 1999. Therefore, we estimate that 
the total annual burden is 7,917 hours (2,800,000  x  .00277 hours + 
7,917) [10/60 = .16667 min. = .16667/60 = .00277 hours].

    Title: The State Agency Responsibilities for Misfiled Food Stamp 
Applications.
    OMB Number: 0584-0064.
    Expiration Date: Three (3) years from date of approval.
    Type of request: New responsibility.
    Abstract: This provision of the final rule would: (1) Continue to 
allow the State agency to require households to file an application at 
a specific certification office or allow them to file an application at 
any certification office within the State or project are; (2) require 
that if an application is received at an incorrect office, the State 
agency advise the household of the address and telephone number of the 
correct office (3) require the State agency to forward an application 
received at an incorrect office to the correct office not later than 
the next business day; and (4) remove the requirement currently located 
in the third sentence of Sec. 273.2(c)(2)(ii) that the State agency 
inform the household that its application will not be considered filed 
and the processing standards must not begin until the application is 
received by the appropriate office.
    Number of Additional Respondents: We are asking that States provide 
reasonable estimates regarding this burden. Comments and/or data 
regarding this estimated percentage are encouraged. Since most project 
areas have only one office, we believe the new rule will affect only 
large project areas with multiple offices. Further, within that group 
of project areas, only those which limit applications taken to a 
specific geographic area or a specific caseload characteristic will 
come under the rule. Therefore, we are estimating approximately 30 
misfiled applications per month in each of the 100 counties. This 
totals approximately 36,000 misfiled applications per year.
    Estimated Number of Responses per Respondent: We believe this 
occurs once per year per misfiled application.
    Estimate of Burden: Household burden--We do not believe this incurs 
additional burden on the household. State burden--This burden time is 
dependent on the method in which the misfiled application is forwarded. 
We believe this burden would take the State approximately 10 minutes 
per misfiled application if the State agency faxed the application one 
page at a time.
    Estimated Total Annual Burden on Respondents: Household burden--We 
believe there is no burden to the household for this provision. State 
burden--This would take an additional 6,000 burden hours per year (10 
min/60 min  x  36,000 = 6000 hours).

    Title: The Transition Notice.
    OMB Number: 0584-0064.
    Expiration Date: Three (3) years from date of approval.
    Type of request: New data collection.
    Abstract: The final rule provides an optional procedure for 
providing TANF leavers with ``transitional food stamp benefits,'' much 
in the same way families receive transitional Medicaid after leaving 
TANF rolls. Under the new policy the State agency would freeze food 
stamp benefits of households leaving TANF rolls for up to 3 months, 
depending on the period of time since the household's last 
certification. Near the close of the transition period, the State 
agency would act on information collected from the household, either 
adjusting the benefit level, or closing the household's food stamp case 
because it is no longer eligible or it has failed to provide sufficient 
information to continue its eligibility for the Program. In some cases, 
the State agency would have to conduct a full recertification of 
eligibility, if it was not possible to extend the household's 
certification period beyond the statutory maximum for its 
circumstances. This provision in the final rule will require State 
agencies to develop a new form; however, State agencies may modify 
existing forms to comply with the requirement.
    Number of Respondents: This provision in the final rule only affect 
families leaving TANF. Those affected households would receive a 
``Transition Notice'' (TN) advising the household that due to the 
closure of cash assistance, the food stamp allotment is frozen at the 
pre-TANF closure amount. In addition, the TN must advise the household 
that to continue participating in the Program, they must report changes 
to the State agency within a specified time frame, or report to a 
recertification interview, as directed in the TN.
    Estimated Number of Responses per Respondent: Household burden--We 
believe there is no additional burden to the household for this 
provision. State burden--We do not anticipate additional burden on the 
State agencies in issuing this Transitional Notice since this burden 
replaces that of the Notice of Expiration (NOE) in such cases.
    We estimate that about 15 State agencies will implement TBA in the 
next 3 years. The total annual burden on the State for developing the 
form is estimated to be a one-time adjustment of 20 hours to develop 
the form and process. This totals 300 hours (20  x  15 State agencies = 
300.

    Title: The Request for Contact.
    OMB Number: 0584-0064.
    Expiration Date: Three (3) years from date of approval.
    Type of request: New data collection.
    Abstract: Another new provision in the final rule requires the 
State agency

[[Page 70138]]

to obtain information or clarify information from the household during 
the certification period. The new form, request for contact (RFC), is 
necessary in situations where the household has reported a change, but 
the information is so unclear that the State agency cannot readily 
determine its effect on the household's benefit amount. The final rule 
places the burden of clarifying an issue on the household. The RFC 
informs the household of the information needed to continue its current 
certification. Since the State agency cannot readily determine a 
household's benefit amount without the clarification or missing 
information, then the information is considered necessary. The State 
agency must issue a written RFC that clearly advises the household of 
the verification it must provide or the actions it must take to clarify 
its circumstances. The RFC affords the household at least 10 days to 
respond, either by telephone or by correspondence, as the State agency 
directs. The RFC also indicates the consequences if the household fails 
to respond to the RFC. Depending on the household's response to the 
RFC, the State agency must take appropriate action, if necessary, to 
close the household's case or adjust the household's benefit amount. 
This is a new form and will be added to the burden package calculation.
    Number of Additional Respondents: We estimate that 25 percent of 
the change reports (12,375,185  x  0.25 = 343,796) will result in a 
request for contact.
    Estimated Number of Responses per Respondent: We also estimate that 
on average, one request for contact will be issued in a 12-motnth 
period.
    Estimate of Burden: Household burden--It is difficult to estimate 
the burden to the household, since the manner in which the household 
responds to the RFC varies. The household may call the local food stamp 
office to report information, arrive in person at the office to report, 
write a reply or send an email. The amount of burden time on the 
household depends on the manner in which the household responds and the 
manner in which the State will accept. Therefore, we estimated the 
household burden at approximately 10 minutes per notice. In addition, 
some households will not respond to the RFC. We estimate 25 percent 
will not respond to the notice. State burden--Due to the automation 
capabilities of most State agencies, we estimate the burden on the 
State to issue the RFC approximately 2 minutes per request. We do not 
anticipate additional burden on the State agencies in issuing this RFC 
since this burden is already calculated as part of the NOAA process.
    The total annual burden on the State for developing the form is 
estimated at a one-time adjustment of 20 hours to develop the form and 
process.
    Estimated Total Annual Burden on Respondents: Household burden--We 
estimate that 25 percent of the change reports (1,375,185  x  0.25 = 
343,796) will result in a request for contact. Since we believe 25 
percent will not respond to the RFC, the remaining households who do 
respond are anticipated to be approximately 75 percent of the RFCs 
issued. We calculate the estimated total annual burden to the 
households will be 42,975 hours (343,796 RFC/year  x  0.75  x  10 min/
60 min per hour = 42,975 hours). State burden--We estimate the annual 
burden would be 11,460 hours (343,796  x  1  x  2/60) to issue the RFC, 
assuming that it will take on average 2 minutes or 0.0333 hours to 
issue the RFC.
    Added to the annual burden are the 20 hours per form for each State 
agency to create the forms. This totals 1,060 hours (20  x  53 = 1,060 
hours). Therefore, the combined total of the annual burden on the State 
totals 12,520 hours (1,060 + 11,460 = 12,520 hours).

Executive Order 12988

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

Unfunded Mandate Analysis

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

Civil Rights Impact Analysis

    FNS has reviewed this final rule in accordance with the Department 
Regulation 4300-4, ``Civil Rights Impact Analysis'' to identify and 
address any major civil rights impacts the rule might have on 
minorities, women, and persons with disabilities. After a careful 
review of the rule's intent and provisions, and the characteristics of 
food stamp households and individuals participants, FNS has determined 
that there is no way to soften their effect on any of the protected 
classes. FNS has no discretion in implementing many of these changes. 
The changes required to be implemented by law, have been implemented.
    All data available to FNS indicate that protected individuals have 
the same opportunity to participate in the Food Stamp Program as non-
protected individuals. FNS specifically prohibits the State and local 
government agencies that administer the program from engaging in 
actions that discriminate based on race, color, national origin, 
gender, age, disability, marital or family status. Regulations at 7 CFR 
272.6 specifically state that ``State agencies shall not discriminate 
against any applicant or participant in any aspect of program 
administration, including, but not limited to, the certification of 
households, the issuance of coupons, the conduct of fair hearings, or 
the conduct of any other program service for reasons of age, race, 
color, sex, handicap, religious creed, national origin, or political 
beliefs.'' Discrimination in any aspect of program administration is 
prohibited by these regulations, the Food Stamp Act of 1977 (Food Stamp 
Act or the Act), the Age Discrimination Act of 1975 (Pub. L. 94-135), 
the Rehabilitation Act of 1973 (Pub. L. 93-112, section 504), and title 
VI of the Civil Rights Act of 1964 (42 U.S.C. 2000d). Enforcement 
action may be brought under any applicable Federal law. Title VI 
complaints must be processed in accordance with 7 CFR part 15. Where 
State agencies have

[[Page 70139]]

options, and they choose to implement a certain provision, they must 
implement it in such a way that it complies with the regulations at 7 
CFR 272.6.

Regulatory Impact Analysis

Need for Action

    We need to take this action with respect to the Program to 
implement provisions of Pub. L. 104-193 (PRWORA) and subsequent 
amendments, which would: (1) Remove specific requirements for State 
agency processing of food stamp applications; (2) revise requirements 
for determining the eligibility of aliens; (3) count as income certain 
State and local energy assistance; (4) allow State agencies to count 
all or part, or none of an alien's income in determining the benefits 
of the rest of the household; (5) allow State agencies to certify 
households consisting entirely of elderly or disabled members up to 24 
months; (6) exclude the earnings of students under age 18; (7) make use 
of a homeless shelter deduction optional; (8) allow State agencies to 
mandate use of a standard utility allowance if they have at least one 
standard that includes heating and cooling costs and one that does not; 
(9) eliminate the exclusion for vendored transitional housing payments 
for homeless households; (10) allow use of standard amounts in 
determining self-employment expenses; (11) make optional the issuance 
of combined allotments to expedited service households that apply after 
the 15th of the month; (12) allow State agencies to issue partial 
allotments to households in treatment centers; (13) require proration 
of benefits following any break in certification; (14) allow State 
agencies to accept an oral withdrawal from the household for a fair 
hearing; (15) revise requirements for producing or displaying 
nutritional education materials; (16) eliminate mandated training 
standards; (17) eliminate the requirement for reviewing and reporting 
on office hours; (18) revise mail issuance requirements in rural areas; 
(19) prohibit Federal reimbursement for recruitment activities from 
being approved as part of a State agency's optional Outreach plan; (20) 
make optional rather than mandatory the use of the Income Eligibility 
and Verification System and the Systematic Alien Verification for 
Entitlements match programs; and (21) establish ground rules for 
implementing the Simplified Food Stamp Program (SFSP). In addition, we 
need to take this action to implement Departmental initiatives to 
revise the policy for counting the resource value of licensed vehicles, 
to provide an optional transitional benefit for TANF leavers, to 
provide an optional alternative reporting system of semi-annual 
reporting for households with earnings, and to make a change to exclude 
from income on-the-job training payments received under the Summer 
Youth Employment and Training Program as required by Section 702 of the 
Workforce Investment Act.

Legislative Provisions

Budget Impact

    This rule implements provisions from two laws, PRWORA and AREERA. 
Using assumptions from the 2001 Budget Agency Mid-session estimate, we 
estimate the total Food Stamp Program budget impact of this rule in 
Fiscal Year (FY) 2000 to be -$617 million. We estimate the 5 year 
budget impact for FY 2000 through FY 2004 to be -$1.932 billion.
    The legislative provisions have a budget impact in FY 2000 of -$622 
million and a 5 year budget impact for FY 2000 through FY 2004 of 
-$3.002 billion.
    The legislative savings primarily stem from the provisions of 
PRWORA that make many aliens ineligible to participate (section 402) 
and the provision that requires counting as income for food stamp 
purposes most State and local energy assistance (section 808). The 
Program realizes smaller savings from the following provisions of 
PRWORA: section 807, earnings of children; section 809, standard 
utility allowances; section 811, transitional housing payments; and 
section 827, proration of benefits at recertification. The SFSP 
authorized under section 854 may result in savings or increased Program 
costs with respect to individual households; however, the net impact of 
SFSP implementation must be cost neutral.
    Provisions in the rule that have negligible budget impact are not 
discussed in this analysis.

Section 402--Alien Eligibility

    Section 402 of the PRWORA significantly reduces the number of legal 
aliens who are eligible for food stamps. Effective August 22, 1996, for 
applicants and August 22, 1997, for current recipients, many aliens 
legally admitted for permanent residence who were previously eligible 
became ineligible. The exceptions are those admitted as refugees, 
asylees, Cubans, Haitians, Amerasians, and those who have had removal 
withheld who retain eligibility for the first 5 years (later changed to 
7 years by AREERA) after admission; lawful permanent residents who have 
earned or been credited with at least 40 quarters of coverage as 
defined by the Social Security Administration; and those who are 
serving or have served in the U.S. armed forces and their spouses and 
children. Effective November 1, 1998, AREERA made certain Hmong, 
Highland Laotians, and American Indians born outside of the U.S. 
eligible for food stamps. It also made aliens who were lawfully living 
in the U.S. on August 22, 1996, eligible for food stamps if they are 
under 18, or are disabled, or were age 65 or older on August 22, 1996.
    Those aliens who lost eligibility will contribute to smaller State 
agency caseloads. However, determining the eligibility of individuals 
will be more complicated. For certain categories of aliens, State 
agencies will have to determine when the individuals were admitted. For 
other categories, State agencies will have to obtain information 
regarding the applicant's work history. Thus, there may be no 
significant savings in caseworker time.
    In FY 2000, without taking into account the cost of restoring 
benefits to selected aliens through AREERA, we estimate that the budget 
impact would have been -$440 million. The budget impact for the 5-year 
period FY 2000-FY 2004 is -$2.275 billion. We estimate that in 1998, 
approximately 838,000 participants lost eligibility with an average 
benefit loss of $23 a month and another 950,000 people remained 
eligible but lost an average of $31 a month. About 80,000 people living 
in households with ineligible aliens received a slightly larger per 
person benefit for those still eligible and participating in the 
Program, on average $12 per month. This is because of economies of 
scale in the allotment tables which are by household size, i.e., a two-
person household based on no income would receive a larger per person 
allotment than a three-person household based on no income. It is 
important to realize that all of these ``gainers'' lived in households 
where the total food stamp benefit available to the household declined.
    Based on information from a simulation model using 1996 Food Stamp 
Quality Control data, together with information from the Immigration 
and Naturalization Service (INS) on immigration and naturalization 
patterns and the Survey of Income and Program Participation (SIPP) on 
the work histories of aliens, we estimate that 20 percent of permanent 
residents meet the 40-quarters work exemption. Using information from 
the Current Population Survey on the veteran status

[[Page 70140]]

of aliens, we estimate that less than 1 percent meet the veteran's 
exemption. Moreover, because applications for naturalization have 
increased dramatically over the last 2 years, we anticipate that 
naturalizations will increase through FY 2001, reducing somewhat the 
number of persons losing eligibility and benefits through that time 
period compared to FY 1998.
    The enactment of AREERA on November 1, 1998 restored benefits to an 
estimated 175,000 legal immigrants when fully implemented in FY 2002, 
with a budget impact of $85 million in 2000 and $665 million for the 
five-year period 2000-2004. At the time of AREERA's passage, the 
estimate of immigrants that would receive restored benefits was higher 
(225,000), but changes in the economy have caused us to revise those 
estimates downward.
    PRWORA does not address how or whether to count the income or 
resources of the aliens made ineligible by PRWORA for purposes of 
determining eligibility or allotment amounts for the rest of the 
household. Alternatives were considered including counting ineligible 
aliens' resources and all income; counting resources and a pro-rated 
share of income; not counting the ineligible aliens' income, but 
capping the resulting allotment for the eligible members at the 
allotment a similarly situated all citizen household would receive; or 
counting neither income nor resources. The alternative chosen under the 
proposed rule would be to allow the State agency to pick one State-wide 
option for determining the eligibility and benefit level of households 
with members who are aliens made ineligible under PRWORA. State 
agencies may either: (1) Count the resources and a pro-rated share of 
the ineligible aliens' income; or (2) count the resources, not count 
the ineligible aliens' income, but cap the resulting allotment for the 
eligible members at the allotment amount the household would receive 
were it not for the PRWORA eligibility restrictions.
    Using a simulation based on the 2000 baseline version of the 1996 
QC Minimodel, we estimate that the option of excluding the income of 
PRWORA-ineligible aliens increases costs by an estimated $2 million for 
FY 2001 and $23 million for FY 2000 through FY 2004. (This cost is 
included in the total for Departmental initiatives.) These estimates 
take into account current State practices and an expected shift of some 
States from the first option.

Section 807--Earnings of Children

    This provision revises the current exclusion from income of the 
earnings of elementary or secondary school students under age 22 to 
exclude the earnings of these students only if they are under 18. Based 
on the 1996 Quality Control data, it is estimated that the benefits of 
approximately 2,700 students will be reduced an average of $62 per 
month. FY 2000 budget impact is estimated at -$2 million and a 5-year 
budget impact of -$12 million.

Section 808--Energy Assistance

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

Section 811--Transitional Housing Payments

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

Section 809--Standard Utility Allowances

    This provision allows State agencies to mandate use of a standard 
utility allowance that includes heating or cooling costs, provided the 
State agency has another standard allowance that does not include 
heating or cooling costs and the mandatory standards will not increase 
Program costs. The PRWORA also provides that in a State that does not 
choose to make standards mandatory, households are allowed to switch 
between actual expenses and a standard only at recertification.
    The rule provides requirements for a nonheating/cooling standard 
and would require State agencies to provide FNS with sufficient data to 
determine whether or not the State agency's proposed standards are 
cost-neutral. The rule also provides that elderly or disabled 
households certified for 24 months may switch at the 12-month point 
when the State agency is required to contact the household. The State 
agency would be required to allow households a choice between using 
actual expenses or a standard when they move and incur shelter 
expenses. The rule also would allow households in private rental 
housing to use a standard allowance that includes heating or cooling 
costs if they incur an expense for heating or cooling separately from 
their rent. Many of these households are currently entitled to the 
standard because they receive Low-Income Home Energy Assistance 
(LIHEAP) payments. Households in public rental housing that incur only 
the cost of excess usage are prohibited by the Food Stamp Act from 
receiving a heating or cooling standard.
    The provision of the PRWORA allowing mandatory utility standards 
would increase State agency flexibility and reduce the time needed to 
calculate the shelter expenses of households which previously claimed 
actual costs. Savings result from two factors: (1) If a State mandates 
a standard, households with shelter costs higher than the SUA would no 
longer be allowed to claim actual costs; and (2) households will no 
longer be allowed to switch between the SUA and actual costs one 
additional time during each 12-month period.
    Using a simulation model based on 1994 data from the Survey of 
Income

[[Page 70141]]

and Program Participation (SIPP), and adjusting for the fact that only 
five States (Delaware, Louisiana, Michigan, North Dakota, and Wyoming) 
with only seven percent of the caseload initially implemented this 
option, we estimate that the benefits of approximately 141,000 people 
were reduced in 1998 for an average loss of a little more than $5 a 
month, and 833 people lost eligibility for an average monthly loss of a 
little more than $11. We estimated the total budget impact for these 
States to be -$10 million.
    We assume that more States will implement this provision, once they 
turn their attention from implementing TANF. We estimate that in 5 
years, States that account for 28 percent of total benefit issuance 
will have opted for required use of the SUA. Under these assumptions, 
the total budget impact is -$20 million in FY 2000 and -$155 million 
over 5 years. By FY 2004, slightly over 3,000 people may lose 
eligibility.

Section 818--Treatment of the Income of Ineligible Aliens

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

Section 827--Proration of Benefits at Recertification

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

Departmental Initiatives

Budget Impact
    The Departmental initiatives to revise the policy for counting the 
resource value of licensed vehicles, revise somewhat the treatment of 
some income, to provide an optional transitional benefit for TANF 
leavers, and to provide an optional alternative reporting system of 
semi-annual reporting for households with earnings produce a cost which 
slightly lowers the total savings from this rule. The cost of the 
Departmental initiatives is $5 million in FY 2000 and sums to $1.070 
billion for the 5-year period FY 2000-FY2004.

Inaccessible Resources and Vehicles

    The final rule allows some households with licensed vehicles of 
moderate value to participate in the program, if they are otherwise 
eligible and have little equity in the vehicle. The amendment to 7 CFR 
273.8(e)(18) expands the list of inaccessible resources to include 
vehicles which if sold, would realize the seller a net proceed of no 
more than $1,500. Moreover, we are greatly simplifying the vehicle 
resource determination for households by eliminating the equity test 
for most vehicles. We will completely exclude vehicles used to produce 
income, used as a home, used to transport a disabled household member, 
used to carry fuel or water, or unlikely to produce a return exceeding 
$1,500. For each adult household member, we will exempt from the equity 
test one licensed vehicle not totally excluded and count that vehicle 
to the extent that the fair market value exceeds $4,650. For each 
household member under 18 years of age, we will exempt from the equity 
test one licensed vehicle not totally excluded which the minor drives 
to work, school or training, or to look for work. Any vehicles not 
exempted from the equity test are subject to resource evaluation at the 
higher of the excess fair market value or the equity value.
    The proposed rule set the limit on inaccessible resources for most 
households at $1,000. With publication of the proposed rule, FNS 
granted waivers to States to implement that policy. As a result, the FY 
2000 cost for

[[Page 70142]]

inaccessible resources, which reflects a $1,000 limit and the number of 
States which requested and received waiver authority, rounds to less 
than $5 million. Comments received on this provision urged FNS to 
increase the limit to $1,500, which FNS has accepted. This new policy 
will take effect in FY 2001 and, therefore, the FY 2001 through FY 2004 
costs reflect a $1,500 limit.
    State agencies are affected by this provision because it greatly 
simplifies the treatment of vehicles. It is expected to reduce payment 
errors based on incorrect application of the resource tests.
    Expanding the definition of inaccessible resources costs $5 million 
in fiscal year 2000, $85 million in fiscal year 2001, $170 million in 
fiscal year 2002, $165 million in fiscal year 2003, $145 million in 
fiscal year 2004, with a five year total of $570 million. In fiscal 
year 2001, when the $1,500 limit goes into effect, 80,000 people gain, 
with an average monthly benefit of $88.78.
    Also, eliminating the equity test for most, but not all, vehicles 
costs $0 million in fiscal year 2000, $30 million in fiscal year 2001, 
$55 million in fiscal year 2002, $40 million in fiscal year 2003, and 
$25 million in fiscal year 2004, with a five year total of $150 
million. In fiscal year 2001, 27,000 people gain, with an average 
benefit of $92.65.
    On October 28, 2000, the President signed the Agriculture, Rural 
Development, Food and Drug Administration, and Related Agencies 
Appropriation Act of 2001 (Public Law 106-387). This law includes a 
provision to allow States to substitute their TANF vehicle rules for 
the food stamp vehicle rules, where doing so would result in a lower 
attribution of resources. The cost of the vehicle changes in this 
regulation, described above, capture the additional budgetary impact 
that these regulatory changes have in broadening food stamp eligibility 
after allowing for the expected impact of the new law.

Optional Transitional Benefits for TANF Leavers

    Several advocacy groups put forth a suggestion for providing TANF 
leavers ``transitional food stamp benefits,'' much in the same way 
families receive transitional Medicaid after leaving TANF rolls. The 
new policy allows State agencies to freeze food stamp benefits of 
households leaving TANF rolls for up to 3 months, depending on the 
period of time since the household's last certification. Near the close 
of the transition period, the State agency would act on information 
collected from the household, either adjusting the benefit level, or 
closing the household's food stamp case because it is no longer 
eligible or it has failed to provide sufficient information to continue 
its eligibility for the Program. In some cases, the State agency would 
have to conduct a full recertification of eligibility if it is not 
possible to extend the household's certification period due to the 
statutory limitation on the length of certification periods. As the 
household would have no reporting requirement during the transitional 
period, the State agency would incur no QC liability for unreported 
changes in household circumstances during the period of time benefits 
are frozen.
    While the Department encourages State agencies to offer the 
Transitional Benefits Alternative (TBA) to households leaving the TANF 
rolls, in order to ease the transition from PA, serve as an important 
transitional work support, and reinforce the fact that food stamps are 
not dependent upon eligibility for TANF, we did not offer this 
procedure in the NPRM. State agencies had no opportunity to comment, 
either to raise objections or to provide suggestions. For this reason, 
the final rule establishes TBA as a State agency option, not a 
mandatory provision of the regulations.
    Families generally leave TANF when they go to work, exceed the 
income or asset limit (due to employment or other factors), fail to 
comply with the behavioral or procedural requirements of TANF, reach 
the Federally or State-defined time limit, lose technical eligibility, 
or leave voluntarily to ``bank'' their TANF months. For State agencies 
electing the TBA, the Department has structured the final rule to allow 
maximum flexibility in deciding which families leaving TANF would be 
eligible for TBA. The final rule requires such State agencies, at a 
minimum, to provide TBA to all families with earnings who leave TANF. 
If the household is losing income as a result of leaving TANF, the 
State agency must adjust the food stamp benefit amount before freezing 
the benefit amount. For example, such treatment might be appropriate 
when a TANF family leaves cash assistance because it has reached the 
time limit for such assistance and has gained no source of income which 
would replace the lost cash assistance. On the other hand, under the 
final rule State agencies may not provide TBA to households which are 
leaving TANF because: a household member has violated a TANF provision 
and the State is imposing a concomitant food stamp sanction in 
accordance with sections 819, 829, or 911 of PWRORA; a household member 
has violated a food stamp work requirement; a household member has 
committed an intentional Program violation; or the TANF case is closing 
because the State agency is taking action in response to information 
indicating the household failed to comply with Food Stamp reporting 
requirements, e.g., the State agency discovered unreported income or 
assets through computer matching indicating noncompliance with Food 
Stamp reporting requirements.
    Using data on TANF caseloads from the Department of Health and 
Human Services and data from TANF research by many sources, we derived 
estimates of the number of cases expected to leave TANF.
    Using 1998 QC data, an average FSP benefit for TANF households was 
inflated to 2001 and beyond. In general, the transitional benefit 
policy provides two additional months of benefits to each case that 
leaves (the current system provides one month due to the processing 
requirements and the requirement to issue a notice of adverse action). 
We then multiply the monthly number of eligible leavers by the average 
benefit by 2 months of additional benefits by 12 monthly sets of 
leavers in a year to get the cost.
    Further reductions to this cost were made to account for: (1) The 
likelihood that some of these cases would return to the TANF program 
within the transition period, thereby reducing the cost of transitional 
benefits because they no longer are eligible for them, (2) the fact 
that many households with TANF have 12 month certification periods, and 
(3) the fact that some households are not eligible for transitional 
food stamps, including households sanctioned off of TANF that receive a 
comparable Food Stamp sanction in accordance with sections 812, 829 and 
911 of PRWORA. Current FSP law states that households may not receive 
benefits beyond 12 months without recertification, so those households 
in the 10th, 11th, or 12th month of their certification periods do not 
receive benefits for the entire transition period.
    Finally, we apply a phase-in to account for State take-up rates. We 
begin with the cost if all States were to adopt the option, and then 
estimate that States will take up this option such that 5 percent of 
the cost is incurred in fiscal year 2001, 10 percent in fiscal year 
2002, 15 percent in fiscal year 2003, and 25 percent in fiscal year 
2004. Ultimately we expect that up to 60 percent of the benefits that 
could be issued via TBA will be issued by fiscal year 2007, based on 
assumptions regarding how many States will

[[Page 70143]]

implement this policy. We adopt these phase-in assumptions based on 
what has been learned thus far from the State response to the quarterly 
reporting option, and the fact that States will need to implement 
computer systems changes, which take time. As a result, we expect in 
fiscal year 2001 about 3,000 cases each month to leave TANF and receive 
two additional months of transitional food stamp benefits of about $226 
per month (this is the weighted average for all types of cases) for a 
total cost of $15 million. By fiscal year 2004 the cost will rise to 
$73 million, affecting 14,000 cases per month, with a total cost for 
fiscal years 2001 to 2004 of $162 million.

Optional Semi-annual Reporting for Households with Earnings

    Because the Department is aware that State agencies are reluctant 
to assign working households long certification periods because of 
potential vulnerability for quality control errors resulting from 
unreported changes, the Department is adopting in this final rule an 
optional reporting system for these households. Under this option, 
households with earned income assigned a six-month certification period 
may be required to report changes in income that result in their gross 
monthly income exceeding 130 percent of the poverty level a month, in 
lieu of the requirement to report changes in the amount of gross 
monthly income that exceed $25. These households would not be subject 
to the remaining reporting requirements in 7 CFR 273.12(a)(1). The 
State agency shall act on changes reported by the household that 
increase benefits in accordance with 7 CFR 273.12(c) and on changes in 
public assistance and general assistance grants and other sources that 
are considered verified upon receipt by the State agency. In order to 
adopt this option, State agencies must assign these households 
certification periods of 6 months or longer. State agencies may opt to 
waive every face-to-face interview in accordance with 7 CFR 273.2(e).
    Using SIPP data covering one year, a simulation was run which 
counted all income changes (minus TANF changes, since it is assumed the 
State would know and act upon all of these changes) and how many times 
a household changed composition during the first six months of the year 
and all of the changes during the last six months of the year. All of 
the income increases were summed together and all of the income 
decreases were summed together and a net figure was calculated. This 
income figure was changed to a benefit figure by applying the average 
benefit reduction rate and by adjusting for the impact of household 
composition changes on benefit levels. Using the total benefits from QC 
data, the percent of monthly benefits not captured during the 6 month 
certification period was calculated.
    To get the cost of this policy, this percentage was multiplied by 
the FY 2001 Mid-Session baseline benefits. Several adjustments were 
made to incorporate assumptions on reporting behavior and the policy 
requirements for when States must act on reported changes.
    Finally, a State phase-in rate is applied. This rate is based on 
expectations of what States will select given all reporting options. We 
believe that the phase-in will be low in the first year (4 percent, for 
a FY 2001 cost of $3 million) as States decide which option to 
implement, but that it will increase rapidly and reach the maximum of 
70 percent by 2005.
    The cost in FY 2001 is $3 million and rises to $51 million in FY 
2004, with a total cost from FY 2000 to FY 2004 of $105 million. When 
fully implemented it will affect nearly 1.5 million households per 
month.

Allow the Self-Employed to Deduct the Principal on Capital Expenditures

    Current policy precludes allowing the cost of capital assets in 
determining self-employment income. We are revising this policy to 
allow capital costs in determining self-employment income. We believe 
that this change recognizes that capital costs are a legitimate expense 
in producing self-employment income and that the change will support 
the self-employed working poor.
    We turned to Internal Revenue Service statistics to determine the 
potential size of the new deduction. We obtained information on the 
size of the depreciation deduction taken by all non-farm industries and 
the size of net income after all deductions for these industries. The 
depreciation deduction is 16 percent net income. Using this as a proxy 
for the size of the new food stamp deduction, we multiplied it times 
the average monthly self-employed income in the 1998 Characteristics of 
Food Stamp Households ($336). Next we adjusted it for the earned income 
deduction and the 30 percent benefit reduction. On average, food stamp 
benefits will increase by $13 per month. Multiplying by the expected 
number of households with self-employment income (about 100,000) 
produces an estimate of $15 million as the cost in each year. The sum 
from FY 2001 to FY 2004 is $60 million.

Plain Language

    We have written this rule under the plain language guidelines to 
make it clearer and easier to read. We have edited wording that we 
preserved from the proposed rule to comply with those guidelines, using 
simpler words and phrases where appropriate, and changing sentences 
from passive to active voice. We did not change the meaning of any of 
the language brought from the proposed rule.

Part 272--Requirements for Participating State Agencies

Bilingual Requirements--Access to Households With Language Barriers--7 
CFR 272.4 and 7 CFR 272.6
    Legal aid organizations, advocacy groups, and State agencies 
commented on the current bilingual standards at 7 CFR 272.4(b). As 
prescribed by Section 11(e)(1)(B) of the Food Stamp Act (7. U.S.C. 
2020(e)(1)(B)), the current rules require State agencies to use 
appropriate bilingual personnel and printed materials in areas in the 
State in which a substantial number of members of low-income households 
speak a language other than English. To determine if a substantial 
number of non-English speaking household resides in an area, the 
current rules specify the methodology for estimating the size of non-
English speaking households and thresholds that trigger mandatory 
bilingual services. Bilingual services also must be provided during 
periods of seasonal influx, such as the influx of migrant or seasonal 
workers into project areas for a short period of time.
    While most comments indicate general support for the current 
standards at 7 CFR 272.4(b), many commenters recommended additional 
regulatory controls to ensure State agencies are in compliance with 
Title VI of the Civil Rights Act of 1964, Section 11(c) of the Food 
Stamp Act (7 U.S.C. 2020 11(c)) and corresponding Food Stamp Program 
regulations at 7 CFR 272.6. Specifically, these commenters recommended 
that the regulations be amended to ensure non-English speaking 
households have access to the FSP by requiring State agencies to 
provide bilingual services to all non-English speaking households 
seeking food stamp assistance, regardless of the size of the low-income 
non-English speaking population in the service area or of how obscure 
the language may be.
    Conversely, a State agency commenting on current bilingual 
standards asserts that PRWORA amendments under Section 835 provide 
State agencies with flexibility in establishing appropriate bilingual

[[Page 70144]]

standards and that the Department was remiss in not proposing 
amendments that would either remove or substantially reduce 
requirements at 7 CFR 272.4(b). The State agency further stated that 
revision of the current regulatory bilingual standards is required by 
the President's reform initiative to remove overly prescriptive, 
outdated and unnecessary regulations.
    Even though Section 835 of PRWORA amends Section 11(e)(2) of the 
Food Stamp Act to provide State agencies with flexibility to determine 
certain processes that best serve eligible households within the State, 
it does not extend this flexibility to services required by law, such 
as bilingual services.
    The Department appreciates the comments received on both sides of 
this issue. However, because of the strongly divergent views offered by 
commenters, the Department has decided to make no changes at this time 
to the current regulations. Although no regulatory changes will be made 
at this time, we would like to advise the public through this preamble 
of the August 11, 2000 Executive Order 13166 entitled, Improving Access 
to Services For Person With Limited English Proficiency.
    Executive Order 13166 directs Federal agencies to ensure that 
recipients of Federal financial assistance, such as the State agencies 
administering the Food Stamp Program, are providing persons with 
limited English proficiency (LEP) a meaningful opportunity to 
participate in Federal programs and activities. Providing a meaningful 
opportunity to LEP persons to participate in the Food Stamp Program 
ensures that State agencies are in compliance with Title VI of the 
Civil Rights Acts of 1964. State agencies failing to provide meaningful 
access would be in violation of Title VI of the Civil Rights Act, which 
prohibits discrimination on the basis of national origin.
    The Department of Justice (DOJ) has issued guidance setting forth 
the standards that Federal agencies and the recipients of Federal funds 
must follow to ensure that LEP persons have meaningful access. Each 
Federal Agency, in consultation with the DOJ, must develop and 
implement guidance. USDA is working to develop guidelines in accordance 
with E.O. 13166 and the Department of Justice Guidance.

State Employee Training--7 CFR 272.4(d)

    Section 836 of PRWORA deleted all Federal requirements for State 
employee training. To reflect this change in the law, the Department 
proposed to delete all the mandatory training requirements at 7 CFR 
272.4(d). State agencies commenting on this section support the change. 
Some advocate and legal organizations requested that the Department 
withdraw the proposal and retain current standards to ensure that State 
agencies properly train employees, especially those making eligibility 
determinations, or rendering fair hearing decisions.
    The final rule adopts the proposed rule at 7 CFR 272.4(d) as 
written. By eliminating training requirements, we are signaling our 
greater concern with the outcome of training, that is, high quality 
administration. However, we strongly encourage states to continue to 
provide quality training to their employees. Quality training 
strengthens Program administration and communicates a strong message to 
employees about the importance of a well run Food Stamp Program. Where 
program reviews indicate program problems caused by deficiencies in 
staff skills, we would expect State agencies to upgrade training 
efforts.

Hours of Operation--7 CFR 272.4(g)

    Section 848 of PRWORA deleted previously designated Section 16(b) 
of the Food Stamp Act. That section required the Secretary of 
Agriculture to establish standards for the periodic review of food 
stamp office hours to ensure that employed individuals were adequately 
served by the FSP. It also required State agencies to submit regular 
reports specifying the administrative actions that the State planned to 
take to meet the standards prescribed in that section.
    To implement Section 848 of PRWORA, the proposed rule specified 
that State agencies would be responsible for setting the hours of 
operation for their food stamp offices. However, in deciding the office 
hours to be offered, State agencies would be required to consider 
section 11(e)(2) of the Food Stamp Act, as amended by section 835 of 
PRWORA. The amendments made by section 835 of PRWORA require States to 
accommodate households with special needs, such as the elderly, working 
poor or households residing on Indian reservations. Finally, the 
proposed provision no longer required State agencies to assess or 
report on office hours.
    In the preamble to the proposed rule, we requested suggestions for 
best serving or providing program access to eligible or potentially 
eligible working individuals. Commenters most often recommended 
expanded office hours. One State agency, the Ohio Department of Human 
Services, noted that State law requires each county department of human 
services to have hours of operation outside the county department's 
normal hours of operation. During these hours, the County department 
will accept applications from employed individuals for the programs 
administered by the County department and assist employed program 
applicants and participants with matters related to the programs. 
Another State agency stated that it improved its service accessibility 
by using the option of a quarterly reporting waiver for households with 
earnings. As of July 1999, FNS extended to all State agencies the 
option of requiring households with earnings to submit quarterly 
reports. Quarterly reporting is viewed as a method for simplifying 
reporting requirements and reducing contacts by working households to 
their local certification office.
    We strongly support policies establishing office hours or other 
accommodations designed to facilitate working families and to ensure 
that working families have access to the FSP. Extended office hours are 
very successful in improving Program access and enhancing a household's 
ability to succeed in work because it allows working households to 
schedule appointments and complete the application process without 
missing work. Also, State agencies that establish alternate or extended 
hours may benefit by receiving bonus awards from the Department of 
Health and Humans Services (HHS). Under HHS final rules (65 FR 52814, 
August 30, 2000) entitled, Bonus to Reward States for High Performance 
Under the TANF Program, a portion of the TANF bonus funding to States 
will be based on their performances in providing food stamps to low-
income working families.
    Accordingly, the Department is adopting in this final rule the 
proposal at Sec. 272.4(f) that requires State agencies to consider the 
special accommodation needs of populations they serve, including 
households containing a working person. Our regulatory focus is on the 
desired outcome rather than the means of achieving it. Recent data 
indicate the FSP is vital in helping families move to self-sufficiency 
and that participation in the FSP is crucial in ensuring that people 
working for low wages have the help they need.

Nutrition Education Materials--7 CFR 272.5(b)

    Section 835 of PRWORA deleted section 11(e)(14) of the Food Stamp 
Act (7 U.S.C. 2020(e)(14)). This section of the Act, and corresponding 
regulations at 7 CFR 272.5(b), required FNS to supply State agencies 
with posters and

[[Page 70145]]

pamphlets containing information about nutrition and the relationship 
between diet and health. State agencies were required to display these 
posters and to make these pamphlets available at all food stamp and 
public assistance offices.
    FNS proposed to implement the PRWORA amendment by removing the 
requirement that State agencies display USDA materials. As noted in the 
preamble to the proposed rule, the deletion of this language does not 
lessen FNS' commitment to nutrition education. The new paragraph shows 
FNS' commitment by encouraging State agencies to develop optional State 
Food Stamp Nutrition Education Plans as permitted under 7 CFR 
272.2(d)(2) to educate households about the importance of a nutritious 
diet and the relationship between diet and health. As of FY 2000, 48 
State agencies have approved nutrition education plans which call for 
the expenditure of about $200 million for nutrition education in the 
FSP, of which 50 percent is financed by Federal funds. Thus, the vast 
majority of State agencies actively support, promote and provide 
nutrition education to FSP clients.
    Comments received from State agencies and organizations 
representing States were supportive of the nutrition education 
proposals at Sec. 272.5. However, one commenter requested that FNS 
withdraw the proposal and another objected to FNS encouraging States to 
implement nutrition education plans. Another commenter noted that State 
agencies have committed millions of dollars in non-federal funds to 
food stamp program nutrition education.
    The final rule adopts the proposed rule at 7 CFR 272.5(b), as 
written. It is a State option to implement and operate a nutrition 
education plan. FNS provides State agencies with comprehensive guidance 
and with broad flexibility in determining how it will provide nutrition 
education to food stamp recipients. This guidance is updated annually 
and reinforces FNS' commitment to nutrition education by stressing the 
relationship of Program regulations and Federal reimbursement of costs 
for State nutrition education activities that are necessary and 
reasonable to benefit Program applicants and participants. Finally, the 
FSP reimburses State agencies with approved Nutrition Education plans 
for 50 percent of their total allowable costs.
Optional Use of the Income and Eligibility Verification System (IEVS) 
and the Systematic Alien Verification for Entitlements (SAVE) Program--
7 CFR 272.8, 272.11 and 273.2
    Section 840 of PRWORA amended Section 11(e)(18) of the Food Stamp 
Act (7 U.S.C. 2020(e)) to make IEVS and SAVE State options. Thus, the 
proposed rule removed the requirement that State agencies operate 
either an IEVS or a SAVE system. For State agencies electing to use 
IEVS and SAVE, the proposed rule only required that the State agencies 
observe the requirements of the data exchange agreements with agencies 
from which data will be obtained or exchanged. The preamble in the 
proposed rule noted that quality control (QC) reviews would continue to 
use data obtained from IEVS and SAVE as a case analysis tool.
    Numerous State agencies commented on this proposal and are 
supportive of the option use IEVS and SAVE requirements and of the 
proposed elimination of IEVS and SAVE requirements. State agencies 
which use IEVS and SAVE will continue to conduct data exchange 
agreements with Federal sources. The data exchange agreements, however, 
will no longer be required as part of the State's Plan of Operation. A 
number of State agencies objected to the continued use of IEVS and SAVE 
as part of QC reviews. Two State agencies commented that by using IEVS 
and SAVE as part of QC, State agencies in effect were not being given 
the option to use IEVS and SAVE and would need to continue with the 
matches.
    Current rules at 7 CFR 275.12 identify the procedures State 
agencies and FNS must follow when reviewing active cases included in 
the QC active sample. Under 7 CFR 273.12(c), a State agency must 
conduct a full field review for all selected active cases and this 
investigation must include a review of any information pertinent to a 
particular case which is available through IEVS. This requirement is 
consistent with QC review procedures that mandate the verification of 
all elements affecting the households eligibility and benefit level in 
the sample month under review.
    The Department decided to retain the current rules at 7 CFR 275.12 
without change because available data indicate that IEVS data are 
generally useful means of improving payment accuracy. Their use by QC 
only reinforces long-standing policy that State adopt methods of 
administration that secure payment accuracy.
    Under Section 840 of PRWORA, State agencies may, but are not 
required to, use IEVS and/or SAVE as part of their responsibility in 
determining eligibility and benefit levels for participating 
households. Those State agencies electing to use either IEVS and/or 
SAVE are provided flexibility in determining how best the IEVS and/or 
SAVE data should be used. The use of IEVS as an analysis tool does not 
diminish a State agency's option to use IEVS or SAVE outside of the QC 
process.
    Accordingly, the Department is adopting the proposed amendments at 
7 CFR 272.8, 7 CFR 272.11 and 7 CFR 273.2 in the final rule without 
change.

Part 273--Certification of Eligible Households

Application Processing--7 CFR 273.2

    As explained in the Notice of Proposed Rulemaking (NPRM), section 
835 of PRWORA amended sections 11(e)(2) and (e)(3) of the Act, 7 U.S.C. 
2020(e)(2) and (e)(3) which govern the food stamp application and 
certification process. Section 11(e) now provides more flexibility for 
State agencies to tailor day-to-day operations of the Program to the 
needs of individual States while ensuring that households continue to 
receive timely, accurate and fair service. More specifically, section 
835 removed the requirement that the Secretary design a uniform 
national food stamp application form and eliminated dictates concerning 
what information had to be included on the application form and in what 
particular location on the form. Section 11(e) of the Act now provides 
that State agencies must develop their own food stamp application form 
and establish their own operating procedures for local food stamp 
offices. States may now use electronic storage of applications and 
other information, including the use of electronic signatures. States 
must provide a method of certifying and issuing benefits to eligible 
homeless individuals.
    While the language of amended Section 11(e) encourages personal 
responsibility and provides more State agency flexibility, it retains 
key specific provisions to protect a client's right to timely, 
accurate, and fair service. The Act continues to: (1) Require that 
applications be processed within 30 days; (2) permit households to 
apply for participation on the same day they first contact the food 
stamp office during office hours; (3) consider an application as 
``filed'' on the date the applicant submits the application with the 
applicant's name, address, and signature (benefits are calculated based 
on the filing date of an application); (4) require that an adult 
representative certify the

[[Page 70146]]

truth of the information on the application, including citizenship or 
alien status of each member, and that such signature is sufficient to 
comply with any provision of Federal law requiring applicant 
signatures; and (5) require that the State agency provide each 
household, at the time of application, a clear written statement 
explaining what acts the household must perform to cooperate in 
obtaining verification and otherwise complete the application process.
    In the NPRM, we proposed to amend 7 CFR 273.2, ``Application 
processing,'' to incorporate the new requirements of Section 11(e) of 
the Act, as amended by various sections of PRWORA. In addition, we 
proposed a major streamlining of the current regulations as part of a 
larger effort to reduce the volume of Federal regulation.
    In the NPRM, we sought to achieve a new balance in the regulations 
between maintaining customer protections in the application process and 
providing States greater flexibility in administering the program. We 
received a large volume of comments on our proposed changes. Commenters 
representing State agencies generally supported the changes, but often 
requested additional streamlining which would provide even greater 
flexibility to States in operating the program. Commenters representing 
the advocacy community, however, strongly objected to many of the 
proposed changes on the grounds that we were removing important 
safeguards for applicants. These commenters requested that existing 
rules be restored and also sought the adoption of new provisions that 
would strengthen customer rights.
    The significant disagreement among commenters over the 
discretionary provisions of the NPRM have caused us to reconsider the 
merit of many of the proposed changes. While existing regulations are 
highly detailed, they do provide a national standard of customer 
service that promotes the basic statutory purpose of providing timely, 
accurate and fair service to applicants for, and participants in, the 
Food Stamp Program. In addition, given the sharp decline in program 
participation among eligibles since the passage of PRWORA and 
acknowledged problems with program access in several areas, we must 
question the desirability at this time of removing many of the 
protections provided applicants and participants under current 
regulations. Given these considerations, we have decided not to 
finalize the discretionary provisions proposed in the NPRM. At this 
time, we are finalizing only those changes to current regulations 
necessitated by PRWORA. For the other sections of 7 CFR 273.2, we will 
be retaining current rules.

Title of Part 273.2

    In the NPRM, we proposed to change the title of 7 CFR 273.2 from 
``Application processing'' to ``Office operations and application 
processing.'' We received no comments on the proposal and are adopting 
it as final.

General Purpose--7 CFR 273.2(a)

    In the NPRM, we proposed to replace current paragraph (a), entitled 
``General purpose,'' with a new paragraph (a), ``Office operations.'' 
The new paragraph would incorporate into the regulations the new 
standards for operating food stamp offices contained in Section 
11(e)(2)(a) of the Act, as amended by Section 835 of PRWORA. 
Specifically, new paragraph (a) would require the following: (1) That 
State agencies establish their own procedures governing office 
operations that the State agency determines best serve households in 
the State, including households with special needs; (2) that State 
agencies provide timely, accurate, and fair service as required by 
Section 835 of PRWORA; (3) that State agencies not impose a processing 
requirement for another assistance program as a condition of food stamp 
eligibility; and (4) that State agencies have a procedure in place for 
informing persons who wish to apply for food stamps about the 
application process and their rights and responsibilities.
    The comments received on this proposal were all supportive of the 
proposed amendment. One commenter did fear that the prohibition on 
imposing processing requirements for other assistance programs as a 
condition of food stamp eligibility might prohibit States from 
utilizing household information obtained under the requirements of 
another program which may affect the household's food stamp 
eligibility. This is not correct. The State may consider household 
information obtained when a household applies for another public 
assistance program when determining a household's eligibility for food 
stamps. The State, however, may not require a household that is 
applying only for food stamps to answer questions on a joint 
application or submit any information that is not needed to complete a 
food stamp eligibility determination.
    The change to 7 CFR 273.2(a) is necessary to reflect the new 
standards for operating food stamp offices contained in section 835 of 
PRWORA, so we are adopting the change as final. However, in the NPRM we 
had proposed to move many of the sentences in current paragraph (a) to 
other sections under 7 CFR 273.2. Since we are not finalizing many of 
the changes to the other parts of 7 CFR 273.2 proposed in the NPRM, we 
are restoring current paragraph (a) in the regulations. That paragraph 
will be renumbered (a)(2), and entitled ``Application processing.''

Food Stamp Application--7 CFR 273.2(b)

    Current paragraph (b) lists the requirements for the food stamp 
application form, including the mandatory content for each form and the 
requirement that deviations from the national application form be 
approved by FNS. In the NPRM, we proposed to amend paragraph (b) to 
reflect new requirements related to the food stamp application form in 
Sections 11(e) of the Act, as revised by section 835 of PRWORA. Section 
835 amended section 11(e) of the Act to remove the list of mandatory 
application content requirements. It also amended Section 11(e)(2) to 
require that State agencies design their own application forms, and to 
provide that the application form may include the electronic storage of 
information and the use of electronic signatures.
    Specifically, we proposed to amend 7 CFR 273.2(b) to require that 
State agencies design their own application forms, provide that the 
application form may include the electronic storage of information and 
the use of electronic signatures, and remove the requirement in current 
paragraph (b)(3) regarding the need for prior FNS approval of State-
designed applications which deviate from the Federally designed 
application. We also proposed to add a new paragraph 7 CFR 273.2(b)(2) 
entitled ``Application contents,'' which would, among other things, 
replace the list of mandatory application content requirements with a 
general requirement that the application must contain all necessary 
information to comply with the Act and regulations. Finally, we 
proposed to add a new paragraph 7 CFR 273.2(b)(3) entitled ``Jointly 
processed cases,'' which would set forth requirements for the 
processing of joint applications used by States to determine an 
applicant's eligibility for other assistance programs in addition to 
the Food Stamp Program.
    A number of commenters objected to the proposed changes to 7 CFR 
273.2(b). Specifically, many opposed our decision to remove the 
existing mandatory application contents requirements relating to the 
right of a household to file an incomplete

[[Page 70147]]

application for food stamps. Under current regulations at 7 CFR 
273.2(b)(1)(iv) through (vii), each application form must contain: (1) 
A place on the front page of the form where the applicant can write 
his/her name, address, and signature; (2) notification on or near the 
front page of the application of the household's right to immediately 
file the application as long as it contains his or her name, address 
and signature; (3) a description on or near the front page of expedited 
service requirements; and (4) notification on or near the front page of 
the application that benefits are provided from the date of 
application. Commenters felt that without these notifications, 
households may be unaware of their right under Section 11(e)(2)(B)(iv) 
of the Act to file an incomplete application, and would likely postpone 
applying for food stamps until they have time to complete the entire 
application form.
    We agree with the commenters that much of the information currently 
required in 7 CFR 273.2(b) should be retained in the regulations. This 
information, though no longer specified in the Act, is necessary to 
meet the standard set by PRWORA for providing timely, accurate, and 
fair service to applicants for, and participants in, the Food Stamp 
Program. Therefore, we are withdrawing most of our proposals to amend 7 
CFR 273.2(b) and will retain current regulations. However, we are 
making some changes to the existing rules at 7 CFR 273.2(b)(1). In 
response to comments, we are adding language to 7 CFR 273.2(b)(1)(iii) 
to make it clear that the applicant is certifying to the citizenship or 
eligible alien status of only those household members applying for 
benefits. We are adding a sentence to 273.2(b)(v) that regardless of 
the type of system a State agency uses (paper or electronic) it must 
provide a means for the applicant to immediately begin the application 
process with name, address and signature.
    We are adding a new paragraph 273.2(b)(1)(viii) to incorporate the 
latest nondiscrimination statement appropriate for the Program. USDA 
Departmental Regulation (DR) 4300-3, Public Notification Policy, dated 
November 16, 1999, establishes the policy for ensuring positive and 
continued notification of the USDA equal opportunity policy to the 
public. DR 4300-3 provides for three nondiscrimination statements. 
These statements govern: (1) Federally-conducted programs; (2) Food 
Stamp Program recipient agencies; and (3) Special Nutrition Programs 
and other recipient agencies. Interested readers may visit the FNS web 
site (www.fns.usda.gov) and click on ``Civil Rights'' to learn more 
about FNS' nondiscrimination policy.
    Finally, in new paragraph 273.2(b)(1)(ix), we are incorporating 
language from paragraph 273.2(b)(3) which requires that multi-program 
application forms clearly afford applicants the option of answering 
only those questions relevant to the program or programs for which they 
are applying. We are revising current paragraph (b)(3) in its entirety 
to incorporate changes necessitated by PRWORA. That paragraph, which 
requires States to seek prior FNS approval for State-designed 
applications which deviate from the Federally designed application, is 
no longer necessary because Section 835 of PRWORA eliminated the 
requirement that State agencies use a Federally-designed application. 
However, we are incorporating the language that was proposed at (b)(3) 
to address comments regarding improving access to the Program.
    Several commenters expressed concern that the current practice of 
asking all household members for information regarding their 
citizenship, immigration status, and possession of social security 
numbers was a significant barrier to participation for certain eligible 
low-income individuals. U.S. citizen and eligible alien members of 
households containing undocumented aliens or legal aliens whose 
immigration status does not permit them to work may feel apprehensive 
about providing the State agency with sensitive information about the 
lack of documentation or social security numbers of certain household 
members. On September 21, 2000, this Department and the DHHS issued a 
letter to all State health and welfare officials, subject: ``Policy 
Guidance Regarding Inquiries into Citizenship, Immigration Status and 
Social Security Numbers in State Applications for Medicaid, State 
Children's Health Insurance Program (SCHIP), Temporary Assistance for 
Needy Families (TANF), and Food Stamp Benefits'' (the ``Tri-Agency 
Letter''). Readers may visit the FNS web site (www.fns.usda.gov) and 
click on ``Food and Nutrition Service'', then ``Food Stamps,'' and then 
``Joint Guidance on Citizenship, Immigration & SSNs.'' The Tri-Agency 
Letter addressed the concerns of the immigrant community by providing 
an option to State agencies to structure application forms so that 
households are allowed to declare certain household members to be 
``non-applicants,'' if they did not wish to answer questions about 
citizenship, immigration status, or the possession of a social security 
number. Any household member so designated would be determined to be an 
ineligible household member under Sec. 273.11(c) and would not receive 
Program benefits. Further, such ineligible household members must 
otherwise cooperate fully by disclosing their income, resources, and 
any other information the State agency needs to determine the 
eligibility and benefit amount of the other household members.
    If a state decides not to permit individual family or household 
members to decline to provide citizenship, immigration status or SSN 
information early in the application process, the state must still 
ensure that their applications forms promote enrollment of eligible 
families and eliminate the potential for discriminatory impact on 
eligible applicants based on national origin. Furthermore, even in 
those states that elect not to offer applicants early opportunity to 
decline to reveal citizenship, immigration status, or SSN information, 
long-standing policy directs that when a household member does not 
disclose his or her citizenship, provide or apply for an SSN, or 
establish satisfactory immigration status, the State agency must 
determine that household member ineligible for benefits, but cannot 
deny benefits to eligible citizen or immigrant household members simply 
because other household members fail to disclose such information.
    Some commenters suggested that the final rule should require State 
agencies to make early declaration of ``non-applicant'' status 
available for individuals who know they do not have documents to prove 
their immigration status, or cannot possess social security numbers. In 
this regard, the Department is still very concerned that current State 
agency application forms and processes inadvertently may have the 
effect of deterring eligible applicants and recipients who live in 
immigrant households from enjoying equal participation and access to 
Program benefits based on their national origin, in violation of 
section 11(c) of the Food Stamp Act and Title VI of the Civil Rights 
Act of 1964. However, as the NPRM did not address this issue at all, we 
will not proceed further without consultation with all partners and 
stakeholders through a future rulemaking. In the meantime, the 
Department encourages State agencies to adopt the option allowing them 
to adjust their application forms and processes to accommodate 
households containing some members who know

[[Page 70148]]

they do not have documents to prove their immigration status or who 
might have difficulty in applying for a social security number.

7 CFR 273.2(c)--Filing an Application

    In the NPRM, we proposed to amend paragraph 7 CFR 273.2(c), 
``Filing an application.'' We proposed to add a new paragraph 7 CFR 
273.2(c)(1) entitled ``Filing process.'' The new paragraph would: (1) 
Retain the requirement appearing in the first sentence of current 
paragraph (c)(1) regarding the manner in which applications can be 
submitted; (2) include new language that clarifies that the application 
may be submitted by facsimile transmission as well as in person, 
through an authorized representative, or by mail; (3) include new 
language that recognizes that some State agencies are using on-line or 
other types of automated applications that may require the applicant to 
come into the local office to complete the application; (4) include the 
requirement appearing in the fifth sentence of current paragraph (c)(1) 
that allows an applicant to file an incomplete application provided it 
contains at the least the applicant's name, address, and signature; (5) 
remove the language appearing in the sixth sentence of current 
paragraph (c)(1) which requires State agencies to document the date the 
application was filed by recording on the application the date it was 
received by the food stamp office; and (6) provide that applications 
signed through the use of electronic signature techniques and 
applications containing handwritten signatures which are then 
transmitted to the appropriate office via fax or other electronic 
transmission technique are acceptable.
    We proposed to add a new paragraph 7 CFR 273.2(c)(2) entitled 
``Households right to file.'' The new paragraph would require the State 
agency to: (1) Make food stamp applications readily accessible to all 
potentially eligible households or to anyone who requests one; (2) 
provide an application in person or by mail to anyone who requests one; 
(3) mail an application by the next business day to anyone who requests 
an application by mail; (4) allow a household to file an application on 
the same day it contacts the food stamp office during office hours; (5) 
post signs or make available other advisory materials explaining a 
person's right to file an application on the day of their first contact 
with the food stamp office and the application processing procedures; 
(6) notify all persons who contact a food stamp office and either 
request food assistance or express financial and other circumstances 
which indicate a probable need for food assistance, of their right to 
file an application and encourage them to do so.
    New paragraph (c)(2) would also address the handling of 
applications filed at the wrong certification office. The new paragraph 
would: (1) Continue to allow the State agency to require households to 
file an application at a specific certification office or allow them to 
file an application at any certification office within the State or 
project area; (2) require that if an application is received at an 
incorrect office, the State agency advise the household of the address 
and telephone number of the correct office; (3) require the State 
agency to forward an application received at an incorrect office to the 
correct office not later than the next business day; and (4) remove the 
requirement currently located in the third sentence of 7 CFR 
273.2(c)(2)(ii) that the State agency inform the household that its 
application will not be considered filed and the processing standards 
must not begin until the application is received by the appropriate 
office.
    We proposed to add a new paragraph 7 CFR 273.2(c)(4) entitled 
``Notice of required verification.'' The new paragraph would require 
that State agencies: (1) Provide households, at the time of application 
for certification and recertification, with a clear written statement 
of what acts the household must perform in cooperating with the 
application process, and identify potential sources of required 
verification; and (2) inform special needs households of the State 
agency's responsibility to assist them in obtaining required 
verification, providing the household is cooperating with the State 
agency. Special needs households were defined as including, but not 
limited to, households with elderly or disabled members, households in 
rural areas with low-income members, homeless individuals, households 
residing on reservations, and households in areas in which a 
substantial number of members of low-income households speak a language 
other than English.
    Finally, we proposed to remove current paragraph (c)(5), and to 
redesignate current paragraph 273.2(c)(6) ``Withdrawing an 
application,'' as new paragraph (c)(3).
    Numerous commenters objected to some of the proposed changes to 7 
CFR 273.2(c) on the grounds that we were removing important safeguards 
for applicants. For example, one commenter opposed the revision to 7 
CFR 273.2(c)(1) which deleted the requirement that States encourage a 
household to file an application on the same day the household first 
contacts the food stamp office for assistance. The commenter thought 
that the language to encourage same day filing should be retained and 
expanded to prohibit State agencies from suggesting any disadvantages 
there might be to applying for food stamps and require them to explain 
that possible disadvantages of applying for other programs do not 
relate to the Food Stamp Program.
    Many commenters also objected to our proposal to repeal the current 
requirement that the food stamp office document the date an application 
is filed by recording on the application the date it is received. The 
commenter thought that, rather than delete the requirement, the 
Department could make it more flexible to account for the different 
ways that States may have for recording application filing dates, such 
as through automated systems.
    Many commenters also objected to the proposal to provide States 
with an extra day for mailing an application to a household that 
requests one over the telephone and for mailing applications to the 
correct office when filed at the incorrect office. The commenters noted 
that the proposed changes will likely result in affected households 
losing one-thirtieth of their benefits for the month of application. 
The commenter recommended that the proposed regulations be amended to 
offer States the option of forwarding a misfiled application by mail 
the day it is received or by fax the next day. The commenter also 
recommended that the final rules provide an exception to the current 
requirement for mailing an application the day it is requested by phone 
to allow for when the request is made after the last mail collection of 
the day.
    Some commenters believed that the proposed provision did not go far 
enough in providing flexibility for State agencies, and recommended 
further simplification to the regulations. One commenter remarked that 
the proposed regulations at 7 CFR 273.2(c)(2), (c)(3), and (c)(4) 
appeared to be more prescriptive than required by the Food Stamp Act 
and Section 835 of PRWORA and should be redrafted in the final rule to 
allow States the flexibility prescribed by the Act to establish their 
own procedures in the operation of local offices.
    Giving the considerable disagreement on the proposed provisions 
among commenters, and our commitment to retaining provisions in the 
regulations that meet the goal of PRWORA to

[[Page 70149]]

provide timely, accurate, and fair service to applicants for, and 
participants in, the Food Stamp Program, we have decided to withdraw 
the proposed changes to 7 CFR 273.2(c). We may consider revising these 
regulations in a future proposed rulemaking. At this time, we are 
implementing only those changes to the existing regulations at 7 CFR 
273.2(c) that are necessitated by PRWORA.
    Current regulations at 7 CFR 273.2(c)(1) require that households 
must file food stamp applications by submitting the forms to the food 
stamp office either in person, through an authorized representative, or 
by mail. No provision is made for the electronic submission of 
applications. As noted above, however, Section 11(e)(2)(C) of the Act, 
as amended by Section 835 of PRWORA, now allows for the use of 
signatures provided and maintained electronically, for the storage of 
records using automated retrieval systems only, and for any other 
feature of a State agency's application that does not rely exclusively 
on the collection and retention of paper applications or other records. 
In accordance with the revised provisions of Section 11(e)(2)(C) of the 
Act, we had proposed in the NPRM to revise section 7 CFR 273.2(c)(1) to 
specifically provide that applications signed through the use of 
electronic signature techniques and applications containing handwritten 
signatures which are then transmitted to the appropriate office via fax 
or other electronic transmission technique are acceptable means of 
filing a food stamp application.
    We received several comments in support of the change, and are 
finalizing the provision at 7 CFR 273.2(c)(1). One commenter thought 
that the household should be given a paper printout of whatever 
information is recorded electronically in order to be able to review it 
and correct errors before the certification process has gone too far. 
We agree with the commenter that the household should be able to verify 
the information that has been recorded. However, we believe how that 
should be done should be left up to the State agency and we are 
amending the final rule accordingly.
    We are making three additional changes to the current regulations 
in response to comments. The current regulations at 7 CFR 
273.(2)(c)(1)(i) provide that the State agency must encourage 
households to file an application on the same day the household or its 
representative contacts the food stamp office in person or by telephone 
and expresses interest in receiving food stamps. One commenter pointed 
out that some applicants for assistance may not be aware of the Food 
Stamp Program, or aware that they might be eligible, so they don't 
express interest in the specific Program, even though they express 
concerns about food security. Therefore, in response to comments and to 
increase access to the Program, we are adding that the State agency 
must encourage a household to file an application for the Program if it 
expresses concerns about food insecurity.
    Current regulations at 7 CFR 273.2(c)(2)(ii) provide that the 
certification office shall offer to forward the household's application 
to the appropriate office that same day if the household has completed 
enough information on the application to file. One commenter suggested 
that State agencies may not be able to forward the application on the 
same day. In order to give the State agencies some flexibility, while 
at the same time protecting the interests of the applicant, this 
commenter suggested we allow the State agency to forward it the next 
day, providing that the State agency ensures it arrives in the 
appropriate office the day it was forwarded. In other words, it can 
send it electronically, via fax, or courier, as long as it arrives the 
day it was forwarded. We agree that this will afford the State agency 
flexibility and protect the applicant. Therefore, we are modifying 7 
CFR 273.2(c)(2)(ii) to provide that the State agency may forward the 
application the next day by any means that ensure the application 
arrives at the appropriate office the day it was forwarded.
    One commenter expressed concern that in an attempt to divert 
households from public assistance, the State agency might inadvertently 
divert a household from applying for food stamps. This commenter 
suggested that in order to protect applicants rights, we amend 7 CFR 
273.2(c)(2)(i) and remind State agencies not to discourage households 
from applying for food stamps. In response to these comments and in an 
attempt to increase Program access, and in conformance with changes we 
are making at 7 CFR 273.2(j) which are discussed later in this 
preamble, we are providing at 7 CFR 273.2(c)(2)(i) that if the State 
agency attempts to discourage households from applying for cash 
assistance, it shall make clear that the disadvantages and requirements 
of applying for cash assistance do not apply to food stamps. In 
addition, it shall encourage applicants to continue with their 
application for food stamps. The State agency shall inform households 
that receiving food stamps will have no bearing on any other program's 
time limits that may apply to the household.
    Finally, current regulations at 7 CFR 273.2(c)(3) require that 
State agencies make application forms readily accessible to potentially 
eligible households and provide an application form to anyone who 
requests one. One commenter pointed out that many State agencies now 
use paperless or interactive electronic systems and no longer keep 
paper applications in stock. Therefore, to accommodate the various 
types of systems in use by State agencies, and to ensure that 
applicants receive timely, accurate and fair service, we are modifying 
the language at 7 CFR 273.2(c)(3) to provide that regardless of the 
type of system a State agency uses (paper or electronic), the State 
agency must provide a means for applicants to begin the application 
process immediately by providing a name, address and signature.

Household Cooperation--7 CFR 273.2(d)

    In the NPRM, we proposed to amend current regulations at 7 CFR 
273.2(d), which contain provisions related to household cooperation in 
the application process and quality control reviews. We proposed to 
retain all of the contents of current paragraph (d)(2), and amend 
paragraph (d)(1) as follows: (1) Rename the paragraph ``Cooperation 
with application process''; (2) remove the example of ``refusal to 
cooperate'' appearing in current paragraph (d)(1); (3) expand on the 
policy regarding household cooperation with subsequent reviews to 
provide that a subsequent review can be in the form of an in-office 
interview; and (4) remove the last two sentences of current paragraph 
(d)(1), which concern the failure of a person outside of the household 
to cooperate with a request for verification.
    One commenter strongly opposed our amendments to 7 CFR 273.2(d)(1). 
The commenter believed that in revising the paragraph, we had omitted 
words and phrases that were critical to preserving the rights of food 
stamp participants and which may leave the requirements of the 
paragraph open to misinterpretation. For example, existing regulations 
require that for a food stamp office to deny a household's application 
for refusal to cooperate, the household must be able to cooperate but 
clearly demonstrate that it will not take actions it can take that are 
required to complete the application process. In the proposed rule, we 
had removed the words ``it can take'' from the sentence, believing them 
to be unnecessary. The commenter believed, however, that removal of the 
words it can take would leave the

[[Page 70150]]

sentence open to new interpretations, including the possibility that a 
household could be denied food stamps based on its failure to produce a 
document that has been destroyed or its failure to obtain a note from 
its estranged landlord.
    The commenter also objected to our proposal to remove the example 
of ``refusal to cooperate'' appearing in current paragraph (d)(1). The 
example, which is meant to illustrate the difference between a 
household being unable to cooperate and refusing to cooperate in 
completing the application process, states that to be denied for 
refusal to cooperate, a household must refuse to be interviewed and not 
merely fail to appear for the interview. We proposed removing the 
example because there are numerous ways that a household could refuse 
to cooperate, and the example is not definitive. The commenter 
believed, however, that the example illustrates an important 
principle--protecting applicants that make good faith efforts to 
cooperate--which does not exist in many TANF programs, and which, 
without a concrete example, may not be applied properly by eligibility 
workers whose primary training has been in AFDC and TANF.
    The commenter also objected to our proposal to remove the last two 
sentences of current paragraph (d)(1), which concern the failure of a 
person outside of the household to cooperate with a request for 
verification. The first of these sentences provides that the State 
agency may not determine a household to be ineligible when a person 
outside of the household fails to cooperate with a request for 
verification. Section 835 of PRWORA amended section 11(e)(3) of the Act 
to remove this requirement. The last sentence of current paragraph 
(d)(1) describes certain individuals who are not considered ``outside'' 
the household for the purpose of the existing provision and, because of 
the change brought about by Section 835 of PRWORA, is no longer 
necessary. We noted in the proposed rule that removal of these two 
sentences does not change current policy because refusal to cooperate 
continues to be defined as refusal by a household member. The commenter 
argued, however, that without a clear statement in the regulations that 
a household may not be determined ineligible because of the failure of 
a person outside the household to cooperate with a request for 
verification, eligibility workers are likely to fail to apply the 
principle and incorrectly deny applications.
    We agree with the commenter that clarity in the regulations is 
critical to ensuring that all food stamp applicants and participants 
receive timely, accurate and fair service. Therefore, we are 
withdrawing our proposal to amend paragraph 7 CFR 273.2(d)(1) and we 
are retaining the existing language of the paragraph with one 
modification. We are reminding State agencies that they must also 
assist households in obtaining the required verification if the 
household is cooperating with the State agency as provided for by 
paragraph 7 CFR 273.2(c)(5).

Interviews--7 CFR 273.2(e)

    In the NPRM, we proposed to amend current regulations at 7 CFR 
273.2(e), which address interview procedures. Chief among the changes 
was a proposal to eliminate the requirement that every household have a 
face-to-face interview at all recertifications. As discussed in the 
NPRM, prior to PRWORA, the Act did not contain an explicit provision 
requiring food stamp applicants to be interviewed. Rather, the 
requirement is inferred. Section 11(e)(2) did provide language which 
allowed elderly/disabled households to request a waiver of the in-
office interview under certain conditions. Section 835 of PRWORA 
amended section 11(e)(2) of the Act to remove this waiver language, 
thereby eliminating any reference in the Act to the fact that in-office 
interviews are conducted. In consideration of the removal of the waiver 
language and in the spirit of PRWORA, the Department chose to 
reevaluate current policy and proposed in the NPRM to replace the 
current interview requirement with the requirement that a face-to-face 
interview be required at the time of initial certification and at least 
once every 12 months thereafter unless the household is certified for 
longer than 12 months or the face-to-face interview is waived by the 
State agency. This proposal would eliminate the requirement to conduct 
a face-to-face interview at the time of recertification if it occurs 
during the 12-month period since the last face-to-face interview.
    In addition, we proposed to amend current rules at 7 CFR 
273.2(e)(2) which address waivers of the interview requirement. Prior 
to enactment of PRWORA, the interview could only be waived if requested 
by the household because the household was unable to appoint an 
authorized representative and had no adult household members able to 
come to the office because the members were elderly, mentally or 
physically handicapped, lived in a location not served by a 
certification office, had transportation difficulties, or had similar 
hardships as determined by the State agency. Section 835 of PRWORA 
struck this waiver provision from the Act and amended Section 11(e)(2) 
of the Act to provide State agencies the authority to waive an 
interview without first being requested by a household. In the NPRM, we 
proposed to amend 7 CFR 273.2(e) to require the State agency to waive 
the in-office face-to-face interview in favor of a telephone interview 
or announced home visit for household hardship cases. The proposal 
allowed the State agency to determine what constitutes hardship cases. 
It also allowed the State agency to waive the in-office interview in 
favor of a telephone interview or scheduled home visit for households 
with no earned income if all of its members are elderly or disabled. 
Under the proposal, the State agency would continue to be required to 
grant a face-to-face interview to any household that requests one.
    Most commenters were supportive of our proposals to revise the 
face-to-face interview requirements, which were felt to be burdensome 
on both participants and State agencies. Because of that support and 
because the changes stem from amendments to the Act made by PRWORA, we 
are adopting the proposals as final in this rule.
    In addition to the above noted changes, we also proposed in the 
NPRM to further revise 7 CFR 273.2(e) to simplify current provisions 
and provide more State agency flexibility in the area of scheduling 
interviews. However, we received mixed remarks on these proposed 
changes from commenters. Several commenters, while supporting the added 
flexibility provided to State agencies, thought we did not go far 
enough in simplifying current rules. For example, several commenters 
requested that we remove the current requirement that the State agency 
hold applications pending until the 30th day from the date of 
application when an applicant misses the scheduled interview or fails 
to provide requested information or verification within 10 days of the 
request. This would allow States to take immediate action to deny an 
application after a missed interview or the expiration of the 10-day 
period for return of requested information.
    Other commenters felt that the proposed regulations did not provide 
enough safeguards for food stamp applicants and recipients. These 
commenters thought that the rules should more closely reflect the 
priority the Administration has given to preserving access to food 
stamps for low-income families in need, and should be amended to 
include

[[Page 70151]]

additional requirements, such as the following: (1) The food stamp 
office should routinely notify all applicants about the possibility of 
waiving the face-to-face interview in cases of hardship and the 
procedures for requesting such waivers; (2) the food stamp office 
should notify all applicants that they may send an authorized 
representative to their interview if they cannot attend personally; (3) 
the food stamp office should notify the applicant of the date and time 
of the interview in person, by telephone, or by letter mailed at least 
seven days in advance of the scheduled interview; (4) the food stamp 
office should send an applicant that misses a scheduled interview a 
notice informing him or her of this fact. The notice should ensure that 
the household has at least 10 days (or, if longer, until the thirtieth 
day following the date of application) in which to contact the food 
stamp office to reschedule an interview before the application may be 
denied and should provide a general telephone number the applicant may 
call to reschedule the appointment without having to reach any 
particular eligibility worker; (5) the food stamp office should 
reschedule the interview for any applicant that visits or calls the 
office on or before the thirtieth day after filing his or her 
application if the household indicates a continued interest in 
receiving food stamps; and (6) the food stamp office should be required 
to accommodate working families in one of the following three ways: (a) 
When the office is open during hours the applicant does not work, offer 
the applicant an interview time that does not conflict with his or her 
work schedule; (b) if the food stamp office is not open during hours 
when the applicant is not working, offer the applicant a telephone 
interview, perhaps during the applicants lunch hour or scheduled break; 
or (c) attempt to reschedule the first missed interview.
    Given the considerable disagreement among commenters on our 
proposals to amend 7 CFR 273.2(e), and the Department's commitment to 
ensuring that all food stamp applicants and participants receive 
timely, accurate and fair service, we have decided to withdraw most of 
the proposed changes not required by PRWORA and to retain current 
rules. However, we are taking this opportunity to remind State agencies 
of current policy: (1) State agencies should take into consideration 
the needs of the household and accommodate these needs when scheduling 
interviews as much as possible (such as scheduling interviews for 
working households when the applicant is not scheduled to work or after 
hours); (2) State agencies should schedule interviews so that the 
household has at least 10 days to provide requested verification before 
the end of the 30 day processing period; (3) State agencies may not 
request private information from households during a group interview; 
(4) State agencies may not require households to report for an in-
office interview during their certification period, though they may 
request households to do so. For example, State agencies may not 
require households to report en masse for an in-office interview during 
their certification periods simply to review their case files, or for 
any other reason. The latter reminder is being incorporated into the 
regulations at 7 CFR 273.2(e).
    We are finalizing two proposed changes put forth in the NPRM. 
Current regulations at 7 CFR 273.2(e)(3) require State agencies to 
schedule a second interview if a household fails to attend the first 
scheduled interview. In the NPRM, we proposed to delete that 
requirement. As noted in the NPRM, some State agencies have found it 
burdensome to schedule multiple interviews and have found that a 
household that fails to attend the first scheduled interview frequently 
does not attend a second scheduled interview. For many years, we have 
granted State agencies waivers of the requirement to reschedule a 
missed interview, under the waiver authority in 7 CFR 272.3(c), on the 
conditions that the State agency notify each household on the 
application or interview appointment notice that it is the household's 
responsibility to contact the State agency to reschedule a missed 
interview, and that the State agency not deny the household's 
application prior to the 30th day after application.
    As with many of our proposals, comments received on our proposal to 
remove the requirement that State agencies reschedule a missed 
interview were mixed. Some commenters strongly supported the change, 
noting that requiring State agencies to schedule a second interview if 
the applicant fails to attend the first scheduled interview is not only 
burdensome but unnecessary, because those households that miss the 
first interview and do not reschedule it on their own, frequently, if 
not always, do not attend the second scheduled interview either. Other 
commenters, however, were concerned that changing the policy could 
result in the denial of food stamps to working families who, unable to 
attend the first interview due to a work conflict or sick child, may 
have difficulty reaching the food stamp office or scheduling an 
interview time they can make before the end of the 30-day period.
    We recognize that a household may not be able to attend a scheduled 
interview. However, in the spirit of PRWORA, which focuses on State 
agency flexibility in the certification process and household 
responsibility, we are removing the requirement that the State agency 
reschedule a missed interview. However, we are adding a requirement to 
7 CFR 273.2(e)(3) that the State agency must send a notice to the 
households that miss their interview appointments indicating that it 
missed the scheduled interview and informing the household that it is 
responsible for rescheduling a missed interview. In addition, we are 
reminding State agencies that if the household contacts the State 
agency within the 30 day processing period, the State agency must 
schedule a second interview. We are making a conforming amendment at 
273.2(h)(1)(i)(D). We are also adding a statement to the same section 
that reminds the State agency that it may not deny a household's 
application prior to the 30th day after application if the household 
fails to appear for the initial interview.
    We proposed at 7 CFR 273.2(e)(1) that interviews may be conducted 
at the food stamp office or another mutually convenient location of the 
State agency's choosing, including a household's residence. One 
commenter suggested we reword the statement to provide that the 
location be ``mutually acceptable'' as opposed to a ``mutually 
convenient location of the State agency's choosing.'' The commenter 
argued that a mutually acceptable location is by definition acceptable 
to the food stamp office. In addition, this commenter stated that the 
regulations as written could be read that applicants must be 
interviewed in their homes. Since home interviews can be viewed as 
invasive and demeaning, the household should be allowed to suggest 
another location. If the alternative is inconvenient to the food stamp 
office, it can always decline. We agree with the commenter that the 
State agency and the household should agree on a location. Therefore, 
we are modifying the proposed language and finalizing it to provide 
that interviews may be conducted at the food stamp office or another 
mutually acceptable location, including a household's residence. 
However, we are also reminding State agencies that if the interview is 
to be conducted in a household's residence, it must be scheduled in 
advance with the household.

[[Page 70152]]

    We proposed at 7 CFR 273.2(e)(2) that the State agency must waive 
the face-to-face interview in favor of a telephone interview on a case-
by-case basis because of household hardship situations. One commenter 
said that since food stamp offices are no longer required to reschedule 
missed interviews, the opportunity for a waived interview becomes much 
more important, especially for those applicants for whom coming into 
the office is a hardship. However, few households are aware of this 
option. Therefore, this commenter suggested that we require State 
agencies to notify households of their right to a waiver of the face-
to-face interview. We agree with this comment. Therefore, at 7 CFR 
273.2(e)(2) we are adding the requirement that State agencies must 
notify the applicant that it will waive the face-to-face interview for 
hardship situations as determined by the State agency. In addition, we 
are retaining current rules which provide that household hardship 
situations include, but are not limited to: illness, transportation 
difficulties, care of a household member, hardships due to residency in 
a rural area, prolonged severe weather, or work or training hours which 
prevent the household from participating in an in-office interview.
    We are making an additional change to current regulations at 7 CFR 
273.2(e) in response to comments. In their remarks, several commenters 
objected to the practice in some State offices of scheduling interviews 
on a ``first-come, first-served'' basis. Typically, a local agency will 
establish a ``quota'' for the number of applicants that staff can 
interview during established working hours. Potential applicants will 
begin to line up in front of the office early in the morning in hopes 
of getting an interview that day. Once the number of applicants in line 
reaches the ``quota'', the local agency will accept no more individuals 
for an interview. The local agency will continue to accept 
applications, but staff advise any further potential applicants to come 
back the next working day. Under this procedure, a household may have 
to return to the food stamp office several times in order to be 
interviewed for the program. This policy is not acceptable as it 
clearly presents a barrier to participation for certain groups, such as 
working families, who cannot afford to take time off repeatedly in an 
attempt to be interviewed. It also violates the principle implied in 7 
CFR 273.2(e) that the State agency schedule a specific date and time 
for an interview for every applicant household. Therefore, we are 
amending the regulations at 7 CFR 273.2(e) to clearly require that the 
State agency must schedule an interview for each applicant that is not 
interviewed on the day he or she submits an application. To the extent 
practicable, States should schedule the interview to accommodate the 
needs of groups with special circumstances, including working families.

Verification--7 CFR 273.2(f)

    Current 7 CFR 273.2(f) sets forth the procedures, including the 
types of documents required, for providing verification to establish 
the accuracy of statements on the application. In the NPRM, we proposed 
to amend paragraph (f) to incorporate changes required by PRWORA and to 
respond to the President's regulatory reform initiative. We received a 
vast number of comments on our proposed changes to this section. Many 
commenters thought that while FNS had proposed some useful 
simplification of requirements related to verification, the agency did 
not go far enough in streamlining current requirements. These 
commenters thought that the rules should go further and, among other 
things, leave verification requirements to be decided by States, which 
should be given the flexibility to target verification requirements to 
items most likely to cause payment errors and relax others in the 
interest of facilitating program access.
    Other commenters strongly opposed our decision to remove many of 
the provisions in the current regulations. The commenters thought that 
without these provisions clearly stating verification requirements 
State eligibility workers could misapply policies, effectively 
discouraging households from following through with their program 
application. For example, one commenter thought that the Department 
should reinstate the requirements at current section 273.2(f)(1)(vii) 
which provide that any documents which reasonably establish the 
applicant's identity must be accepted and no requirement for a specific 
type of document, such as a birth certificate, may be imposed. Without 
this language, the commenter feared that some food stamp offices would 
insist that a household produce the one form of verification they 
consider ``best'' even if the applicant lacks that form of identity. 
The same commenter thought that FNS should reinstate in section 
273.2(f)(1)(vi) a cross reference to section 273.3(a), which prohibits 
States from establishing durational residency requirements. The 
commenter notes that while section 273.3(a) would continue to prohibit 
durational residency requirements, without a cross-reference to that 
provision in the verification rules, it could be missed by many 
eligibility workers, resulting in improper denials.
    Given the considerable disagreement among commenters on our 
discretionary proposals to amend 7 CFR 273.2(f), we have decided to 
withdraw those proposed changes and retain current regulations. We may 
consider again proposing revisions to 7 CFR 273.2(f) in a future 
rulemaking. At this time, we are adopting into the regulations changes 
necessitated by PRWORA.
    In response to comments, we are retaining one sentence from the 
NPRM in the final rule. The final rule at 7 CFR 273.2(f) will remind 
State agencies to give households at least 10 days to provide required 
verification in accordance with 7 CFR 273.2(h)(1)(i)(C) and refer State 
agencies to 7 CFR 273.2(i)(4) which contain the verification procedures 
for expedited service cases.
    The regulations at current paragraph (f)(1)(xi) provide the 
requirements for verifying the shelter costs of homeless households who 
claim shelter costs greater than the homeless household shelter 
standard. In the NPRM, we proposed to revise the first sentence of this 
section to conform with Section 5(e) of the Act, 7 U.S.C. 2015(e)(5), 
as amended by Section 809 of PRWORA, which establishes an optional 
homeless household shelter deduction. This PRWORA change is discussed 
later in this preamble. The revised sentence requires homeless 
households claiming shelter expenses to provide verification of their 
shelter expenses in order to qualify for the homeless shelter deduction 
if the State agency has such a deduction. We also proposed to remove 
the language currently appearing in the second and third sentences of 
the paragraph which requires the eligibility worker to use prudent 
judgment in determining if the homeless household's verification of 
shelter expenses is adequate and provides an example. These sentences 
do not provide specific verification requirements and thus, we 
believed, are not necessary.
    One commenter objected to requiring verification of shelter 
expenses over and above the homeless shelter deduction. The commenter 
pointed out that under section 5(e)(5) of the Act, States are not 
required to limit this deduction to households that can verify shelter 
costs. States may choose not to do so in recognition of the fact that 
when people pay for temporary shelter, it is

[[Page 70153]]

commonly through informal transactions that are impossible to verify. 
The commenter expressed concern that if the final rules mandate 
verification of these expenses, they are likely to result in the 
effective elimination of this deduction: States may find verifying 
incidental shelter expenses too burdensome and error-prone and drop the 
deduction, or; in those States that maintain it, few homeless 
households would produce satisfactory verification. We agree with this 
commenter. Therefore, we are deleting the requirement at 7 CFR 
273.2(f)(1)(xi). We are moving that provision to 7 CFR 273.2(f)(2)(iii) 
under which States may verify the information if questionable. In 
addition, several commenters objected to our intention to remove the 
second and third sentences of paragraph (f)(1)(xi). One commenter 
thought that eliminating the option of allowing State agencies to use 
prudent judgment if the household claims shelter expenses but is unable 
to provide verification places an undue burden upon this very 
vulnerable population. We agree with the commenters that retaining the 
last two sentences in current paragraph (f)(xi) may prevent an 
unnecessary verification burden on homeless households, and we are 
retaining the two sentences in this rule at 7 CFR 273.2(f)(2)(iii).
    Current paragraph (f)(4)(i) and (ii) provide that the State agency 
may use a collateral contact to verify information provided by an 
applicant. One commenter expressed concern that collateral contacts 
impair the confidentiality protections of the statute. This commenter 
warned that an inquiry from the food stamp office makes it obvious that 
a household has applied for benefits. This might be an embarrassment to 
the household. Therefore, to respond to this commenter's concerns, we 
are revising 7 CFR 273.2(f)(4)(ii) to provide that when talking with a 
collateral contact, State agencies should disclose only the information 
that is absolutely necessary to get the information being sought. State 
agencies should avoid disclosing that the household has applied for 
food stamps, and should not disclose any information supplied by the 
household, especially information that is protected by 7 CFR 273.1(c). 
State agencies should also not suggest that the household is suspected 
of any wrong doing.
    Current paragraph (f)(4)(iii) governs use of home visits in the 
event documentary evidence is insufficient. One commenter expressed 
concern that some State agencies may justify home visits for the entire 
caseload or certain segments of the caseload by asserting that certain 
households are more error-prone. Certainly our intention in this 
provision is not to sanction universal mandatory home visits or home 
visits for households that fit error-prone profiling. Certainly rumors 
of such a policy could have a chilling effect on program participation. 
We are taking this opportunity to remind State agencies that home 
visits are to be used only when documentary evidence is insufficient to 
make a firm determination of eligibility or benefit level, and the home 
visit is announced in advance. In addition, in response to this 
commenter and to improve Program access, we are amending 7 CFR 
273.2(f)(4)(iii) to provide that home visits are to be used on a case-
by-case basis where the supplied documentation is insufficient. Simply 
because a household fits a profile of an error-prone household doesn't 
mean that it has not provided sufficient verification. In addition, we 
are reminding State agencies to assist the household in obtaining 
verification in accordance with 7 CFR 273.2(c)(5). The commenter also 
suggested that we broaden the prohibition on unannounced investigatory 
home visits. Such an action is beyond the scope of this rule. However, 
we are taking this opportunity to suggest that State agencies consult 
their legal counsel on their authority to stage unannounced home visits 
that are intended to investigate fraud. Neither the Food Stamp Act nor 
the Program regulations provide authority for such visits.
    Current paragraph (f)(5)(i) requires State agencies to help 
applicants with verification, allows households to supply documentary 
evidence in person or through another means, prohibits State agencies 
from requiring households to present verification in person, and 
requires the State agency to accept any reasonable documentary evidence 
provided by households. Section 835 of PRWORA revised section 11(e) of 
the Act to remove the requirement that State agencies assist households 
in obtaining verification and the prohibition against requiring 
households to present additional proof of a matter for which the State 
agency already possesses current verification. While PRWORA removed the 
requirement to assist all households in the verification process, there 
remains a mandate to offer assistance to special needs households.
    Although Section 835 of PRWORA did remove several requirements 
related to verification from the Act, we have decided not to change the 
substance of the current regulation. We believe that the current, long 
standing policies at 7 CFR 273.2(f)(5)(i) are a necessary adjunct of 
the PRWORA requirement that State agencies provide accurate, timely, 
and fair service. This includes the policy that States assist all 
applicants in obtaining verification. Although the Act now requires 
States to assist, at a minimum, households with special needs, we 
believe that in order to satisfy the Act's standard of timely, accurate 
and fair service, States must be required to assist all households in 
obtaining verification. The final rule does amend the current language 
to allow households to submit documentation by facsimile or other 
electronic devices.
    Current paragraph (f)(9) provides procedures for using IEVS 
information to verify eligibility and benefits. To conform to the 
changes we previously discussed under section 272.8, in the final rule, 
we are amending the title of 7 CFR 273.2(f)(9) and the contents of 
paragraph (f)(9)(i) to indicate that use of IEVS is now a State option. 
If State agencies do access IEVS, the procedures contained in the 
remainder of paragraph (f)(9) are still appropriate and, therefore, we 
are making no other changes to the section.
    Current paragraph (f)(10) provides procedures for verifying alien 
status through the SAVE system. To conform to the changes we previously 
discussed under Sec. 272.11, in this final rule, we are amending the 
introductory paragraph of 7 CFR 273.2(f)(10) to indicate that use of 
SAVE is now a State option. If State agencies do access SAVE, the 
procedures contained in the remainder of paragraph (f)(10) are still 
appropriate and, therefore, we are making no other changes to the 
section.
    We also proposed in the NPRM to make a number of revisions to 
paragraph (f) to reflect changes in the procedures for verifying alien 
status in the Food Stamp Program required by PRWORA and other Federal 
laws. A discussion of those proposed revisions follows in the 
paragraphs set forth below.

How Must State Agencies Verify Eligible Alien Status?

    Section 402 of PRWORA and Sections 503 through 509 of AREERA made 
extensive changes in requirements for alien eligibility which affect 
the verification requirements. The changes affecting eligibility are 
described below under the discussion of alien eligibility at section 
273.4 in this final rule. Section 432 of PRWORA also affects the 
requirements for verification of alien eligibility. Section 432(a) of 
PRWORA and subsequent amendments required the Attorney General to 
publish

[[Page 70154]]

regulations providing requirements for verifying that a person applying 
for a Federal public benefit is a qualified alien or is a U.S. citizen 
or non-citizen national and is eligible to receive the benefit. The 
Department of Justice (DOJ) developed Interim Guidance, which it 
published in the Federal Register on November 17, 1997 (62 FR 61344). 
State agencies should also be aware that DOJ will be publishing a final 
rule on Verification of Eligibility for Public Benefits. DOJ published 
the proposed rule in the Federal Register on August 4, 1998 (63 FR 
41662). Our proposed rule referenced the forthcoming final rule. We 
proposed that the Department would incorporate into the final version 
of this rule relevant changes to alien verification procedures that 
DOJ's makes in its final rule. The Interim Guidance provides currently 
acceptable procedures for the verification of citizenship, alien 
status, and military connections. Section 432(b) of PRWORA provided 
that not later than 24 months after the date the verification 
regulations are adopted, States that administer a program that provides 
a Federal public benefit must have in effect a verification system that 
complies with the new regulations. We proposed to remove current 
paragraphs (f)(1)(ii)(B), (C), and (D), which mandate the types of 
documents that State agencies must use for verification. State agencies 
may refer to the DOJ Interim Guidance, Program policy interpretations, 
and the Social Security Administration (SSA) procedures for obtaining 
work history information. These sources provide examples of 
verification, including verification the household provides, which 
State agencies may use in developing their own verification 
requirements.
    The Department proposed to remove current 7 CFR 273.2(f)(1)(ii)(A), 
which requires the household to provide verification that each alien is 
eligible. In the introductory paragraph (f)(1)(iv), we proposed that 
State agencies must verify the immigration status of all aliens and 
other factors relevant to the eligibility of individual aliens prior to 
certification. Other factors relevant to the eligibility of individual 
aliens could be the date of admission or date status was granted; 
military connection; 40 qualifying quarters of work coverage; battered 
status; Indian, Hmong or Highland Laotian status; place of residence on 
August 22, 1996; or age on August 22, 1996. We also proposed to include 
in new paragraph (f)(1)(iv) the provision from the first sentence of 
current paragraph (f)(1)(ii)(G), which provides that an alien whose 
eligibility is questionable is ineligible until the alien provides 
acceptable documentation, with two exceptions which would be contained 
in new paragraphs (f)(1)(ii)(A) and (B). We would remove the last 
sentence of current paragraph (f)(1)(ii)(G) because the reference to 7 
CFR 273.11(c) is unnecessary. These changes, would eliminate current 
paragraph (f)(1)(ii)(G). In regard to expedited service, State agencies 
would have determined the eligible status of aliens prior to 
certification, but could postpone verification in accordance with 
paragraph (i).
    Pursuant to the President's regulatory reform initiative, we 
proposed to remove the first two sentences and the last sentence of 
current paragraph (f)(1)(ii)(E) because they do not provide any 
significant guidance to State agencies and are unnecessary. New 
paragraph (f)(1)(ii)(A) would include the provisions appearing in the 
third and fourth sentences of current paragraph (f)(1)(ii)(E), with 
some changes in wording for clarity. The third sentence of current 
paragraph (f)(1)(ii)(E) provides that when a State agency accepts a 
non-INS document from the household as reasonable evidence of alien 
status, the State agency must send the document to INS for 
verification. The fourth sentence of current paragraph (f)(1)(ii)(E) 
provides that the agency must not delay, deny, reduce or terminate an 
individual's benefits while awaiting such verification. With these 
changes, current paragraph (f)(1)(ii)(E) would be eliminated.
    Several advocacy groups thought that the introductory text of 
paragraph (f)(1)(iv) (``[t]he immigration status of aliens must be 
verified.'') would lead State agencies to attempt to verify the 
immigration status of ineligible aliens. We did not intend such a 
result. The final rule makes it clear that the Department is 
authorizing State agencies to verify only the status of aliens claiming 
eligible immigration status. Moreover, we are retaining the language of 
the current rule indicating that households must have the option to 
withdraw the application or participate without an alien who does not 
wish the State agency to contact INS to verify his or her status. We 
received only a few comments on the proposal to require State agencies 
to use the DOJ verification guidance in developing their verification 
procedures. One State agency thought that the proposal to make use of 
SAVE optional gave State agencies the authority to verify the 
immigration status of certain aliens only if questionable. This is 
clearly not the case. Verification of immigration status is mandatory 
for all applicant alien household members, whether or not a State 
agency elects to use SAVE. Another State agency felt that the 
Department should not adopt by reference unpublished DOJ rules which 
might impose burdensome verification requirements on State agencies. 
The Department recognizes the State agency's concerns, and the final 
rule deletes the reference to a future DOJ final rule. However, as 
stated previously, PRWORA section 432(a) charges DOJ with the 
responsibility for publishing rules for verification of alien status 
and citizenship. PRWORA section 432(b) requires State agencies to 
comply with such regulations. As of the date of publication of this 
final rule, DOJ has not published its final rule outlining the 
verification requirements. However, we understand that DOJ is making 
changes to the rule in response to the comments it received in the 
proposed rule. Once DOJ issues its final rule, the Department will 
review its provisions and determine if further rulemaking is 
appropriate for the Program.
    We proposed a new paragraph (f)(1)(iv)(B) to address verification 
of alien eligibility when work history is questionable. Section 
402(a)(2)(B) of PRWORA provides that aliens lawfully admitted for 
permanent residence may be eligible for food stamps if they can be 
credited with 40 qualifying quarters of work. The conforming amendment 
proposed here would provide that State agencies must obtain 
verification of eligibility based on 40 qualifying quarters of work 
before the State agency may certify the alien, unless the State agency 
or the applicant has submitted a request to SSA regarding the number of 
quarters of work that can be credited, SSA has responded that the 
individual has fewer than 40 quarters, and the individual or the State 
agency has documentation from SSA that SSA is conducting an 
investigation to determine if more quarters can be credited. If the 
State agency can document that SSA is conducting an investigation, the 
individual may participate for up to 6 months from the date of the 
first determination that the number of quarters was insufficient for 
eligibility. This provision is based on an interpretation of the phrase 
``has worked 40 qualifying quarters of coverage'' set forth in section 
402(a)(2)(B)(ii) of PRWORA. An immigrant, under the express terms of 
section 402(a)(2)(B), would be eligible for food stamp benefits if the 
immigrant had actually worked 40 qualifying quarters of coverage, 
notwithstanding SSA's inaccurate or incomplete recording of the 
immigrant's work history. Food

[[Page 70155]]

stamp eligibility is premised on the immigrant's act of working the 40 
quarters rather than SSA's recording of the immigrant's work history. 
Thus, in keeping with past practice concerning the receipt of benefits 
pending the completion of Federal government verification, we proposed 
to permit immigrants to receive food stamp benefits for a maximum 
period of 6 months. We emphasized that food stamp benefits pending the 
completion of an SSA investigation are only available to an alien who: 
(1) Is admitted as a lawful permanent resident under the Immigration 
and Nationality Act (INA), i.e., an immigrant; (2) SSA has determined 
has fewer than 40 quarters of coverage; and (3) provides the State 
agency with documentation produced by SSA indicating SSA is 
investigating the number of quarters creditable to the alien.
    One advocacy group felt that proposed 6-month period for resolution 
of quarters of coverage disputes with the SSA was arbitrary, unfair, 
and noncompliant with the SAVE statute. Moreover, they thought the 
Department should allow participation pending the outcome of any 
Federal agency's investigation of a matter which bears on the 
individual's eligible alien status, and the State agency's 
determination of ``battery or extreme cruelty,'' as long as the alien 
is cooperating with the investigation. We are partially adopting this 
suggestion in the final rule. The SAVE statute requires the Department 
to accept an alien's attestation of ``satisfactory'' alien status until 
verified through SAVE. However, PRWORA imposed new facets of 
verification of eligibility factors for aliens which go far beyond the 
verification of immigration status with the INS which the SAVE statute 
contemplates. For example, in addition to immigration status, status as 
a veteran and possession of 40 quarters of Social Security coverage now 
have a bearing on an alien's eligibility. As Congress did not amend the 
SAVE statute to provide for attestation of matters beyond those which 
the State agency can confirm through INS, we find no mandate to expand 
affirmation of status to encompass verification of information held in 
the files of other Federal agencies. Nor do we believe that Congress 
intended that we allow an indefinite period for completion of the 
verification process. After several years of operating under the 6-
month limit, the Department is unaware of any instances where SSA was 
unable to complete a requested investigation within the established 
time frame. Accordingly, we are preserving this time frame in the final 
rule. However, the Department is using its discretionary authority to 
add to the final rule a provision requiring that State agencies certify 
the individual pending the results of an investigation for up to 6 
months when the applicant or the State agency has submitted a request 
to a Federal agency for verification of information which bears on the 
individual's eligible alien status. For example, a State agency may 
find it necessary to contact the Department of Veterans Affairs to 
confirm an immigrant's veteran status. On the other hand, we are unable 
to extend the same procedure to an alien who is pursuing qualified 
alien status based on the outcome of a State agency's determination of 
battery or extreme cruelty. There is a real distinction between an 
alien seeking qualified status based on battery and an alien who 
already possesses an eligible immigration status. An alien cannot 
legally attest to food stamp eligibility based on an immigration status 
she does not yet possess. In order to have qualified aliens status, the 
alien must initiate a claim for such status and receive a favorable 
determination from the State agency. In this respect, such an alien is 
in the position of an asylum applicant or an applicant for 
naturalization. Unless and until INS actually grants the alien an 
eligible immigration status, he or she remains ineligible for the 
Program.
    A commenter thought that State agencies could read the proposed 
rule to limit the verification of quarters of coverage to information 
contained in SSA's files. We did not intend such a reading of the rule. 
The commenter correctly pointed out that SSA records do not show 
current year earnings and in some cases the last year's earnings, 
depending on the time of request. Also, in some cases, an applicant may 
have work from uncovered employment that SSA does not document, but is 
countable toward the 40 quarters test. In both of these cases, the 
individual, rather than SSA, would need to provide the evidence need to 
verify the quarters. While we believe that State agencies are following 
the SSA guidance for determining 40 quarters of coverage, we did reword 
the final rule to make these points clear. Finally, the same commenter 
thought that State agencies lack the resources to correlate 40 quarters 
of coverage information with the immigrant's possible participation in 
a Federal means-tested public benefit program during the time the 
quarters were earned by the immigrant, or by a parent or spouse. 
Consequently, the burden of verifying that quarters are countable would 
fall on the immigrant himself. The commenter urged the Department to 
limit verification of participation in a Federal means-tested public 
benefit program to those situations where the State agency knows of 
such participation based on a specific communication from SSA or 
because the State agency itself provided the federal means-tested 
public benefit at issue. Otherwise, the Department should permit States 
agencies to rely conclusively on reports of quarters from SSA and to be 
immune from subsequent QC scrutiny based on these decisions. The 
Department is unwilling to adopt this suggestion. First, such a policy 
likely would defeat the purpose of the statutory ban on counting 
quarters of Social Security coverage of immigrants who participate in 
Federal means-tested benefit programs while they are earning the 
quarters of coverage. Second, we are retaining that requirement that 
State agencies assist households in providing required verification. 
Accordingly, State agencies must devote sufficient resources to observe 
the statutory mandate with due diligence.
    We proposed to remove current 7 CFR 273.2(f)(1)(ii)(F). That 
paragraph specifies that the State agency must provide alien applicants 
sufficient time (at least 10 days) to provide verification and that the 
State agency must provide benefits timely. The time period for 
providing verification would be included in the introductory text of 
paragraph (f). In as much as the Department is not revising this 
paragraph in the final rule, we are restoring, but revising, the 
provision in the final rule to delete the reference to acceptance of 
non-INS documentation.

How Must State Agencies Verify U.S. Citizenship or Non-Citizen National 
Status?

    Paragraph (f)(2)(ii) currently provides requirements for 
verification of citizenship if a household's statement that a household 
member is a U.S. citizen is questionable. We proposed to combine 
paragraphs (f)(2)(i) and (f)(2)(ii) into a new paragraph (f)(2) and 
revise the provisions regarding verification of citizenship. We 
proposed to retain the requirement that State agencies verify 
citizenship only if it is questionable. We also proposed to retain the 
provision that participation in another program that requires 
verification of citizenship is acceptable proof of citizenship, if 
verification was obtained for the other program. As indicated above 
under the discussion of verification of alien eligibility, DOJ also has 
provided guidelines for verification of

[[Page 70156]]

citizenship. Therefore, we proposed to remove the verification guidance 
in current paragraph (f)(2)(ii) and provide in new paragraph (f)(2)(ii) 
that State agencies must verify citizenship in accordance with the DOJ 
guidance if a household member's citizenship status is questionable.
    State agencies and advocacy groups generally supported the proposal 
to verify a statement of citizenship only when questionable. Several 
advocacy groups asked the Department to restore a deleted provision 
allowing a declaration from a citizen that the household member in 
question is a citizen. One State agency felt that the Department should 
not adopt by reference unpublished DOJ rules which might impose 
burdensome verification requirements on State agencies. The same State 
agency suggested that the Department allow State agencies to accept 
statements of parents on behalf of children who as minors obtained 
derivative citizenship when their parents naturalized. The State agency 
observes that many individuals cannot produce documentation of this 
category of derivative citizenship as the INS documents cost $160.
    In response to comments, we are modifying the proposed language to 
add a requirement to verify the non-citizen national status of 
individuals whose status is questionable, in addition to the existing 
requirement to verify the U.S. citizenship of individuals whose 
citizenship is questionable. The addition conforms to the final 
language of section 273.4(a), as we are adding U.S. non-citizen 
nationals to the groups of individuals eligible for participation in 
the Program. We are restoring the language of the current regulations 
requiring State agencies to accept the written statement of a third 
party with personal knowledge of the household member's U.S. 
citizenship or non-citizen national status. We are retaining the 
requirement in the current regulations, that, absent verification or 
third party attestation of U.S. citizenship or non-citizen national 
status, the member whose citizenship is in question is ineligible to 
participate until the issue is resolved. State agencies must treat such 
an individual as an ineligible alien and treat the income and resources 
as set forth in section 273.11(c). Finally, we do not believe it is 
necessary to include a specific provision relating to verification of 
the citizenship of children who naturalize with their parents. Under 
the final rule, a naturalized parent, or other knowledgeable third 
party, could attest to the citizenship of the child, if the State 
agency had reason to question the child's citizenship.

Normal Processing--7 CFR 273.2(g)

Delays in Processing--7 CFR 273.2(h)

    In the NPRM, we proposed to combine and revise the requirements in 
7 CFR 273.2(g) and (h), which currently address the procedures for 
processing applications and handling delays in processing, 
respectively, and redesignate the new paragraph as 7 CFR 273.2(h). We 
proposed to include in new paragraph (g) provisions related to 
authorized representatives. This section is addressed below. The 
proposed changes to the requirements for application processing were 
made to allow State agencies to establish their own operating 
procedures and to give them more flexibility in processing 
applications.
    In the NPRM, we proposed to amend new 7 CFR 273.2(h) as follows: 
(1) Retain in (h)(1) the policy contained in current paragraph (g)(1) 
that State agencies provide eligible households an opportunity to 
participate within 30 days of the date of application; (2) remove, as 
unnecessary, the third sentence of current paragraph (g)(1) referring 
to the special procedures in 7 CFR 273.2(i) for expedited service; add 
to new paragraph (h)(1) the first sentence of current paragraph (g)(3), 
which requires that a notice of denial be sent within 30 days if the 
household is found to be ineligible; and (4) delete the remainder of 
current paragraph (g)(3) to enhance State agency flexibility.
    We also proposed to add a new paragraph (h)(2) which would require 
State agencies to continue to process cases if the State agency is at 
fault for not processing the case within the 30-day time period. If the 
State agency is at fault for delaying the application process, benefits 
would be restored back to the application filing date. If the household 
is at fault for the delay, the State agency may either deny the case or 
hold it pending for an additional period of time to be determined by 
the State agency but not more than 2 months. If the household is at 
fault for the delay, benefits would be provided retroactive to the date 
the household takes the required action.
    We also proposed to add a new paragraph (h)(3), which would retain, 
but consolidate, the current procedures for determining the cause of a 
delay. Delays that are the fault of the State agency include, but are 
not limited, to failure to explore and attempt to resolve with the 
household any unclear and incomplete information provided at the 
interview; failure to inform the household of the need for one or 
members to register for work and allow the members at least 10 days to 
complete work registration; failure to provide the household with a 
statement of required verification and allow the household at least 10 
days to provide the missing verification; and failure to notify the 
household that it could reschedule a missed interview. Delays that are 
the fault of the household include, but are not limited to, failure to 
cooperate with the State agency in resolving any unclear or incomplete 
information provided at the interview; failure to register household 
members for work; failure to provide missing verification; and failure 
to reschedule a missed interview appointment.
    Finally, we proposed that 7 CFR 273.2(g)(2), which addresses the 
issuance of combined allotments for households that apply after the 
15th of the month, be redesignated with minor editorial changes as 7 
CFR 273.2(h)(4).
    As with many of the other provisions in the NPRM, the comments 
received on our proposed changes to 7 CFR 273.2(h) were mixed. On the 
one hand, several commenters were very supportive of the proposals, 
especially our decision to remove much of the prescriptive language 
regarding handling of applications when the decision is delayed beyond 
30 days. Many of these commenters, however, requested further 
simplification to the regulations. Several commenters again requested 
that we amend the regulations to allow State agencies to take immediate 
action to deny an application after a missed interview or the 
expiration of the 10-day period for return of requested information.
    On the other hand, many commenters opposed the Department's 
proposal to repeal provisions in existing paragraphs (g) and (h) which 
address client protections. For example, one commenter objected to our 
proposal to remove the requirement at current 7 CFR 273.2(h)(2)(A) that 
the State agency reopen a case that has been denied for failure to take 
a required action if the household takes the required action within 60 
days from the date of application. The commenters noted that without 
this provision, households can be required to submit a new application 
and restart the application process even though they have produced the 
verification necessary to determine their eligibility, which may cause 
some households to be discouraged and abandon their efforts to obtain 
food stamps. The same commenters opposed the Department's proposed 
rewording of the current requirement at 273.2(h)(1)(i)(C). This 
provision provides that where verification is

[[Page 70157]]

incomplete, the State agency must provide the household with a 
statement of required verification, offer to assist the household in 
obtaining required verification, and allow the household sufficient 
time to provide the missing verification. Sufficient time is defined as 
at least 10 days from the date of the State agency's initial request 
for the ``particular verification'' that was missing. In the NPRM, we 
dropped the words ``particular verification.'' Although no change in 
policy was intended, some commenters felt that dropping the words could 
potentially weaken the principle significantly. For example if the 
household presents verification that is deemed insufficient by the 
State agency, the household may not have sufficient time left in the 
10-day period to get the specific documentation requested by the State.
    Given the considerable disagreement among commenters on our 
proposals to amend existing paragraphs (g) and (h), and the 
Department's commitment to ensuring that all food stamp applicants and 
participants receive timely, accurate and fair service, we have decided 
to withdraw the proposed changes and retain current rules, with one 
exception as discussed below.
    One commenter pointed out that some States require prolonged job 
searches prior to registering persons for work in their TANF-funded 
programs. To avoid confusion, this commenter argued, the rules at 7 CFR 
273.2(h)(i)(B) should clarify that households cannot be denied food 
stamp work registration on that basis. In addition, because some 
persons with disabilities may feel it would be dishonest to register if 
they are unable to work, no household should have its application 
delayed or denied for failure to register unless the food stamp office 
has reviewed the possibility of an exemption. We agree with this 
commenter, but believe that program policy has always called for the 
resolution of work registration status before any food stamp work 
requirement may be imposed. Therefore, at 7 CFR 273.2(h)(i)(B), we are 
clarifying that State agencies determine if an individual is exempt 
from work registration prior to requiring a household member to 
register.

Authorized Representatives--7 CFR 273.2(g)

    In the NPRM, we proposed to redesignate the provisions of current 7 
CFR 273.1(f) on authorized representatives as paragraph 7 CFR 273.2(g). 
We also proposed to move into that new section all of the requirements 
governing use of authorized representatives that appear in 7 CFR 
273.1(f), 7 CFR 273.11(e) and (f), and 7 CFR 274.5, and to condense and 
revise those requirements. We also proposed to (1) move the provisions 
for using treatment centers and group homes as authorized 
representatives currently located at 7 CFR 273.1(f)(2) to 7 CFR 
273.11(e) and (f); (2) remove the introductory paragraph of 7 CFR 
273.1(f)(2) because it is unnecessary; (3) include the discussion in 7 
CFR 273.1(f)(2)(1)(i) regarding drug and alcohol treatment centers in 7 
CFR 273.11(e)(1) in place of the reference to 7 CFR 273.1(f)(2); (4) 
move the first, second, fourth, fifth, and last sentences in current 7 
CFR 271.2(f)(2)(ii) regarding group living arrangements into 7 CFR 
273.11(f)(1); move the sixth sentence of current 7 CFR 271.2(f)(2)(ii) 
into 7 CFR 273.11(f)(7); (5) remove the remainder of 7 CFR 271.2(f) 
because it is unnecessary; (6) add a reference to 7 CFR 273.11(e) and 
(f) to new paragraph 7 CFR 273.2(g)(1)(iii); and (7) remove 7 CFR 
273.1(f) and 7 CFR 274.5.
    We proposed to entitle 7 CFR 273.2(g)(1) ``Applying for benefits.'' 
We proposed to include in new paragraph (g)(1)(i) the provisions of 
current 7 CFR 273.1(f), (f)(1)(i) and (f)(1)(ii) with minor editorial 
changes. The new paragraph would include the current provisions that 
allow an authorized representative to act for the household in the 
application process and to complete work registration forms for those 
household members required to register for work. It would also continue 
to require the State agency to inform the household of its liability 
for overissuances which result from erroneous information given by the 
authorized representative. We would also remove current paragraph (3) 
regarding nonhousehold members who can apply for minors and include the 
content in new paragraph (f)(ii).
    We also proposed to remove the information in introductory 
paragraph 7 CFR 274.5(a) and the first sentence of paragraph (b) 
because they are unnecessary. The contents of paragraph (a)(1) and the 
second sentence of paragraph (a)(2) would be included in new paragraph 
(g)(2) entitled ``Obtaining food stamp benefits'' with minor editorial 
changes. The new paragraph would include the current provisions for 
encouraging the household to name an authorized representative for 
obtaining benefits at the time of application, that the 
representative's name be recorded in the household's case file and on 
its ID, and that the representative for obtaining benefits may be the 
same person designated to make application on behalf of the household. 
In the new paragraph (g)(2)(ii), we proposed to include a reference to 
7 CFR 274.10(c) which provides for designating an emergency authorized 
representative subsequent to the time of certification.
    We proposed to add a new paragraph (3) entitled ``Using benefits.'' 
This paragraph would include the information currently contained in 7 
CFR 274.5(a)(6) and (7) and 274.5(c). The last sentence in 7 CFR 
274.5(c) which prohibits a person disqualified for committing an 
intentional Program violation from using benefits on behalf of the 
household would be removed.
    We also proposed to combine the current restrictions on designating 
authorized representatives in 7 CFR 273.1(f)(4) for application 
processing and 7 CFR 274.5 for obtaining benefits into proposed 
paragraph 7 CFR 273.2(g)(4), entitled ``Restrictions on designations of 
authorized representatives.'' We proposed to revise the provisions to 
omit examples and other unnecessary language. Proposed paragraph (4)(i) 
would provide that State agency employees involved in certification and 
issuance and retailers authorized to accept food stamp benefits may not 
act as authorized representatives without the specific written approval 
of the designated State agency official and only if that official 
determines that no one else is available to serve as an authorized 
representative. Proposed paragraph (4)(ii) would provide that 
individuals disqualified for intentional Program violations cannot act 
as authorized representatives while they are disqualified unless no one 
else is available. Proposed paragraph (4)(iii) would include the 
provisions for disqualifying authorized representatives for 
misrepresentation or abuse, and paragraph (4)(iv) would contain the 
current provision that homeless meal providers may not act as 
authorized representatives for homeless food stamp recipients. Proposed 
paragraph (4)(v) would allow the State agency to restrict the number of 
households an authorized representative may represent.
    Our proposal to consolidate the provisions on authorized 
representatives into one section of the regulations was generally well 
received by commenters. One commenter did object to our proposal to 
remove the requirement currently contained at 7 CFR 274.5(a)(2) that 
requires food stamp offices to take steps to ensure that farm workers 
are acting voluntarily when they designate a grower or labor contractor 
as their authorized representatives. The commenter noted that since 
employers have so much leverage over farm workers, they and their 
family members should be

[[Page 70158]]

prohibited from serving as authorized representatives unless it is 
clear that the household needs such assistance and has no one else to 
whom to turn. We concur with the commenter that the potential for fraud 
and abuse still exists in such situations and are therefore reinstating 
the requirement.
    Several commenters objected to the proposal in 7 CFR 
273.2(g)(4)(iii) to exempt drug and alcohol treatment programs from 
disqualification in cases of fraud. The commenters thought that 
fraudulent acts committed by substance abuse treatment centers should 
be treated in the same manner as similar acts by retailers. One 
commenter asked that FNS provide instructions in these regulations on 
what actions States should take when it is discovered that a treatment 
center or group home knowingly provided false information or misused 
benefits.
    Current regulations at 7 CFR 274.5(d) provide that drug and alcohol 
treatment centers and the heads of group living arrangements which act 
as authorized representatives for their residents and which 
intentionally misrepresent households circumstances may be prosecuted 
under applicable State fraud statutes for their acts. We are amending 
the proposed regulations on authorized representatives to include this 
provision.
    One commenter thought that proposed regulations at 7 CFR 
273.2(g)(1) addressing when a household may use an authorized 
representative are too limiting for households with disabilities. The 
commenter thought that persons with disabilities should be permitted to 
nominate an authorized representative in cases where completing the 
application process would be unusually burdensome for them but not 
literally impossible.
    The proposed regulations at 7 CFR 273.2(g)(1) permit a household to 
utilize an authorized representative when ``a responsible member of the 
household cannot complete the application process.'' We believe that 
this language is sufficiently broad to allow persons with disabilities 
who may find completing the application process unduly burdensome to 
utilize an authorized representative. Therefore, we are not changing 
the proposed provision.
    The same commenter thought that proposed regulations at 7 CFR 
273.2(g)(ii) preclude non-household members from serving as authorized 
representatives except for those cases in which the non-household 
member is the only adult in the household. We disagree with the 
commenter. The proposed regulations at 7 CFR 273.2(g)(1)(i) clearly 
state that a non-household member may be designated as an authorized 
representative and does not limit that authority to situations in which 
the nonmember is the only adult in the household.
    A commenter thought that the proposed regulations should be amended 
to permit households to designate authorized representatives to carry 
out household responsibilities during the certification period, such as 
submitting reports on changes in household circumstances, as well as at 
application.
    The Department did not intend for the proposed regulations to 
prohibit authorized representatives from carrying out household 
responsibilities during the certification period. We recognize that 
there may be instances in which a household cannot satisfy program 
requirements after certification, such as submitting information on 
changes in household circumstances. Therefore, we are amending the 
proposed regulations at 7 CFR 273.2(g)(1) to provide that the 
authorized representative designated for application processing 
purposes may also fulfill household responsibilities during the 
certification period. The household will be liable for any 
overissuances that results from erroneous information given during the 
certification period by the authorized representative.
    One commenter requested that the proposed language at 7 CFR 
273.2(g)(1)(iii) be clarified regarding the use of authorized 
representatives for individuals residing in group living arrangements. 
The provision requires that residents of drug or alcohol treatment 
centers and group homes apply and be certified for food stamps through 
the use of authorized representatives in accordance with sections 
273.11(e) and (f). The commenter noted that regulations at 7 CFR 
273.11(f) allow residents of a group home to apply either through the 
center's authorized representative or on their own behalf. We are 
clarifying the regulations at 7 CFR 273.2(g) to note the distinction in 
the requirements to use authorized representatives that exist for 
residents of drug or alcohol treatment centers and group homes.
    We are adopting the proposed regulations on authorized 
representatives as final with the changes noted above, including those 
changes to Sec. 273.11(f). However, because we are retaining current 
regulations at 7 CFR 273.2(g), we are designating the section on 
authorized representatives as 7 CFR 273.2(n).

Expedited Service--7 CFR 273.2(i)

    In the NPRM, we proposed to amend 7 CFR 273.2(i), which lists the 
categories of households entitled to expedited service and establishes 
the procedures that State agencies must use in providing that service. 
Section 838 of PRWORA amended Section 11(e)(9) of the Act, (7 U.S.C. 
2020(e)(9)) by removing households consisting entirely of homeless 
people as a category of households entitled to expedited service and 
increasing the number of days which State agencies have to provide 
expedited service from 5 to 7 calendar days. We proposed to implement 
the changes resulting from section 838 of PRWORA by amending 7 CFR 
273.2(i) as follows: (1) removing the reference to homeless households 
in current paragraph (i)(1)(iii); (2) renumbering paragraph (iv) as 
(iii); and (3) changing the expedited processing time frame appearing 
in current paragraph (i)(3) from 5 days to 7 days.
    Our proposals to amend 7 CFR 273.2(e) to implement the requirements 
of section 838 of PRWORA have already been finalized in another rule, 
the Non-Discretionary Provisions of the Personal Responsibility and 
Work Opportunity Reconciliation Act of 1996, published on October 30, 
2000 (65 FR 64581). Please refer to that rule for a complete 
understanding of the final provisions.
    In addition to making the changes to 7 CFR 273.2(i) mandated by 
PRWORA, we also proposed to amend the section by removing repetitive 
definitions and simplifying the procedures for providing expedited 
service.
    Comments received on the proposed discretionary changes were mixed. 
Some commenters, while supporting the increased flexibility provided 
under the revised regulations, thought the Department should go still 
farther in simplifying expedited service requirements for State 
agencies. For example, one commenter opposed the regulations at the 
renumbered paragraph (i)(6), which provide no limit on the number of 
times a household can be certified under expedited service procedures. 
The commenter saw no logical reason why households that fail to submit 
timely recertification applications should be rewarded with the ability 
to receive benefits expeditiously, and preferred that expedited service 
be reserved to households newly applying and those who have been off 
the program for a month. Other commenters felt that the revised 
regulations failed to contain sufficient provisions protecting customer 
rights. One commenter thought that the food stamp office

[[Page 70159]]

should be required to contact households that submit incomplete 
applications promptly to request more information and to inform them 
that they may be eligible for expedited issuance based on gross income, 
liquid resources, and shelter costs. In addition, the commenter thought 
that application forms should be required to have a prominent place on 
or near the front where the household can indicate its gross income, 
liquid resources, shelter costs, and status (or not) as a migrant or 
seasonal farm worker. The commenter thought that if a ready opportunity 
is offered to provide this information, many households are likely to 
do so, facilitating the screening for expedited issuance of 
applications that are mailed in or dropped off by applicants whose work 
schedules prevent them from waiting to meet with agency staff.
    Given the considerable disagreement among commenters on our 
proposals to amend paragraph (i), and the Department's commitment to 
ensuring that all food stamp applicants and participants receive 
timely, accurate and fair service, we have decided to withdraw the 
proposed changes and retain current rules.

PA, GA and Categorically Eligible Households--7 CFR 273.2(j)

    As noted in the proposed rule, section 835 of PRWORA amended 
section 11(e) of the Act to eliminate the mandate for the joint 
processing of applications for households in which all members are 
receiving public assistance (PA), supplemental security income (SSI), 
or general assistance (GA). However, State agencies retained the option 
to continue to jointly process these cases. Accordingly, we proposed in 
the NPRM to revise current paragraph (j) in its entirety. Specifically, 
we proposed to revise the paragraph as follows: (1) retain pertinent 
provisions related to the categorical eligibility of certain households 
for the Food Stamp Program; (2) remove provisions or references 
associated with mandatory joint application processing; and (3) retain 
those joint processing provisions we believe are necessary to protect 
the client should a State agency opt to continue joint processing of 
TANF, SSI or GA households.
    We received a large number of comments opposing the changes made in 
the NPRM to paragraph (j). Many commenters felt that our proposal 
removed too many existing safeguards for applicants. For example, some 
commenters thought that many of the provisions in current paragraph 7 
CFR 273.2(j)(1)(iv) should be retained, including the provision which 
requires a food stamp office to postpone denying the application of a 
household that is applying for TANF-funded benefits and that would be 
categorically eligible for food stamps if the household's TANF 
application is approved, and the provision which requires that notices 
denying food stamps to households with applications pending for cash 
assistance or SSI should inform the household that it should notify the 
food stamp office if its cash assistance or SSI benefits are approved.
    Commenters requested that we restore many other provisions as well, 
including the provision in current section 273.2(j)(1)(iii) which 
prohibits food stamp offices from delaying a household's food stamp 
benefits beyond 30 days if the State has sufficient verification to 
determine food stamp eligibility even if it is waiting for further 
information it needs to determine the family's eligibility for TANF-
funded benefits, and the provision in current section 273.2(j)(4)(vi) 
which does not require that all household members receive benefits from 
the same assistance program to be categorically eligible for food 
stamps.
    Given the considerable opposition raised by commenters to our 
proposed changes to 7 CFR 273.2(j), we are withdrawing most of those 
changes at this time. The existing provisions in paragraph (j) promote 
program access among recipients of other assistance programs, and we 
agree with the commenters that, given the Department's commitment to 
ensuring program access and to providing timely, accurate and fair 
service to applicant and participants, the provisions should be 
retained at this time.
    However, we are making several changes to paragraph (j) to reflect 
changes in the Act brought about by PRWORA and to address comments 
received on the NPRM.
    Section 835 of PRWORA amended section 11(e) of the Act to eliminate 
the mandate for joint application processing for households in which 
all members are receiving PA, SSI, or GA. However, State agencies may 
opt to continue to jointly process these cases. To reflect this change 
in the law, we are amending the introductory paragraph of (j), and 
paragraphs (j)(1)(i) and (j)(3).
    Several commenters were disappointed that the proposed regulations 
did not require food stamp offices to inform households that TANF time 
limits or other requirements do not apply to the receipt of food stamp 
benefits. These commenters cited recent studies which indicate that 
many families that are eligible for food stamps are leaving the program 
at the same time their cash assistance cases are closed. The commenters 
feared that many of these households are prematurely leaving the Food 
Stamp Program because of the erroneous belief that they are no longer 
eligible for food stamps when they lose eligibility for TANF.
    Participation in the Program is a vital component of the transition 
from welfare to work. Eligible households that fail to take advantage 
of the Program because of confusion over the linkage between TANF and 
food stamp eligibility lose a vital nutritional support and jeopardize 
their ability to become self-sufficient. Therefore, we agree with the 
commenters that food stamp applicants and recipients that also 
participate in the TANF program should be informed that their 
eligibility for food stamps does not necessarily cease when they lose 
eligibility for TANF. We are amending the regulations at 7 CFR 
273.2(j)(1) to require that the State agency notify households applying 
for TANF that the time limits or other requirements that apply to the 
receipt of TANF benefits do not apply to the receipt of food stamp 
benefits. Further, State agencies must notify such households that if 
TANF benefits cease because they have reached a time limit, have begun 
working, or for other reasons, they may still qualify for food stamp 
benefits. We are making a similar amendment to 7 CFR 273.2(e)(1).
    One commenter expressed concern that in an attempt to divert 
households from applying for TANF, State agencies may inadvertently be 
diverting households from applying for food stamps. This commenter 
suggested we include language reminding State agencies not to 
discourage households from applying for food stamps. In response to 
this comment and in an attempt to increase Program access, we are 
providing at 273.2(j) that if the State agency attempts to discourage 
households from applying for cash assistance, it shall make clear that 
the disadvantages and requirements of applying for cash assistance do 
not apply to food stamps. In addition, it shall encourage applicants to 
continue with their application for food stamps. The State agency shall 
inform households that receiving food stamps will have no bearing on 
any other program's time limits that may apply to the household.
    One legal assistance group commented that a local welfare agency 
required joint applicants for food stamps and cash assistance to submit 
to at least five separate interviews in its process for determining 
eligibility. Failure of the household to attend any one of these 
interviews or to provide

[[Page 70160]]

verification of circumstances as required under the cash assistance 
rules will result in denial of the application. This is the case even 
if the household submitted verification which would be acceptable in a 
food stamp only case. The current regulations allowing State agencies 
to use PA verification rules for factors of eligibility which are 
common to both food stamps and cash assistance could be read to 
sanction the local agency's practices. However, it was never the 
Department's intent that a household could be denied both food stamps 
and cash assistance, if it had complied with the food stamp 
verification requirement, but had failed to comply with a more 
stringent cash assistance requirement. While the Department believes 
that the language of the current rule expresses this intent, it is 
apparent that it is subject to interpretation in ways not in consonance 
with our policy. Accordingly, the final rule amends 7 CFR 
273.2(j)(1)(iii) to clarify this intent. State agencies may continue to 
use PA verification rules for factors of eligibility which are common 
to both food stamps and cash assistance; however, the State agency may 
not deny the household's food stamp application if it has provided 
sufficient verification in accordance with food stamp rules. For 
example, a State agency may not deny a household's food stamps under 
joint processing, if it has submitted verification of its circumstances 
sufficient for food stamp purposes, but fails to submit to a home visit 
required for cash assistance purposes.
    Several commenters thought that the final rules at 7 CFR 273.2(j) 
should be updated to incorporate the substance of the Department's July 
14, 1999, guidance on categorical eligibility as well as the key points 
of clarifying questions and answers it has issued since. The guidance 
clarified categorical eligibility in the Program by stating that it 
applies not just to households receiving cash assistance under TANF-
funded programs but also to those receiving or authorized to receive 
non-cash or in-kind benefits or services from such programs.
    We agree with the commenters and are amending paragraph (j)(2) to 
incorporate into current regulations much of the Department's July 14, 
1999, guidance on categorical eligibility, with modifications. It has 
come to our attention that this policy has allowed State agencies to 
use categorical eligibility beyond the scope of what was originally 
intended. The original intent of categorical eligibility was to reduce 
the administrative burden on State agencies by simplifying the 
certification process and eliminating the need for the eligibility 
worker to apply two different income eligibility tests for a household 
applying for public assistance and food stamps. Therefore, Congress 
allowed the State agency to apply the public assistance income and 
resource tests to applicants of both programs, thus eliminating the 
need to satisfy a second income eligibility test for the Food Stamp 
Program. However, the context for categorical eligibility changed after 
PRWORA, particularly because TANF is a block grant and can be used to 
support in-kind and non-cash benefits and services to low-income 
working families who may or may not be required to meet income 
eligibility criteria. The four purposes of the TANF block grant are to 
(1) provide assistance to needy families so that children may be cared 
for in their own homes or in the homes of relatives; (2) end the 
dependence of needy parents on government benefits by promoting job 
preparation, work, and marriage; (3) prevent and reduce the incidence 
of out-of-wedlock pregnancies and establish annual numerical goals for 
preventing and reducing the incidence of these pregnancies; and (4) 
encourage the formation and maintenance of two-parent families. Funds 
spent to meet the first and second purposes of the block grant must be 
spent on ``needy families'', as defined by the State, and thus 
applicants must meet the State's definition of ``needy''. Funds spent 
to meet the third and fourth purposes of the block grant are not 
limited to ``needy families.'' In general, States have designed their 
TANF cash assistance programs and support services for families who 
meet income eligibility criteria. However, some TANF services do not 
have income eligibility criteria. We believe that it is inappropriate 
to confer food stamp eligibility without income eligibility criteria. 
Therefore, in this regulation, we are modifying the policy that was set 
forth on July 14, 1999. We have decided to confer categorical 
eligibility to all households authorized to receive TANF funded 
benefits and services designed to further TANF purposes one and two, 
which by statute must be targeted to ``needy families.'' In addition, 
we have decided to confer categorical eligibility to all households 
authorized to receive TANF funded benefits and services designed to 
further TANF purposes three and four, as long as those services have 
income eligibility criteria set at 200 percent of the Federal poverty 
level or lower. We made this decision in order to (1) ensure that only 
TANF benefits and services with income eligibility criteria confer 
categorical eligibility, and (2) maximize the usefulness of categorical 
eligibility based upon an analysis by HHS which determined that for 
services with income eligibility criteria, such criteria tend to be set 
at 200 percent of the Federal poverty level or lower (although some 
States may have income eligibility criteria at higher levels).
    At the same time, we realize that some households no longer qualify 
for cash assistance simply because they have reached a time limit. Some 
households, simply by virtue of their past participation in the TANF 
cash assistance program, receive post-assistance transitional benefits, 
such as child care. Such programs are covered by the categorical 
eligibility policies described above. If transition services are 
designed to further TANF purposes one and two, they confer categorical 
eligibility since those households must meet the State's definition of 
``needy''. If transition services are designed to further TANF purposes 
three and four, they confer categorical eligibility as long as the 
transition services have an income eligibility test set at 200 percent 
of the Federal poverty level or below. Though we believe that the 
regulations as written cover these individuals, where States have 
discretion pursuant to this rule and as described below, we are urging 
them to identify such programs as conferring categorical eligibility 
for food stamp purposes.
    We realize that there are several State agencies that have 
identified programs to confer categorical eligibility for food stamps 
that are designed to further purposes three and four of the TANF block 
grant and that either have income eligibility criteria above 200 
percent of the poverty level or have no income eligibility criteria at 
all. In order to satisfy the new requirements of this rule, we 
recognize that State agencies will need time to adjust processes so 
that certain programs no longer confer categorical eligibility. 
Therefore, in order to give State agencies the necessary time to make 
these changes, we are providing that State agencies may continue to use 
these programs to confer categorical eligibility for food stamp 
purposes until September 30, 2001.
    Based on the above discussion, in this rule at 273.2(j)(2), 
households that meet the following requirements would be categorically 
eligible: (1) households in which all members receive or are authorized 
to receive cash assistance through a program funded in full or in part 
with Federal money under Title IV-A or with State money counted for 
maintenance of effort (MOE) purposes under Title IV-A; (2) households 
in which all members receive or are

[[Page 70161]]

authorized to receive non-cash or in-kind services or benefits from a 
program that is more than 50 percent funded with State money counted 
for MOE purposes under Title IV-A or Federal money under Title IV-A and 
that is designed to further purposes one and two of the TANF block 
grant; (3) households in which all members receive or are authorized to 
receive non-cash or in-kind services or benefits from a program that is 
more than 50 percent funded with State money counted for MOE purposes 
under Title IV-A or Federal money under Title IV-A and that is designed 
to further purposes three and four of the TANF block grant and that 
requires participants to have a gross monthly income at or below 200 
percent of the Federal poverty level; (4) households in which all 
members receive or are authorized to receive SSI benefits, and (5) 
households in which all members receive or are authorized to receive PA 
and/or SSI benefits in accordance with (j)(2)(i)(A) though (j)(2)(i)(D) 
of this section.
    Also, State agencies have the option to extend categorical 
eligibility to the following households if doing so will further the 
purposes of the Food Stamp Act: (1) households in which all members 
receive or are authorized to receive non-cash or in-kind services or 
benefits from a program that is less than 50 percent funded with State 
money counted for MOE purposes under Title IV-A or Federal money under 
Title IV-A and that is designed to further purposes one and two of the 
TANF block grant. States must inform FNS of the TANF services that 
confer categorical eligibility under this option; (2) subject to FNS 
approval, households in which all members receive or are authorized to 
receive non-cash or in-kind services or benefits from a program that is 
less than 50 percent funded with State money counted for MOE purposes 
under Title IV-A or Federal money under Title IV-A and that is designed 
to further purposes three and four of the TANF block grant and that 
requires participants to have a gross monthly income at or below 200 
percent of the Federal poverty level; (3) households in which one 
member receives or is authorized to receive benefits according to 
(j)(2)(i)(B), (j)(2)(i)(C), (j)(2)(ii)(A) and (j)(2)(ii)(B) of this 
section and the State agency determines that the whole household 
benefits.
    In response to comments and to incorporate current policy, we are 
including at 273.2(j) the definition of ``authorized to receive.'' For 
purposes of this provision, ``authorized to receive'' means that an 
individual has been determined eligible for benefits under PA program 
funded in full or in part with Federal money under Title IV-A or with 
State money counted for maintenance of effort (MOE) purposes under 
Title IV-A, and has been notified of this determination, even if the 
benefits have been authorized but not received, authorized but not 
accessed, suspended or recouped, or not paid because they are less than 
a minimum amount.
    Finally, several commenters requested that FNS amend current rules 
at section 273.2(j)(2)(vii)(F) which prohibit States from denying 
categorically eligible households when they are eligible for no food 
stamp benefit. One commenter noted that as a result of the Department's 
July 1999 guidance on categorical eligibility, significantly more 
households are likely to be categorically eligible but eligible for no 
food stamp benefit due to their income. To require States to certify 
such households for zero benefits would be administratively burdensome 
and could discourage States from adopting expansive categorical 
eligibility policies. The commenter recommended that the regulations 
should be revised to give States the same option to treat categorically 
eligible households that are eligible for zero benefits in the same 
manner as they treat households that are not categorically eligible: 
where a household's net income exceeds the level at which benefits are 
provided, States should be allowed to choose between denying the 
application or certifying the case but suspending benefits.
    We agree with the commenters that allowing States to deny 
categorically eligible households when they are eligible for no food 
stamp benefit would alleviate administrative burdens on States and 
eliminate a potential barrier to States adopting more expansive 
categorical eligibility policies. Therefore we are amending current 
rules at section 273.2(j)(2)(vii)(F) to make this change.

Alien Eligibility--7 CFR 273.4

    We proposed to revise 7 CFR 273.4(a) to remove references to those 
aliens no longer eligible and add provisions referencing the alien 
provisions of Title IV of PRWORA, as amended. We also proposed to 
revise the section to remove unnecessary and overly prescriptive 
requirements. As discussed above, we also made conforming amendments to 
7 CFR 273.2(f)(1)(ii) to address verification of alien eligibility 
under the new alien eligibility requirements and to reference the DOJ 
Interim Guidance.

What is a Citizen?

    We proposed to add a reference in paragraph (a)(1) to the DOJ 
Interim Guidance which includes a definition of the term ``citizen.'' 
Several commenters pointed out that they could not find this reference 
in the regulatory amendment. We inadvertently omitted this reference in 
the proposed rule; however, it appears in the text of the final rule.
    We proposed to add the term ``non-citizen national'' to paragraph 
(a)(2) to clarify that non-citizen nationals are eligible to 
participate. Several commenters pointed out that the term appearing in 
the regulatory text, ``alien national,'' was not usual DOJ terminology. 
The use of this term was a drafting error. The final rule uses the term 
``non-citizen national'' and includes a reference to the definition in 
the DOJ Interim Guidance.

What is a Qualified Alien?

    In accordance with section 431 of PRWORA, we proposed to define a 
qualified alien as:
    (1) an alien who is lawfully admitted for permanent residence under 
the INA;
    (2) an alien who is granted asylum under section 208 of the INA;
    (3) a refugee who is admitted to the United States under section 
207 of the INA;
    (4) an alien who is paroled into the United States under section 
212(d)(5) of the INA for a period of at least 1 year;
    (5) an alien whose removal or deportation is being withheld under 
section 241(b)(3) or 243(h) of the INA;
    (6) an alien who is granted conditional entry pursuant to section 
203(a)(7) of the INA as in effect prior to April 1, 1980;
    (7) a battered alien, an alien whose child has been battered, or an 
alien child of a battered parent; or
    (8) a Cuban or Haitian entrant as defined in section 501(e) of the 
Refugee Education Assistance Act of 1980.
    Several State agencies objected to the requirement that State 
agencies determine if an alien has been subjected to ``battery or 
extreme cruelty'' with respect to establishing qualified alien status. 
Some State agencies and many advocacy groups suggested that we 
establish national standards for State agency use in making 
determinations of ``battery or extreme cruelty.'' One State agency 
worried that FNS would scrutinize ``battery or extreme cruelty'' 
determinations through the Quality Control process. While national 
standards for such determinations might be good public policy, Congress 
clearly delegated the authority for making such decisions to the 
States, assisted by

[[Page 70162]]

guidance from the U.S. Attorney General. (See Exhibit B to Attachment 5 
of the DOJ Interim Guidance.) We can find no authorization to preempt 
the States' authority in these matters. Moreover, we believe the 
Attorney General's Interim Guidance is sensible and comprehensive. We 
defer to her expertise in immigration matters and feel that State 
agencies would do well to follow her suggestions. Accordingly, we are 
not changing the proposed language in the final rule. We do wish to 
point out that FNS does not intend to review State agency ``battery or 
extreme cruelty'' determinations through the food stamp QC process. The 
Department has no mandate to question the substance of State agency 
determinations on this issue. However, once a State agency makes a 
``battery or extreme cruelty'' determination, food stamp QC will assess 
whether the State agency timely and correctly applied its determination 
to the food stamp case under review.

Which Aliens Must Be Both Qualified Aliens and Food Stamp Eligible 
Aliens?

    To be eligible for food stamps, most aliens must be both a 
qualified alien as defined in section 431 of PRWORA and meet one of the 
food stamp criteria in section 402 of PRWORA. Section 402, as amended 
by the Balanced Budget Act, limits eligibility for food stamps to 
qualified refugees, asylees, deportees, specified Amerasians, Cuban and 
Haitian entrants, certain legal permanent residents, and veterans and 
active duty personnel and the spouse and unmarried dependent children 
of the veterans and active duty personnel. We proposed to include the 
list in paragraph (a)(5)(ii).
    We received numerous comments on the iteration of aliens who must 
have qualified alien status and food stamp eligible status. Several 
State agencies and many advocacy groups requested that the Department 
clarify the regulation to indicate that each category of eligible 
immigration status stands alone for purposes of determining 
eligibility. For example, a refugee is eligible for 7 years from the 
date of entry, even if he or she adjusts status to lawful permanent 
resident status later during that 7-year period. We thought the 
regulation language was clear that, as illustrated in the example, 
adjustment to a more limited status does not override eligibility based 
on an earlier less rigorous status, or that if eligibility expires in 
one eligible status, the alien may yet be eligible under another. 
However, in view of the comments, we are adding a paragraph to the 
final rule to emphasize this point. A number of commenters thought the 
Department should require that State agencies provide a 1 to 2 year 
advance warning to aliens in a time-limited eligibility status that 
they are approaching the limit and that to continue participating they 
have some other basis of eligibility once they reach the limit. We are 
not adopting this suggestion, as we are reluctant to impose this burden 
on State agencies. We believe that Program informational materials 
directed to immigrant populations adequately explain the food stamp 
eligibility requirements for aliens and that the immigrant community is 
well aware of the time limits and other requirements. Moreover, we have 
doubts about the utility of the suggestion. Through the policy changes 
in PRWORA, Congress intended to provide impetus to aliens to become 
naturalized citizens as soon as possible. Consider the case of a 
refugee couple who have continuously worked and participated in the 
Program for 5 years since they entered the U.S., and have adjusted to 
lawful permanent resident status. Unless that couple has diligently 
pursued meeting all the requirements for naturalization, a warning at 
the end of the 5th or 6th year will come too late. After the 7-year 
period expires, and these aliens have not naturalized, they will likely 
lose food stamp eligibility, as none of the quarters of social security 
coverage will count due to their participation in the Program. A State 
agency thought that aliens with a pending application for lawful 
permanent resident status should remain eligible, even though the 7-
year period of eligibility had expired. The Department cannot adopt 
this suggestion, as the statute does not allow such treatment.

What Are the Requirements for Eligibility as a Lawful Permanent 
Resident?

    Under section 402(a)(2)(B) of PRWORA, the eligibility of aliens 
lawfully admitted for permanent residence is limited to those who have 
earned or can be credited with 40 qualifying quarters of work. An alien 
may get credit for all of the qualifying quarters worked by a parent of 
the alien before the alien becomes age 18 and the quarters worked by a 
spouse of the alien during their marriage, if they are still married or 
the spouse is deceased. We proposed to include this requirement in the 
introductory language of the new paragraph (b)(1).
    To establish eligibility based on 40 quarters of work, the State 
agency may request information from the Social Security Administration 
through the Quarters of Coverage History System (QCHS) and/or obtain 
verification from the household. State agencies may request and receive 
information regarding qualifying quarters from SSA according to SSA 
instructions. For each individual (other than the person who signed the 
application) whose SSN is submitted to SSA with a request for quarters 
of coverage information, the State agency must obtain a signed form 
consenting to the release of the information. This form is to be filed 
in the household's case file. Section 5573 of the Balanced Budget Act 
authorizes SSA to disclose quarters of coverage information concerning 
an alien and an alien's spouse or parents to other government agencies. 
Therefore, if the household needs quarters of coverage based on 
relationship and it cannot obtain a signed form, the State agency may 
submit a request to SSA for information regarding the individual's work 
history. These requests will be processed manually by SSA. Procedures 
for requesting information from SSA are contained in SSA's manual for 
obtaining quarters of coverage information.
    Aliens who can be credited with 40 qualifying quarters, as reported 
by SSA, would be certified, if otherwise eligible. Those who do not 
have 40 quarters according to SSA records and who accept that 
determination would be denied participation. However, individuals who 
believe they should be credited with more quarters of work may request 
that SSA investigate their work history to determine if more quarters 
can be credited. As indicated above under the discussion of 
verification of alien eligibility, we proposed to require that if SSA 
is conducting an investigation to determine if more quarters can be 
credited, the applicant may participate pending the results of the 
investigation for up to 6 months from the date of SSA's original 
finding of insufficient quarters. We proposed a conforming amendment to 
include this requirement in the verification requirements in new 7 CFR 
273.2(f)(1)(iv)(B).
    SSA has prepared guidance for State agencies to use in requesting 
work history information through the QCHS. Through this system, State 
agencies are able to obtain information about work performed in jobs 
covered by Title II of the Social Security Act and some work that is 
not covered by Title II, such as some employment with Federal, State, 
or local governments or nonprofit organizations. If the State agency 
cannot obtain work history information from SSA, the State agency will 
have to obtain verification of work from the applicant or other 
available data

[[Page 70163]]

sources. This will always be the case for recent quarters (lag 
quarters) worked because of the time it takes SSA to update the 
database using the most recent tax returns.
    Section 402(a)(2)(B)(ii) of PRWORA also provides that no qualifying 
quarter creditable for a period beginning after December 31, 1996, can 
be included as one of the credited quarters if the individual received 
any Federal means-tested public benefit (as provided under section 403) 
during that quarter. Section 435 of PRWORA provides that no qualifying 
quarter for any period after December 31, 1996, by a parent or spouse 
of the alien may be included if the parent or spouse received any 
Federal means-tested public benefit during that quarter. Section 403(c) 
includes a list of types of assistance or benefits that are exempt from 
the prohibition (exempt assistance). The list includes: certain 
emergency medical assistance; short-term, non-cash emergency disaster 
relief; assistance under the National School Lunch Act; assistance 
under the Child Nutrition Act of 1966; certain non-Title XIX public 
health assistance; certain foster care and adoption payments; student 
assistance provided under titles IV, V, IX, and X of the Higher 
Education Act of 1965, and titles III, VII, and VIII of the Public 
Health Service Act; benefits under the Head Start Act; and benefits 
under the Workforce Investment Act. The list also includes in-kind 
services which may not be means-tested, such as soup kitchens and 
short-term shelter, specified by the Attorney General. The DOJ 
published a Notice in the Federal Register on August 30, 1996 (61 FR 
45985), containing a non-exclusive list of the types of exempt in-kind 
services.
    Each Federal agency which issues means-tested public benefits is 
responsible for identifying and publishing a list of benefits to which 
the term ``Federal means-tested public benefit'' as used in PRWORA 
applies. According to Federal Register notices published by HHS (62 FR 
45256) and SSA (62 FR 5284) on August 26, 1997, TANF, Medicaid, and SSI 
are Federal means-tested public benefits. According to a Federal 
Register notice published by this Department on July 7, 1998 (63 FR 
36653), the Food Stamp Program and the block grant food assistance 
programs in Puerto Rico, American Samoa, and the Commonwealth of the 
Northern Mariana Islands are the only FNS program to which the term 
applies. We proposed that ``received'' means that the alien actually 
received the assistance or food stamps in the quarter in question.
    Several commenters suggested that we specify in the regulations the 
programs which are Federal means-tested public benefits. We are not 
adopting this suggestion, since we do not wish to amend the regulations 
every time a Federal agency adds a program to the list. However, we do 
intend to keep a current list posted on the FNS web site, so that 
interested parties will have easy access to this information.
    We proposed to provide in paragraph (a)(5)(ii)(A) that if an alien 
was determined eligible for any Federal means-tested public benefit as 
defined by the agency providing the benefit or was certified to receive 
food stamps during any quarter after December 31, 1996, the quarter 
cannot be credited toward the 40-quarter total. Likewise, if the alien 
needs a quarter from a parent or spouse, the parent or spouse's quarter 
cannot be counted if the parent or spouse was determined eligible for 
any Federal means-tested public benefit or was certified to receive 
food stamps during the quarter. For example, if the alien worked and 
the alien's parents received SSI in the first quarter of 1997, the 
alien would have one quarter counted because the alien worked and did 
not receive assistance; if the alien did not work but the alien's 
parents worked and received SSI, the alien would not have any countable 
quarters.
    The Department received several comments on the 40 quarters of 
coverage provisions. One commenter thought that the Department should 
specify that a quarter earned by a parent or spouse is creditable to 
the worker and transferable to the spouse or child even when the child 
of the parent or the spouse receives a federal means-tested public 
benefit. The Department cannot adopt this suggestion as it violates the 
clear language of the statute. Moreover, SSI follows the same policy. 
The same commenter suggested that the Department should mandate that 
quarters worked before a child is born or adopted are creditable. We 
are adding clarifying language in the final rule as such a policy was 
our intent. The same commenter urged the Department to make it clear 
that up to four quarters can be earned in any year when an immigrant 
has sufficient earnings during periods of nonreceipt of benefits. The 
commenter further suggested that the Department structure the 
computation of qualifying quarters so that an alien could evade the 
strictures of the statute by foregoing receipt of a Federal means-
tested public benefit in a quarter and earning enough in that quarter 
to receive credit for 4 quarters of coverage. The commenter opined that 
the alien could then receive a Federal means-tested public benefit in 
the other quarters of the year and that such receipt would not 
disqualify the quarters earned in a period of nonreceipt of a Federal 
means-tested public benefit. The commenter correctly points out that 
SSA allows credit for a maximum of four quarters of coverage for 
earnings received in a period of less than 1 year. SSA bases credit for 
quarters on the individual's earnings over the course of the year, not 
on the amount earned in each calendar quarter. Since this point is made 
clear in SSA's guidance we saw no need to include the issue in the 
proposed regulations. The Department is not adopting the commenter's 
suggestion, because it is at odds with the procedures SSA uses to 
determine qualifying quarters for SSI. Even if a worker earns enough in 
one quarter to qualify for 4 quarters of coverage, SSA does not credit 
a quarter until it actually begins. Credit for the quarter accrues on 
the first day of the quarter. Thus, it is possible to correlate 
qualifying quarters of coverage with quarters in which the alien or the 
alien's parents or spouse received a Federal means-tested public 
benefit. The final rule does provide more guidance for determining 
qualifying quarters. We are adding language to the final rule 
specifying that State agencies must evaluate quarters of coverage and 
receipt of Federal means-tested public benefits on a calendar year 
basis. If an alien earns 4 quarters coverage in a calendar year and 
receives Federal means-tested public benefits in 2 quarters of that 
year, the State agency must disqualify 2 of the quarters of coverage so 
earned. Finally, the same commenter urged the Department to require 
that quarters of coverage credited from the earnings of a spouse 
continue even if the couple subsequently divorces. The commenter argued 
that current FNS policy allows State agencies the option of crediting 
such quarters of coverage to a divorced spouse even after the former 
spouse is recertified and that a uniform national policy would be 
preferable. The commenter's statement is not an accurate portrayal of 
FNS policy. The FNS guidance on this matter allows States to use 
discretion in this matter either by immediately discrediting the 
quarters of a divorced spouse or by waiting until the household's next 
recertification. However, once the State agency redetermines 
eligibility, the alien loses the quarters of the former spouse. In view 
of the clear language of the statute, the Department is not adopting 
the commenter's suggestion. However, to be consistent with SSI policy, 
the final rule provides that once the State agency determines 
eligibility

[[Page 70164]]

based on the quarters of coverage of the spouse, such eligibility 
continues until the household's next recertification. Also, for 
consistency with SSI policy, the final rule stipulates that if the 
alien earns the 40th quarter of coverage prior to applying for food 
stamps in that same quarter, the State agency must allow that quarter 
toward the 40 qualifying quarters total. Finally, the final rule 
codifies a DOJ legal determination that qualifying quarters of work not 
covered by Title II of the Social Security Act may be credited in 
determining the eligibility of an immigrant. According to DOJ's 
determination, Congress intended to adopt the mechanism used by SSA for 
calculating the amount of wages necessary to obtain a quarter of 
coverage, but not the limitations on the types of employment in which 
the wages may be earned.

Which Qualified Aliens are Subject to a 7-Year Eligibility Limit?

    Section 402(a)(2)(A) of PRWORA provided that refugees admitted 
under section 207 of the INA, asylees admitted under section 208 of the 
INA, and aliens whose deportation or removal has been withheld under 
sections 243(h) or 241(b)(3) of the INA would be eligible for 5 years. 
Refugees would be eligible for 5 years from the date of entry into the 
country, asylees would be eligible for 5 years from the date asylum was 
granted, and deportees would be eligible for 5 years from the date 
deportation or removal was withheld. Section 5302 of the Balanced 
Budget Act of 1997 reorganized section 402(a)(2)(A) to separate the 
requirements for eligibility for SSI and food stamps and to provide in 
paragraph (A)(ii)(IV) that an alien granted status as a Cuban or 
Haitian entrant, as defined in section 501(e) of the Refugee Education 
Assistance Act of 1980, would be eligible for 5 years from the date 
granted that status. Section 5306 of the Balanced Budget Act further 
amended section 402(a)(2)(A) of PRWORA to add a new paragraph 
(A)(ii)(V) which provided that certain Amerasians would be eligible for 
5 years from date admitted to the United States as an Amerasian 
immigrant pursuant to section 584 of the Foreign Operations 
Appropriations Act, incorporated as section 101(e) of Public Law 100-
202 as amended by Public Law 100-461. This legislation provided for 
certain Amerasians in Vietnam, with their close family members, to be 
admitted to the U.S. as immigrants through the Orderly Departure 
Program beginning on March 20, 1988. These Amerasians will be admitted 
for permanent residence at the point of entry.
    The AREERA further amended section 402 of PRWORA. Section 503 of 
AREERA amended section 402(a)(2)(A) of PRWORA to extend the time period 
that refugees, asylees, deportees, Cubans, Haitians, and Amerasians can 
be eligible from 5 years to 7 years. Section 402(a)(1) of PRWORA makes 
all other types of qualified aliens (with the exceptions of lawful 
permanent residents with 40 qualifying quarters of work and alien 
members of the armed forces, alien veterans, and certain members of 
such an alien's family) ineligible for food stamps for as long as they 
maintain their current alien status; all other non-qualified aliens are 
ineligible under section 401(a) of PRWORA. Section 504 of AREERA 
amended section 402(a)(2)(F) of PRWORA to provide that aliens who are 
receiving benefits or assistance for blindness or disability as defined 
in section 3 (r) of the Food Stamp Act may be eligible for food stamps 
provided that they were lawfully residing in the United States on 
August 22, 1996. Section 506 of AREERA added a new section (I) to 
section 402(a)(2) of PRWORA to make aliens eligible if they were 
lawfully residing in the United States on August 22, 1996 and they were 
65 years of age or older on that date. Section 507 of AREERA added a 
new section (J) to section 402(a)(2) of PRWORA to make aliens eligible 
if they were lawfully residing in the United States on August 22, 1996 
and are currently under 18 years of age. We proposed to include the 
alien eligibility criteria added by AREERA in section 7 CFR 273.4(a).
    One commenter thought that the provision relating to aliens who 
were legally residing in the United States on August 22, 1996, and were 
age 65 or older on that date could be clarified by specifying that the 
provision applied to aliens born on or before August 22, 1931. The 
Department has adopted this suggestion.
    In order to formalize our existing guidance on the applicability of 
the disparate eligibility requirements enumerated in section 402 and 
section 403 of PRWORA, we proposed to apply the requirements of PRWORA 
section 402 uniformly to the Food Stamp Program. We received no 
comments on this determination. Because we are currently reviewing our 
existing guidance, we decided not to address the applicability of 
PRWORA section 403 to the Program in this final rule. We will issue 
revised guidance if necessary as a result of our review.
    Under section 402(a)(2)(C) of PRWORA, an alien lawfully residing in 
any State who is a veteran honorably discharged for reasons other than 
alien status or who is on active duty in the Armed Forces of the United 
States for reasons other than training or the spouse or unmarried 
dependent child of a veteran or person on active duty is eligible to 
participate. Section 5563 of the Balanced Budget Act of 1997 amended 
the provision regarding military-related eligibility to: (1) apply the 
minimum active duty service requirement (24 months or the period for 
which the person was called to active duty); (2) expand the definition 
of ``veteran'' to include military personnel who die while on active 
duty and certain aliens who served in the Philippine Commonwealth Army 
during World War II or served as Philippine Scouts after World War II; 
and (3) add eligibility for the unremarried surviving spouse of a 
deceased veteran, provided the couple was married for at least one year 
or for any period if a child was born of the marriage or was born to 
the veteran and the spouse before the marriage and the spouse has not 
remarried.
    We proposed to define an unmarried dependent child for purposes of 
section 402(a)(2)(C) regarding persons with a military connection to 
include a legally adopted or biological dependent child of an honorably 
discharged veteran or active duty member of the Armed Forces if the 
child is under the age of 18 or a full-time student under the age of 
22. It would also include a child of a deceased veteran provided the 
child was dependent upon the veteran at the time of the veteran's 
death. In addition, we proposed to include a disabled child age 18 or 
older if the child was disabled and dependent on the active duty member 
or veteran prior to the child's 18th birthday. This definition is 
consistent with that developed for the Supplemental Security Income 
(SSI) program. We also proposed to apply this definition of an 
unmarried dependent child to section 402(a)(2)(K) regarding unmarried 
dependent children of Hmong and Highland Laotians. Section 431(a) of 
PRWORA provides that except as otherwise provided, the terms used have 
the same meaning given such terms in section 101(a) of the INA. 
However, there is no definition of a child in section 101(a), and there 
are two definitions in 101(b), one for immigration purposes and one for 
nationality purposes. Because of the ambiguity of the law and the fact 
that both of the INS definitions are much more complicated than the 
definition used for SSI purposes, we proposed to use the SSI definition 
of dependent child. We also considered using

[[Page 70165]]

dependent as used for other food stamp purposes such as the work 
registration exemption, but believe they are too restrictive for this 
purpose.
    We proposed to include the eligibility provision for individuals 
with a military connection in new paragraph (a)(5)(ii)(G).
    Under current regulations at 7 CFR 273.4(a)(8) and (a)(9), aged, 
blind, or disabled aliens admitted for temporary or permanent residence 
under section 245A(b)(1) of the INA and special agricultural workers 
admitted for temporary residence under section 210(a) of the INA are 
eligible to participate. The PRWORA does not address the status of 
aliens admitted for temporary residence. Therefore, these aliens are 
eligible only if they meet the requirements of section 402 of PRWORA 
described above, and we proposed to remove paragraphs (a)(8) and 
(a)(9).
    We also proposed to remove 7 CFR 273.4(b), (c) and (d) as 
unnecessary and redesignate paragraph (e) as paragraph (b). Current 
paragraph (b) is a partial list of ineligible aliens. Current paragraph 
(c) refers to the provisions in 7 CFR 273.11(c)(2) for treatment of the 
income and resources of an ineligible alien and is unnecessary. Current 
paragraph (d) explains how to treat the income and resources of an 
alien while awaiting a determination of an individual's eligible alien 
status. Provisions governing the treatment of individuals while 
awaiting verification of eligible alien status are located at 7 CFR 
273.2(f)(1)(ii), and it is not necessary to repeat the procedure at 7 
CFR 273.4. We would retain in redesignated paragraph 7 CFR 273.4(b) the 
requirement in current 7 CFR 273.4(e) to report illegal aliens to INS.
    We proposed a conforming amendment to 7 CFR 273.1(b)(2)(ii), 
concerning ineligible household members. We proposed to change the 
reference in 7 CFR 273.1(b)(2)(ii) from ``Sec. 273.4(a)'' to 
``Sec. 273.4'' because both paragraphs 273.4(a) and (b) describe 
eligibility requirements for aliens.

What Does the Term ``Lawfully Residing'' Mean?

    Several advocacy groups suggested that we add a definition of the 
term ``lawfully residing'' in the United States to the final rule. Such 
groups further suggested that the DOJ definition of ``lawfully 
present'' for purposes of receiving benefits under Title II of the 
Social Security Act could be used for food stamp purposes. The DOJ 
definition gives lawfully present status to the following aliens:
    (1) A qualified alien as defined in section 431(b) of Pub. L. 104-
193;
    (2) An alien who has been inspected and admitted to the United 
States and who has not violated the terms of the status under which he 
or she was admitted or to which he or she has changed after admission;
    (3) An alien who has been paroled into the United States pursuant 
to section 212(d)(5) of the INA for less than 1 year, except:
     Aliens paroled for deferred inspection or pending 
exclusion proceedings under 236(a) of the INA; and
     Aliens paroled into the United States for prosecution 
pursuant to 8 CFR 212.5(a)(3);
    (4) An alien who belongs to one of the following classes of aliens 
permitted to remain in the United States because the Attorney General 
has decided for humanitarian or other public policy reasons not to 
initiate deportation or exclusion proceedings or enforce departure:
     Aliens currently in temporary resident status pursuant to 
section 210 or 245A of the INA;
     Aliens currently under Temporary Protected Status (TPS) 
pursuant to section 244A of the INA;
     Cuban-Haitian entrants, as defined in section 202(b) Pub. 
L. 99-603, as amended;
     Family Unity beneficiaries pursuant to section 301 of Pub. 
L. 101-649, as amended;
     Aliens currently under Deferred Enforced Departure (DED) 
pursuant to a decision made by the President;
     Aliens currently in deferred action status pursuant to 
Service Operations Instructions at OI 242.1(a)(22);
     Aliens who are the spouse or child of a United States 
citizen whose visa petition has been approved and who have a pending 
application for adjustment of status;
    (5) Applicants for asylum under section 208(a) of the INA and 
applicants for withholding of deportation under section 243(h) of the 
INA who have been granted employment authorization, and such applicants 
under the age of 14 who have had an application pending for at least 
180 days.
    We are adopting this suggestion to clarify eligibility requirements 
for Hmong and Highland Laotian tribal members, and certain individuals 
whose eligibility depends on their lawful residence in the United 
States on August 22, 1996. While we are adopting DOJ's definition by 
reference, we are not repeating the definition in the final rule. We 
now believe a definition of the term ``lawfully residing in the United 
States'' is necessary for two reasons. First, although Hmong and 
Highland Laotian tribal members do not have to be qualified aliens to 
be eligible for food stamps, they still must have a lawful immigration 
status. The definition set forth at 8 CFR 103.12(a) will provide 
guidance to State agencies in making this determination. Second, aliens 
who must qualify under the AREERA amendments to PRWORA to be eligible 
for food stamps must meet two separate tests: (1) the alien had to be 
lawfully residing in the United States on August 22, 1996; and (2) the 
alien must have current status as a qualified alien (with the above-
noted exception for Hmong and Highland Laotians). The final rule 
clarifies that an alien may have had an immigration status on August 
22, 1996, that would not currently qualify the alien for participation. 
As long as the alien met the definition of ``lawfully residing in the 
United States'' then, the alien may be eligible for food stamps, if now 
he or she has adjusted to a qualifying immigration status. For example, 
a 70 year old alien had an application for asylum pending as of August 
22, 1996. Subsequently, the INS grants the asylum request. The alien is 
eligible for 7 years from the date of the granting of asylum. On the 
other hand, an individual who was present in the United States on 
August 22, 1996, but not lawfully residing in the United States, may 
not use this provision to access food stamp benefits. This is true even 
if he or she later achieves a qualifying immigration status. For 
example, an undocumented then-66 year old alien was present in the 
United States on August 22, 1996. The alien subsequently leaves the 
county and returns as a LPR. Unless the alien has earned or can get 
credit for 40 quarters of Social Security coverage, the alien is not 
eligible for food stamps.

May any Non-Qualified Aliens Participate in the Program?

    Section 505 of AREERA amended section 402(a)(2)(G) of PRWORA to 
provide that aliens who are American Indians born in Canada to whom the 
provisions of section 289 of the Immigration and Nationality Act apply 
or who are members of an Indian tribe as defined in section 4(e) of the 
Indian Self-Determination and Education Assistance Act may be eligible 
for food stamps. Section 508 of AREERA added a new section (K) to 
section 402(a)(2) of PRWORA to make any individual eligible who is 
lawfully residing in the United States and was a member of a Hmong or 
Highland Laotian tribe at the time that the tribe rendered assistance 
to United States personnel by taking part in a military or rescue 
operation during the Vietnam era (August 5, 1964-May 7,

[[Page 70166]]

1975). Section 508 further extends food stamp eligibility to the 
spouse, or unremarried surviving spouse, and unmarried dependent 
children of such Hmong or Highland Laotian. Section 509 of AREERA 
amended section 403(b) of PRWORA to provide that American Indians made 
eligible by section 505 and Hmong and Highland Laotians and their 
families made eligible by section 508 do not have to be qualified 
aliens to be eligible for food stamps. We proposed that members of 
these groups are the only aliens who can be eligible for food stamps 
without being a qualified alien as defined in section 431 of PRWORA.
    There were several comments relating to the eligibility of Hmong 
and Highland Laotians. One commenter thought the Department should 
simply confer eligibility on any person who was a member of a Hmong or 
Highland Laotian tribe on or prior to May 7, 1975. We are not adopting 
this suggestion. The Department has no authority to change the clear 
requirement of the statute. One State agency suggested that the 
Department include step-children in the definition of ``dependent 
child'' for purposes of determining eligible status under section 508. 
As stated previously, the Department is adopting the definition as 
proposed for the sake of consistency with SSI.

How Must State Agencies Comply With the Requirement To Report Illegal 
Aliens?

    The Department proposed no changes in, nor received any comments 
on, the requirement in renumbered 7 CFR 273.4(b)(1) to report illegal 
aliens. However, we are taking this opportunity to recognize the 
September 28, 2000 (65 FR 58301) publication of the Interagency Notice 
providing guidance for compliance with PRWORA section 404. PRWORA 
section 404 requires certain Federal and State entities at least four 
times annually, to notify the INS of any alien the entity ``knows'' is 
not lawfully present in the U.S. The Interagency Notice specifies that 
a government entity ``knows'' that an alien is present illegally only 
when the entity's finding or conclusion of unlawful presence is made as 
part of a formal determination subject to administrative review and is 
supported by a determination of the INS or the Executive Office of 
Immigration Review, such a Final Order of Deportation. PRWORA section 
404 does not apply to the Food Stamp Program; however, for purposes of 
complying with the reporting requirement in 7 CFR 273.4(b)(1), the 
Department considers a State agency to be compliant if it limits its 
reporting of illegal aliens for food stamp purposes to the standard of 
``knowing'' established in the above-cited Interagency Notice. We 
believe that ``knowing'' that an alien is present illegally as defined 
in the Interagency Notice is consistent with the State agency 
``determining'' that an alien is present illegally as required under 7 
CFR 273.4(b)(1), as interpreted to conform with the September 28, 2000 
(65 FR 58301) Interagency Notice providing guidance for compliance with 
PRWORA Sec. 404.

How Must State Agencies Treat the Deemed Income and Resources of 
Sponsored Aliens?

    We proposed to move the sponsored alien provisions from 7 CFR 
273.11(j) to new paragraph 7 CFR 273.4(c) and to renumber 7 CFR 
273.11(k) as 7 CFR 273.11(j). This will consolidate most of the alien 
provisions.
    Current rules at 7 CFR 273.11(j) establish special procedures for 
determining the income and resources of sponsored aliens. Sponsored 
aliens are individuals lawfully admitted to the United States for 
permanent residence. A sponsor is a person who executed an affidavit of 
support on behalf of an alien as one of the conditions required for the 
alien's entry into the United States. The current rules require that a 
portion of the gross income and resources of the sponsor and the 
sponsor's spouse (if living with the sponsor) be deemed to the 
sponsored alien for a period of 3 years from the date of the sponsored 
alien's entry into the country as a lawfully admitted permanent 
resident alien. Under section 5(i) of the Food Stamp Act, the income of 
the sponsor and the sponsor's spouse (if living with the sponsor) is 
the total annual income reduced by the income eligibility standard for 
a household equal in size to the sponsor's household, and deeming 
continues for only 3 years. The Act also requires the subtraction of 
$1,500 from the resources of the sponsor and the sponsor's spouse prior 
to deeming the remainder to the alien.
    Section 421 of PRWORA, as modified by the OCAA and the Balanced 
Budget Act, contains several provisions which revise the current 
requirements. First, section 421(a)(1) provides that, notwithstanding 
any other provision of law, the income and resources of the alien must 
be deemed to include the income and resources of any person who 
executed an affidavit of support pursuant to section 423 of PRWORA 
which is a legally binding contract. Section 421(a)(2) provides that 
the income and resources of the spouse (if any) of the person executing 
the affidavit are to be deemed to the alien. Section 421(b) provides 
that the deeming must continue until the alien becomes a citizen or has 
worked 40 qualifying quarters of coverage as defined under title II of 
the Social Security Act or can be credited with such qualifying 
quarters. Any quarter creditable for a period beginning after December 
31, 1996, cannot be credited if the alien received any Federal means-
tested public benefit during the quarter. Section 403 includes a list 
of types of assistance exempt from the prohibition against allowing a 
quarter of work credit for a quarter in which an alien received any 
means-tested public benefit. This list of exempt assistance is 
addressed in the discussion of alien eligibility requirements above.
    Section 552 of OCAA amends section 421 of PRWORA to provide two 
exceptions to the requirement that the income and resources of the 
sponsor(s) and sponsor's spouse be deemed to the sponsored alien. For 
indigent aliens deeming is limited to the amount actually provided by 
the sponsor to the alien for a period beginning on the date of such 
determination and ending 12 months after such date. The Department 
proposed that the State agency establish criteria for determining when 
an alien is unable to obtain food and shelter considering all income 
and assistance provided by individuals and thus should be considered 
indigent. The State agency must notify the Attorney General of each 
such determination, including the names of the sponsor and the 
sponsored alien involved. Deeming is eliminated for 12 months for 
battered alien spouses and children and parents of battered children if 
the benefit provider determines that the battering is substantially 
connected to the need for benefits. Section 5571 of the Balanced Budget 
Act of 1997 includes the alien child of a battered parent in this 
provision. Deeming of the batterer's income and resources is eliminated 
after 12 months if the battery is: (1) recognized by a court or the 
INS; and (2) has a substantial connection to the need for benefits. 
These provisions do not apply if the battered alien lives with the 
batterer.
    Section 423, as amended by section 551(a) of the OCAA, provides 
that the sponsored alien provisions in PRWORA apply to aliens who are 
sponsored under a new legally binding affidavit of support. It also 
requires that if a sponsored alien has received any benefits under a 
means-tested public benefit program, the State agency must request that 
the sponsor provide reimbursement in the amount of such assistance. If, 
within 45 days after the

[[Page 70167]]

request for reimbursement, the sponsor has not indicated a willingness 
to commence payment, the State agency may bring legal action against 
the sponsor pursuant to the affidavit of support. The DOJ published an 
interim rule with request for comments on the new affidavits of support 
and reimbursement provisions in the Federal Register on October 20, 
1997 (62 FR 54346). The rule is effective on December 19, 1997, and the 
new affidavits of support should be used for all aliens who become 
sponsored after that date.
    The Department proposed to revise 7 CFR 273.11(j) to incorporate 
provisions of PRWORA, OCAA, and the Balanced Budget Act of 1997 and to 
streamline the section by increasing State agency flexibility and 
removing redundant requirements. Our proposals generated many adverse 
comments. Generally, State agencies and advocacy groups opposed the 
proposals to delete the provisions of the current regulation, which 
tend to reduce the amount of the sponsor's income and resources which 
could be considered available to the sponsored alien. Many commenters 
urged us to restore the deductions from the sponsor's income and 
resources which are included in the current regulations. Commenters 
worried that the proposals, if implemented, would result in the 
ineligibility of other household members, particularly U.S. citizen 
children of sponsored aliens, ostensibly an unintended result of the 
deeming provisions. They felt the proposed rule was antithetical to the 
Department's efforts to increase participation of low-income households 
containing eligible aliens and U.S. citizens. Commenters also cited the 
inequity of counting the deemed income of the sponsored alien as being 
available to individuals for whom the sponsor has executed no affidavit 
of support.
    The Department carefully reviewed the concerns the commenters 
raised on this difficult issue. We struggled to find a sensible way to 
comply with new PRWORA deeming provisions, while taking into account 
the existing requirements of section 5(i) of the Act. During 
formulation of the final rule, we had extensive discussions of this 
issue with other agencies within the Executive Branch. Based on these 
conversations and comments we received, we determined that the 
provisions of PRWORA which require deeming of a sponsor's income and 
resources do not conflict with the provisions of the Act specifying how 
to calculate the amount of money to deem from a sponsor. Therefore, 
those Food Stamp Act provisions remain in effect.
    We concluded that the best reading of the law, in consideration of 
the comments received and the determination noted above, would be to 
modify the proposed rule as follows. Outlined below are the proposals 
and changes we made in the final rule:
    1. We proposed in new paragraph (c)(1) to add a reference to 
section 213A of the INA, which contains requirements for the affidavit 
of support. We incorporated the definition of ``sponsor'' in the 
definition of ``sponsored alien'' and removed the definitions of ``Date 
of entry'' and ``Date of admission'' because those terms are no longer 
relevant to the new deeming requirements
    Several commenters questioned the ability of the Department to 
require deeming of income from spouses who had not executed an 
affidavit of support. One State agency thought that the regulation was 
unclear on the point of the obligation of a spouse to support the 
sponsored alien. The State agency asked for guidance in situations 
where the affidavit of support predates the marriage, or the spouse 
signs an affidavit of support and subsequently, the couple divorce.
    The Department agrees that the obligation of spouses to support the 
sponsored alien needs clarification. There seems to be an inconsistency 
between the provision in PRWORA requiring the deeming of the income of 
an individual who has executed an affidavit of support on behalf of an 
immigrant and the provision requiring the deeming of income of a spouse 
without specifying whether this individual has also executed an 
affidavit of support (either Form I-864 or Form I-864A). We look to the 
INS regulations at 8 CFR 213a to resolve this apparent inconsistency. 
Through its regulation, INS has made it clear that only individuals who 
execute legally binding contracts for support are responsible for the 
support of the sponsored alien. Further, only those individuals who 
have signed either Form I-864 or Form I-864A are responsible for 
reimbursing the value the value of Federal means-tested public benefits 
paid to an eligible sponsored alien. The final rule specifies that only 
those persons who have executed affidavits of support are sponsors.
    One State agency observed that sponsored status is not indicated on 
the ``green card'' or on ASVI; therefore, staff are unable to identify 
sponsored aliens, absent specific Interim Guidance from FNS. The State 
agency correctly observed that sponsored status is not indicated on the 
I-551 or through ASVI. However, as there is no list of categories of 
legal permanent residents who would be excluded from obtaining a 
sponsor, the Department expected that eligibility workers would need to 
explore sponsored alien status with all immigrants during the 
application and verification process. In view of the State agency's 
concern, FNS will explore the need for and possibly issue additional 
guidance on this issue.
    2. We proposed to revise the introductory text of current paragraph 
(j)(2) to incorporate our original reading of the statute that PRWORA 
requires that all of the sponsor's income and resources be counted in 
determining the eligibility and benefits of the sponsored alien, and 
that deeming lasts until the alien becomes a citizen or can be credited 
with 40 qualifying quarters of coverage. The income and resources of 
sponsored aliens, whether they are eligible or ineligible aliens, would 
include the income and resources of the sponsor and would be counted in 
determining the eligibility and benefits of the rest of the household, 
in accordance with 7 CFR 273.11(c). We proposed to remove the provision 
in current paragraph (j)(2)(v) requiring the counting of the income and 
resources of both the sponsor and sponsor's spouse in determining 
eligibility. We proposed to remove the provisions of current 
regulations in paragraph (j)(2)(i)(A) allowing a 20 percent deduction 
from the sponsor's earned income and paragraph (j)(2)(i)(B) allowing a 
deduction for an amount equal to the Program's monthly gross income 
eligibility limit for a household equal in size to the sponsor's 
household. We proposed also to remove the provision allowing use of the 
income amount reported for AFDC purposes in current paragraph 
(j)(2)(ii). We proposed to remove the provision of paragraph (j)(2)(iv) 
which limits the deemed amount of the sponsors' resources to those in 
excess of $1,500 to conform with our reading of PRWORA section 421 
regarding deeming of sponsor resources. With the removal of these 
provisions, we proposed to retain and designated as paragraphs 
(c)(2)(i) and (c)(2)(ii), respectively current paragraphs (j)(2)(iii) 
regarding money the sponsor pays to the alien and (j)(2)(iv) requiring 
the division of the income and resources of the sponsor among the 
number of aliens sponsored by that sponsor. We proposed to delete 
current paragraph (j)(2)(vii) which provides specific procedures for 
handling changes in sponsors in order to provide State agency 
flexibility. We believed that the State agency is in the best position 
to make these decisions.

[[Page 70168]]

Requirements contained elsewhere in current regulations for reporting 
and acting on changes that affect a household's eligibility or benefit 
levels are already comprehensive and we believed there was no 
additional Federal interest to be protected by providing specific 
procedures for this particular kind of change.
    In the final rule, the Department is making significant revisions 
to the deeming provisions, and is limiting their application to 
situations where the sponsored alien is an eligible alien. We felt that 
PRWORA gave the Department discretion to determine whether section 421 
requires that the amount of income and assets of a sponsor of an 
ineligible alien be counted in the food stamp case of a household which 
includes both eligible and ineligible members. Accordingly, the final 
rule excludes the deemed income and resources of an ineligible 
sponsored alien.
    However, we could find no such latitude in the case of an eligible 
sponsored alien. In as much as the eligible alien is a household 
member, we see no way to exclude the income and resources, including 
the deemed income and resources of the alien's sponsor, from the 
calculation of household eligibility and benefit amount, if the 
sponsored alien is not indigent as discussed below. In the final rule, 
we are restoring some significant provisions of the current regulations 
relating to the computation of the sponsor's income and assets. These 
are the provisions allowing a 20 percent deduction from the sponsor's 
earned income and allowing a deduction for an amount equal to the 
monthly gross income eligibility limit for a household equal in size to 
the sponsor's household, and the provision which limits the deemed 
amount of the sponsors' resources to those in excess of $1,500. The 
final rule also provides that the normal food stamp definitions of 
income and resources apply to the determination of sponsor income and 
resources. To the extent that another assistance program the State 
agency administers collects gross income information on sponsors from 
sponsored aliens, the State agency may use this information in the 
sponsored alien's food stamp case. Several commenters suggested that 
the Department raise the resource exclusion to $2,000 to conform to the 
resource limit for households without an elderly member as set forth in 
section 5(g)(1) of the Act. We are unable to adopt this suggestion, as 
Congress did not raise the threshold amount for excluding the resources 
of a sponsor when it raised the general resource limits for households 
without an elderly member.
    3. Current paragraph (j)(3) exempts the following aliens from the 
deeming provisions: aliens whose sponsor is participating in the 
Program in the same household as the sponsored alien or in a separate 
household, aliens who are sponsored by a group as opposed to an 
individual, and aliens not required to have sponsors. We proposed to 
delete the exemption for aliens whose sponsor is participating in the 
Food Stamp Program in a separate household from the sponsored alien. We 
proposed to retain the exemption for sponsored aliens who are included 
in the same household as the sponsor so that the State agency does not 
double count sponsor's income and resources. We proposed to add 
exemptions for indigent aliens and certain battered aliens and the 
child of a battered alien as provided in the OCAA and the Balanced 
Budget Act of 1997 and to require reporting each indigence 
determination to the Attorney General.
    Many commenters opposed the proposal to delete the exemption from 
deeming for sponsored aliens whose sponsor participates in the Program 
in a separate household. The Department is not adopting this 
suggestion. As stated previously, section 423 of PRWORA provides that 
the deeming provisions apply to aliens who are sponsored under a new 
legally binding affidavit of support. The provision does not apply to 
aliens who are not required to have an affidavit of support filed on 
their behalf, nor to those who have an organization, as opposed to a 
``person,'' as their sponsor. The Department's regulations excuse from 
the deeming provisions sponsored aliens who participate in the Program 
in the same food stamp household as their sponsor. In this instance, 
the food stamp household concept already requires consideration of the 
income and assets of all eligible household members. Beyond the just-
noted exceptions to deeming, the Department sees no legal basis for 
excusing an eligible sponsored alien from the deeming requirements, 
simply because the sponsor is receiving food stamps. Receipt of food 
stamps does not render invalid the affidavit of support the sponsor has 
signed. However, the Department has restored the provisions of the 
current regulations with respect to the amount of deemed income that 
State agencies may count in the food stamp case of an eligible 
sponsored alien. Accordingly, little or no income or resources of a 
sponsor who is participating in the Program could be deemed in the food 
stamp case of a eligible sponsored alien.
    Some State agencies and many advocacy groups suggested that we 
establish national standards for State agency use in making 
determinations of ``indigence'' with respect to excusing sponsored 
aliens from the deeming provisions. After consultation with the INS, 
the Department has determined that it does have authority to mandate 
such standards and the final rule adopts the suggestion. Section 423 of 
PRWORA requires the State agency to determine that a sponsored alien 
would, in the absence of the assistance provided by the State agency, 
be unable to obtain food and shelter, taking into account the alien's 
own income, plus any cash, food, housing, or other assistance provided 
by other individuals, including the sponsor. The State agency must 
notify the Attorney General of each such determination, including the 
names of the sponsor and the sponsored alien involved. The final rule 
emphasizes the indigence exception by more closely defining the term 
``inability to obtain food and shelter without assistance.'' Under the 
final rule, a sponsored alien is indigent if the sum of all the 
sponsored alien's household's income and any assistance the sponsor or 
others provide (cash or in-kind) is less than or equal to 130 percent 
of the poverty income guideline. The Department feels that the 130 
percent of poverty income guideline is a well-recognized benchmark for 
determining if a household is in need of food stamps and other 
government assistance. However, to comply with the statute, and unlike 
a normal determination of income for food stamp eligibility purposes, 
the indigence determination includes the value of in-kind assistance 
the sponsor and others provide. The State agency would determine the 
amount of income and other assistance provided in the month of 
application. Each indigence determination is good for 12 months and is 
renewable for additional 12-month periods. If the sponsored alien is 
indigent, then the normal food stamp budgeting process would begin. The 
State agency would count in the food stamp budget whatever actual cash 
contributions the sponsor and others make.
    The Department believes the procedure for determining indigence 
would work as follows:
    A. The eligibility worker (EW) would inquire about sponsored alien 
status if an alien is a LPR.
    B. If the LPR is an eligible sponsored alien, then the EW would 
make an indigence determination.
    C. If the alien is indigent, then the EW processes the case as 
normal, counting only the actual amount of cash support

[[Page 70169]]

from the sponsor. If the alien is not indigent, then the EW would 
require the sponsored alien to collect information on the total amount 
of the sponsor's income and assets and deem appropriate amounts to 
establish eligibility and benefit amount.
    4. We proposed to retain the provisions of current paragraph (j)(4) 
concerning the sponsored alien's responsibility for obtaining the 
cooperation of the sponsor and providing information about the sponsor 
to the State agency.
    Some commenters questioned how a sponsored alien could garner 
information from a sponsor with whom the alien's relationship had 
soured, particularly if the sponsor were battering the alien. We are 
leaving this language unchanged in the final rule; however, the 
Department has restored the requirement that State agencies assist 
aliens in obtaining information from recalcitrant sponsors.
    5. We proposed to delete the provisions of current paragraph (j)(5) 
which lists specific responsibilities of the State agency for 
processing cases involving households with sponsored aliens. We 
believed that these requirements are unnecessary because the State 
agency is aware of the information about the sponsor that must be 
obtained and there is no need to provide detailed regulatory 
requirements. We received no adverse comments on this provision, so we 
are leaving the proposed language unchanged in the final rule.
    We proposed to renumber current paragraph (j)(6) concerning 
procedures for acting on a household's application pending receipt of 
verification about the sponsor's income and resources as paragraph 
(j)(5). We proposed to delete the last sentence of current paragraph 
(j)(6) in the new paragraph (j)(5). That sentence requires State 
agencies to assist aliens in obtaining verification in accordance with 
the provisions of current Sec. 273.2(f)(5). In accordance with 
amendments made by PRWORA discussed above, we proposed to remove the 
requirement to assist households in obtaining verification from the 
regulations. Inasmuch as the Department is retaining current 
Sec. 273.2(f)(5), we are restoring this reference to the final rule.
    6. We proposed to remove current paragraph (j)(7) requiring the 
Department to enter into a Memorandum of Agreement between the 
Department and other Federal agencies as this is a Federal 
responsibility, and it is addressed by DOJ's interim rule published on 
October 20, 1997, (62 FR 54346). We received no adverse comments on 
this provision, so we are leaving the proposed language unchanged in 
the final rule.
    7. We proposed to remove the provisions of current paragraph (j)(8) 
concerning overissuances which may result from the use of incorrect 
sponsor information. A State agency asked us to clarify the status of 
recipient claims filed against sponsors pursuant to 7 CFR 
273.11(c)(8)(iii). The State agency worried that any such claims might 
become uncollectible once the new rule is effective.
    In regard to the State agency's question on the status of 
overissuance claims against sponsors, current Sec. 273.11(j)(8)(iii) 
and the requirements of PRWORA section 423(e), address completely 
separate issues. The USDA regulation addresses recipient claims 
situations where a sponsor is at fault for providing inaccurate 
information to the State agency for the purpose of establishing the 
eligibility and benefit amount of the sponsored alien's household. 
PRWORA section 423(e) addresses situations where the sponsor has 
executed the specified affidavit of support and owes the benefit-
providing agency the value of any Federal means-tested public benefits 
provided to the sponsored alien. (This issue is discussed extensively 
in the following paragraph.) Accordingly, any existing claims against 
sponsors filed under 7 CFR 273.11(j)(8)(iii) remain valid claims. After 
the State agency implements the final rule, any recipient claims 
arising from overissuances to a household which includes a sponsored 
alien will be the sole responsibility of that household.
    8. The NPRM did not establish any procedures for sponsor 
reimbursement of means-tested public benefits provided to sponsored 
aliens, as stipulated under PRWORA section 423(e). Instead, in the 
proposed rule's preamble, the Department directed readers to refer to 
an Interim DOJ rule published on October 20, 1999 (62 FR 54346). There 
was much adverse commentary from State agencies and advocacy groups on 
the lack of policy direction on this issue.
    Advocacy groups urged the Department to be more specific as to the 
calculation of benefits for which a State agency could bill a sponsor 
when the eligible sponsored alien receives food stamp benefits. 
Advocacy groups also urged us to prevent State agencies from billing 
sponsors until the Department and other Federal agencies develop 
uniform collection procedures through the regulatory process. Several 
State agencies and advocacy groups urged the Department to exempt 
certain sponsors from the requirement to reimburse the Federal 
government for the value of food stamps issued to eligible sponsored 
aliens.
    During the development of the final rule, it became apparent to us 
that the issue of billing sponsors for the value of means-tested public 
benefits was extremely complex and could not be resolved without 
coordination and consultation with other Federal agencies. After 
consultation with appropriate departments of the Executive Branch, we 
have decided not to regulate this issue until the Department has 
completed a thorough policy development process in coordination with 
other Federal agencies, with one exception discussed below.
    The final rule addresses the issue of State agencies billing 
sponsors who themselves participate in the Program, either in the same 
household or in a separate household. Commenters have raised an issue 
which is not easily resolved. Under the OCCA amendment to PRWORA, an 
intending sponsor must demonstrate the means to maintain an annual 
income of at least 125 per cent of the Federal poverty income guideline 
for the sponsor's household size, including any dependents and the 
sponsored alien(s). Also, a sponsor may qualify financially based on 
the anticipated contribution of the sponsored alien to the sponsor's 
household's income. The annual income requirement is no less than 100 
percent of the Federal poverty income guideline if the sponsor is an 
active duty member of the armed forces and the intending immigrant is 
the sponsor's wife or child. Further, the obligation of the sponsor to 
support a sponsored alien ceases only when the alien naturalizes or 
when the alien works or can get credit for 40 quarters of social 
security coverage. However, the framers of the OCCA amendment to PRWORA 
apparently did not contemplate that individuals and their families who 
meet the minimum financial requirements for sponsorship may yet qualify 
for food stamps, as well as other Federal means-tested public benefits. 
The general gross income guideline for the Program is 130 per cent of 
the Federal poverty income guideline. The gross income test does not 
apply to households which include a member age 60 or older; rather, 
such households must pass a net income test of 100 percent of the 
Federal poverty income guideline, after deducting allowable expenses 
from gross income. The Department does not believe that Congress 
intended that in order to comply with the law State agencies must bill 
sponsors for the value of food

[[Page 70170]]

stamp benefits paid to the eligible sponsored alien, notwithstanding 
the fact that the sponsors themselves are eligible for the Program or 
that the eligible sponsored alien is a member of the sponsor's food 
stamp household. After consultation with DOJ, the Department believes 
it has the authority to forestall such an incongruous result. 
Accordingly, the final rule exempts sponsors who are themselves 
participating in the Program from receiving bills from State agencies 
for the value of food stamp benefits provided to an alien for whom they 
have signed an affidavit of support.
    9. Finally, based on comments from State agencies and advocacy 
groups, the final rule deletes the requirement in the proposed rule 
that State agencies may prorate the income and resources of the sponsor 
among multiple sponsored aliens only if the sponsored aliens apply for 
or participate in the Program. However, the final rule retains the 
requirement that the State agency must prorate the deemed income among 
the various sponsored aliens regardless of whether the sponsor 
participates in the program (as set forth in Sec. 273.4(c)(2)(v)).

7 CFR 273.8

Inaccessible Resources--Vehicles--7 CFR 273.8(e) and (f)

    We proposed to amend section 273.8(e)(18) to allow vehicles to be 
treated as inaccessible resources. We also proposed to amend section 
273.8(h)(1) to add a provision for excluding the value of a vehicle 
that the household is unable to sell for any significant return because 
the household's interest is relatively slight or the costs of selling 
the household's interest would be relatively great. The rule would have 
excluded any vehicle which was likely to produce a return of less than 
$1,000 or $1,500, depending on the household's resource limit. We also 
solicited public comment on the ways in which we could simplify the 
method for evaluating vehicles. Currently, the rules are fairly 
complex. Some vehicles are exempted from consideration as a resource. 
Others which are nonexempt, but are the household's only transportation 
or are used for employment or training are subject only to the fair 
market test. A third category of household vehicles is subject to a 
dual test, which counts as a resource the higher of the fair market 
value in excess of $4,650 or the equity value. (Section 810 of PRWORA 
amended section (5)(g) of the Act to set the fair market value 
exclusion limit at $4,650, effective October 1, 1996. See the final 
rule ``Food Stamp Program: Non-Discretionary Provisions of the Personal 
Responsibility and Work Opportunity Reconciliation Act of 1996'' 
published in the Federal Register on October 30, 2000 (65 FR 64581) for 
further information.) We advised commenters that the fair market value 
test is established by statute, while the equity test is subject to 
Departmental discretion.
    The proposal to allow vehicles to be considered under the 
inaccessible resources provision received widespread support. Many 
commenters agreed that the rule change would help working households 
achieve or maintain self-sufficiency. Several commenters suggested 
raising the threshold amount for determining inaccessibility to higher 
amounts than we proposed. Commenters pointed out that the food stamp 
fair market value limit had simply not kept pace with the value of a 
modest, reliable vehicle in today's economy. Commenters argued that the 
Department should eliminate the equity value test as this was not 
required by statute and its use unduly complicated the resource 
determination for vehicles. State agencies generally supported the rule 
change, but worried that estimating the proceeds of the sale of a 
vehicle would be complex. Moreover, they thought the ``proceeds value'' 
of a vehicle would be subject to constant recalculation as the 
household paid down its loan balance.
    State agencies correctly observed that the ``proceeds value'' of an 
inaccessible resource would require periodic evaluation as the loan 
balance on the resource declines. As the Department did not propose to 
amend the change reporting requirements of 7 CFR 273.12(a) in 
connection with this rulemaking, we intend that State agencies assess 
the vehicle's continued inaccessibility at recertification. In its July 
1999 food stamp initiative, the Department offered State agencies the 
opportunity to increase program access and improve accuracy rates. By 
use of reporting options and other available waivers, State agencies 
may limit the number of times eligibility workers need to reevaluate 
inaccessibility by assigning households the longest certification 
period consistent with the stability of their circumstances. Also, some 
State agencies worried that the way the Department structured the 
proposed rule, eligibility workers would have to evaluate almost every 
vehicle for inaccessibility before going on to the fair market value 
and equity tests. This was not our intent. The way we sequence issues 
in the regulations to meet regulatory drafting requirements is not 
necessarily the best way to address issues in the actual certification 
process. State agencies may find it more expedient and efficient to 
instruct eligibility workers and program computer systems to follow a 
different sequence, as long as they achieve the correct outcome. For 
example, if a household's only vehicle has a fair market value of no 
more than $4,650, it is not necessary to inquire further into its 
accessibility. In actual practice, inaccessibility might be the test of 
last resort, if the eligibility worker could not find any other way to 
exclude the vehicle from resource consideration.
    We are sympathetic to commenters' concerns that the current fair 
market value limit is outdated. However, as the fair market value 
threshold is set by statute, any modification to the current policy is 
beyond the scope of this rulemaking.
    In the final rule we are using our discretion to simplify greatly 
the resource determination for vehicles. First, we are establishing a 
uniform threshold amount of $1,500 for determining if the value of a 
resource is inaccessible. This action will eliminate the need to 
distinguish between households with a $2,000 resource limit and those 
with a $3,000 limit for calculating the threshold amount of a resource. 
Second, the Department is changing the policy for exempting the equity 
value of licensed vehicles. Currently, the regulations exempt from the 
equity test one licensed vehicle per household and additionally any 
licensed vehicles used to go to work, training or education, or to look 
for work. In the final rule, we are broadening the exclusion from the 
equity test for licensed vehicles. The regulation exempts from the 
equity test one licensed vehicle per adult household member and any 
licensed vehicle a minor drives to work, school or training, or to look 
for work. These changes will simplify the resource calculation and aid 
more low-income families.
    Under the final rule, these are the provisions for handling 
licensed vehicles:
    (1) The rule completely excludes a vehicle from the resource test 
if it is necessary to produce income, used as a home, necessary to 
transport a disabled household member, necessary to carry fuel for 
heating or water for home use, or it is classified as an inaccessible 
resource (i.e., likely to produce a return of no more than $1,500);
    (2) The rule exempts from the equity test and requires evaluation 
for fair market value only one licensed vehicle not excluded under the 
previous paragraph for each adult household

[[Page 70171]]

member regardless of use, and any unexcluded licensed vehicle a 
household member under age 18 drives to work, school or training, or to 
look for work. The State agency would count the fair market value in 
excess of $4,650 for each such vehicle.
    (3) For any other vehicles the household possesses, the rule 
requires counting of the higher of the fair market value in excess of 
$4,650 or the equity value.
    The following examples show how the new policy would work: (1) A 
household is making payments on a 1994 sedan with a fair market value 
of $7,000. The household has no other vehicles. The eligibility worker 
knows that excess fair market value ($2,350) would make the household 
ineligible. In this instance, the eligibility worker must determine if 
the vehicle is inaccessible. It turns out that the household would net 
$500 from the vehicle, if it were sold. As the proceeds from the sale 
would be no more than $1,500, the eligibility worker would deem the 
entire value of the vehicle to be an inaccessible resource and would 
exclude the vehicle from consideration as a resource for eligibility 
purposes. (2) Alternatively, assume a household has a single vehicle 
which is not otherwise excludable and has a fair market value of 
$6,200. The eligibility worker could first evaluate the vehicle 
according to its excess fair market value. The countable fair market 
value of the vehicle as a resource would be $1,550 ($6,200-$4,650). 
Assuming the household did not have any other countable resources that, 
combined with the $1,550, would exceed the applicable resource limit 
for the household, the household would remain eligible for 
participation. In that case, the eligibility worker did not have to use 
the inaccessible resource provision to exclude the vehicle. (3) A 
household consisting of two members has three licensed vehicles. One of 
the vehicles is a specially equipped van used for transporting a 
household member who is disabled. The other two vehicles would net the 
household more than $1,500 each if sold. In this case, the van is 
totally excluded and the other two vehicles are subject only to the 
excess fair market value test.
    Finally, in response to comments, we are adding a sentence to 7 CFR 
273.8(e)(17) to make it clear that if an individual receives non-cash 
or in-kind services under a TANF-funded program, the State agency must 
determine if the individual or the household benefits from the 
assistance provided.

7 CFR 273.9

JTPA Payments--7 CFR 273.9(b)(1)(v)

    We proposed to change the references in 7 CFR 273.9(b)(1)(v) from 
the Job Training Partnership Act (JTPA) to the Workforce Investment Act 
of 1998 (WIA) based on section 199A(c) of the WIA which states that all 
references in any other provision of law to a provision of the 
Comprehensive Employment and Training Act (CETA) or JTPA, as the case 
may be, shall be deemed to refer to the corresponding provision of the 
WIA. Since publication of the proposed rule, we have received questions 
about the exclusion of WIA payments. Although section 181(a)(2) of the 
WIA provides that allowances, earnings and payments to individuals 
participating in programs under said Act shall not be considered as 
income for purposes of determining eligibility for and the amount of 
benefits for any Federal program based on need, section 5(l) of the 
Food Stamp Act provides that notwithstanding section 181(a)(2) of the 
WIA, earnings to individuals participating in on-the-job training under 
Title I of the WIA shall be considered earned income for purposes of 
the Food Stamp Program, except for dependents less than 19 years of 
age. Accordingly, we are adopting the revision to paragraph (b)(1)(v) 
as proposed.

Transitional Housing Payments--7 CFR 273.9(c)(1)(i)(E) and 
(c)(1)(ii)(E)

    Current regulations at 7 CFR 273.9(c)(1)(i) and (ii) exclude the 
full amount of any PA or GA grant made to a third party (vendor 
payment) on behalf of a household residing in transitional housing for 
the homeless. Section 811 of PRWORA amended section 5(k)(2)(F) of the 
Act to remove the exclusion for transitional housing payments.
    In accordance with section 811 of PRWORA, we proposed to rescind 7 
CFR 273.9(c)(1)(i)(E) and (c)(1)(ii)(E) to eliminate the exclusion for 
PA or GA transitional housing vendor payments. State agencies would 
continue to be able to exclude emergency housing assistance to migrant 
or seasonal farmworker households while they are in the migrant stream 
and emergency and special assistance that is above the normal grant. GA 
payments from a State or local housing authority and assistance 
provided under a program in a State in which no cash GA payments are 
provided would also be excludable. With the removal of paragraph 
(c)(1)(i)(E), we proposed that current paragraph (c)(1)(i)(F) become 
paragraph (c)(1)(i)(E). Also, with the removal of paragraph 
(c)(1)(ii)(E) and the removal of paragraph (c)(1)(ii)(A), as described 
under ``Energy Assistance'' below, we proposed that current paragraphs 
(c)(1)(ii)(B) through (G) would become paragraphs (c)(1)(ii)(A) through 
(c)(1)(ii)(E).
    We received no comments on the proposal to rescind 7 CFR 
273.9(c)(1)(i)(E) and (c)(1)(ii)(E) to eliminate the exclusion for PA 
or GA transitional housing vendor payments and the resulting 
redesignations. Accordingly, we are adopting the revisions and 
redesignations as proposed.

Earnings of Children--7 CFR 273.9(c)(7)

    Current regulations at 7 CFR 273.9(c)(7) exclude the earned income 
of any household member who is under age 22 and an elementary or 
secondary school student living with a natural, adoptive or stepparent 
or under the parental control of a household member other than a 
parent. Section 807 of PRWORA amended section 5(d)(7) of the Act (7 
U.S.C. 2014(d)(7)) to exclude the income of children age 17 and under. 
Accordingly, we proposed to amend 7 CFR 273.9(c)(7) to exclude the 
earned income of any household member who is under age 18. We proposed 
to retain all the other provisions of 7 CFR 273.9(c)(7) regarding this 
exclusion which were implemented in the rule published October 17, 1996 
(61 FR 54292). We received no substantive comments on this proposed 
change. Therefore, we are adopting it as proposed.
    Currently, 7 CFR 273.10(e)(2)(i) provides that for prospective 
eligibility and benefit determination, the earned income of a high 
school or elementary school student must be counted beginning with the 
month following the month in which the student turns 22. Section 
273.21(j)(1)(vii)(A) provides that the student's income must be counted 
beginning with the budget month after the month in which the student 
turns 22. We proposed to make conforming amendments to these sections 
to change the age from 22 to 18. We received no substantive comments on 
this proposed change. Therefore, we are adopting it as proposed.

Nonrecurring Lump-Sum Payments--7 CFR 273.9(c)(8)

    In 7 CFR 273.9(c)(8) regarding nonrecurring lump-sum payments, we 
proposed to add a sentence to allow TANF diversion payments to be 
excluded under certain conditions. Current policy is that they may be 
excluded if no more than one payment is anticipated in any 12-month 
period to

[[Page 70172]]

meet needs that do not extend beyond a 90-day period, the payment is 
designed to address barriers to achieving self-sufficiency rather than 
provide assistance for normal living expenses, and the household did 
not receive a regular monthly TANF payment in the prior month or the 
current month. We proposed to include this policy except that we 
changed the 90-day period to a 4-month period to reflect that the 
Department of Health and Human Services uses a 4-month period as the 
regulatory framework for its definition of short-term. (See 64 FR 
17759, April 12, 1999.)
    We received comments from one State association, four State 
agencies, and many advocacy groups. The commenters supported including 
the exclusion of TANF diversion payments; the State association and two 
State agencies suggested expanding the exclusion to cover all 
additional or all TANF diversion payments. The advocacy groups 
suggested that the definition be expanded to include any TANF payments 
not recognized as assistance under TANF regulations because of the 
exception for non-recurrent short-term benefits and that the 
regulations incorporate a reference to the definition of assistance in 
the TANF regulations. We agree with the commenters that the exclusion 
for TANF diversion payments should be consistent with the TANF 
exception for non-recurrent short-term benefits. Accordingly, we have 
modified the provision to exclude TANF payments not defined as 
assistance because of the exception for non-recurrent, short-term 
benefits in 45 CFR 261.31(b)(1).

Energy Assistance--7 CFR 273.9(c)(11)

    Under current regulations at 7 CFR 273.9(c)(11), energy assistance 
provided under any Federal law is excluded from consideration as 
income. Energy assistance provided under State or local law which meets 
the requirements specified in the regulations is excluded from income 
if FNS has approved the exclusion. Section 808 of PRWORA replaced 
section 5(d)(11) of the Act with a new section 5(d)(11) , 7 U.S.C. 
2014(d)(11), which modifies the exclusion for Federal and State agency 
energy assistance payments. Federal energy assistance payments are 
excluded under this provision, with one exception. Energy assistance 
provided under Title IV-A of the Social Security Act is not excluded, 
thereby eliminating the exclusion of any energy assistance provided as 
part of a State's public assistance grant. The new provision allows an 
exclusion for one-time payments or allowances made under a Federal or 
State law for the costs of weatherization or emergency repair or 
replacement of an unsafe or inoperative furnace or other heating or 
cooling device.
    In accordance with PRWORA provisions, we proposed to revise 7 CFR 
273.9(c)(11) in its entirety, adding exclusions in new paragraph 
(c)(11)(i) for any payments or allowances made for the purpose of 
providing energy assistance under any Federal law other than Part A of 
Title IV of the Social Security Act and new paragraph (c)(11)(ii) for 
one-time payments issued on an as-needed basis under Federal or State 
law for weatherization or emergency replacement or repair of heating or 
cooling devices. All other provisions appearing under current paragraph 
(c)(11) were proposed to be removed.
    We received comments on this proposal from a State agency and many 
advocacy groups. All suggested clarification to the proposed language. 
The State agency believed that the word ``and'' between paragraph (i) 
and (ii) should be replaced by ``or'' because the ``and'' could be 
misconstrued to prohibit the exclusion of Title IV-A payments for 
weatherization or emergency repair. We agree with the commenter that 
the word ``or'' is clearer and accordingly have revised paragraph (i) 
to end with ``or''.
    The advocacy groups felt that the language in paragraph (ii) did 
not make it clear that the exclusion of Federal energy assistance 
applies as long as the program under which the payments are being 
provided is federal, regardless of whether the agency making the 
payments is a federal one. Specifically, the advocacy groups were 
concerned that not citing Department of Housing and Urban Development 
(HUD) and USDA Rural Housing Service (RHS) payments could result in 
future policy changes which could result in these payments being 
counted as income. In order to alleviate any confusion we have retained 
reference to specific exclusion of HUD and RHS energy assistance 
payments. Accordingly, we are adopting the revised paragraph (c)(11)(i) 
and (ii), modified as discussed above.

Shelter Costs--7 CFR 273.9(d)(5), Standard Utility Allowance--7 CFR 
273.9(d)(6), and Adjustment of Shelter Deduction--7 CFR 273.9(d)(9)

    We propose to reorganize 7 CFR 273.9(d)(5) and (6) to include all 
provisions related to shelter expenses in revised 7 CFR 273.9(d)(6). 
Current paragraph (d)(5) sets forth the requirements for allowing a 
deduction from the household's income for shelter expenses, including a 
description of allowable shelter costs and the special provisions for 
homeless households. Current paragraph (d)(6) describes the procedures 
for establishing and using a standard utility allowance as a shelter 
cost deduction. We proposed to reorganize 7 CFR 273.9(d)(5) and (6) by 
moving the provisions of paragraph (d)(5), combining them with the 
provisions in paragraph (d)(6), and retitling the revised paragraph 
(d)(6) as ``Shelter costs.'' We also proposed to redesignate paragraph 
(d)(7) regarding child support as (d)(5). We received no comments on 
the proposed reorganization and are adopting that structure as 
proposed.
    1. Homeless households. Current regulations at 7 CFR 273.9(d)(5)(i) 
provide that State agencies must use a standard estimate of the shelter 
expenses for households in which all members are homeless and are not 
receiving free shelter throughout the month. State agencies may develop 
their own standards or use an annually adjusted standard provided by 
FNS, currently $143 per month. Further, under current regulations, the 
homeless shelter estimate is used in determining the household's excess 
shelter deduction. That is, if the household claimed no shelter costs 
exceeding the estimate, the estimate would be considered to be the 
household's total shelter cost and the amount of the estimate over 50 
percent of the household's income would be the household's excess 
shelter deduction.
    Section 809 of PRWORA amended section 11(e)(3) of the Act to remove 
the homeless shelter provision and added a new paragraph (5) to section 
5(d) of the Act (7 U.S.C. 2014(d)(5)) to provide that State agencies 
may develop an optional standard homeless shelter allowance not to 
exceed $143 per month. The new paragraph provides that the State agency 
may use the allowance in determining eligibility and allotments for 
homeless households and that the State agency may make a household with 
extremely low shelter costs ineligible for the allowance.
    We proposed to revise current 7 CFR 273.9(d)(5)(i) (redesignated as 
paragraph (d)(6)(i)) to add an optional homeless shelter deduction from 
net income. Households claiming the homeless shelter deduction would be 
entitled to no other shelter deduction. They could, however, be 
entitled to a deduction for excess shelter expenses instead of the 
homeless shelter deduction if they verified actual costs. We received 
two comments from State agencies on this proposal. One State agency 
supported it; the other State agency opposed the

[[Page 70173]]

provision. That State agency believed the Department was interpreting 
the law too literally and that many State agencies would not adopt the 
optional separate homeless deduction. The Department does not agree 
with this commenter. As discussed in the proposed rule, the language of 
the law is clear that the allowance is to be used as a deduction in 
determining eligibility and allotments. The law does not indicate that 
the standard is to be used in computing the excess shelter expense, as 
is the case with the standard utility allowance. Accordingly, we are 
adopting the provision as proposed.
    We also proposed a conforming amendment to 7 CFR 273.10(e)(1)(i) to 
add a new paragraph (G) to include the standard homeless shelter 
deduction. We received no comments on this conforming amendment and are 
adopting it as proposed.
    2. Excess shelter deduction. Currently, 7 CFR 273.9(d)(5)(ii) 
provides that households are allowed a deduction for shelter costs in 
excess of 50 percent of the household's income after all other 
deductions have been subtracted. It provides that the shelter deduction 
cannot exceed the maximum limit established for the area, unless the 
household contains a member who is elderly or disabled. We proposed 
that the provisions of current paragraph (d)(5)(ii) concerning 
application of the excess shelter expense limit in households with and 
without an elderly or disabled member would be included in the 
introductory language of new 7 CFR 273.9(d)(6)(ii). We received no 
comments on this reorganization and are adopting it as proposed.
    Current paragraph (d)(5)(ii) provides that the maximum shelter 
deduction limits applicable for use in the States, District of 
Columbia, Guam, and the Virgin Islands will be published as a notice 
document in the Federal Register. In 7 CFR 273.9(d)(9), the shelter 
deduction amounts and adjustments are described. Section 809 of PRWORA 
eliminated the annual cost of living adjustments and set the limits for 
the various areas by year. Therefore, we proposed to remove these 
provisions and provide instead that FNS will notify State agencies when 
the amount of the excess shelter limits change. We received no comments 
on the proposal to eliminate the General Notices and the description of 
the adjustment procedures. Therefore, we are deleting the provisions as 
proposed.
    Current paragraphs (d)(5)(ii)(A) through (E) describe allowable 
shelter expenses. We proposed to amend paragraph (d)(5)(ii)(C) to 
expand the list of allowable utility costs to include fuel or 
electricity used for household purposes other than heating or cooling 
(including cooking) as an allowable utility expense. We received 
comments from one State association and four State agencies, all 
supporting the expansion. We also received comments from many advocacy 
groups suggesting that the list of allowable utility costs be revised 
to include a more generic description of telephone service that would 
include all of the various components of mandatory telephone fees. The 
advocacy groups pointed out that the current language ``the basic 
service fee for one telephone, including tax on the basic fee'' does 
not reflect the way charges are now billed in the competitive telephone 
marketing environment. We agree with the advocacy groups about the need 
to update the telephone service fee description. We are taking the 
opportunity at this time to add the costs of installing and maintaining 
wells and septic tank systems as an allowable utility cost. We have 
repeatedly over the years denied the allowability of these costs under 
current regulations. We have reconsidered this and have determined that 
these costs are analogous to costs for water and sewage. Accordingly, 
we are adopting the proposed revision to 7 CFR 273.9(d)(5)(ii)(C), 
expanding the description of basic telephone service, and adding well 
and septic tank system installation and maintenance to the list of 
allowable utility costs.
    One State association and four State agencies requested that the 
regulations at current paragraph (d)(5)(ii)(A) be revised to include 
the recent policy decision to allow condo fees as shelter cost as a 
continuing charge for shelter. We have adopted this suggestion and are 
amending 7 CFR 273.9(d)(5)(ii)(A) accordingly.
    The provisions of current paragraph (d)(5)(ii)(A) through (E), with 
the modifications outlined above, were proposed to be included in new 
paragraph (d)(6)(ii)(A) through (E). In addition, we proposed to remove 
an unnecessary sentence referring to the excess shelter deduction from 
7 CFR 273.10(e)(1)(i)(E). We are adopting this redesignation and are 
deleting this sentence.
    3. Standard utility allowance--7 CFR 273.9(d)(6). Under the 
proposed reorganization of 7 CFR 273.9(d)(6), provisions for utility 
standards would be contained in 7 CFR 273.9(d)(6)(iii) and would be 
reorganized. The reader is referred to the proposed rule for a detailed 
description and rationale of the proposed reorganization. Discussed 
below are the substantive changes we proposed concerning the standard 
utility allowances.

A. Developing Standards

    Current regulations at 7 CFR 273.9(d)(6)(i) allow State agencies to 
offer a single standard utility allowance that includes the cost of 
heating and/or cooling, cooking fuel, electricity not used to heat or 
cool the residence, the basic service fee for one telephone, water, 
sewerage, and garbage and trash collection to households that incur a 
heating or cooling cost, receive energy assistance under the Low-Income 
Home Energy Assistance Act of 1981 (LIHEA), or receive other energy 
assistance but still incur out-of-pocket expenses. This allowance is 
hereinafter called the heating and/or cooling standard utility 
allowance (HCSUA). Instead of offering a single HCSUA, State agencies 
may offer an individual standard allowance for each utility expense, 
such as electricity, water, sewerage, or trash collection.
    Section 890 of the PWORA, which amended section 5(d) of the Act, 
allows State agencies to develop one or more standards that include the 
cost of heating and cooling and one or more standards that do not 
include the cost of heating and cooling. Currently, there is no 
regulatory provision for a limited utility allowance (LUA) that 
includes utility expenses other than heating or cooling and is offered 
to households that do not have a heating or cooling expense but do 
incur the costs of other utilities. We proposed to add the authority 
for developing an LUA in paragraph (d)(6)(iii)(A).
    We proposed in paragraph (d)(6)(iii)(A) that State agencies could 
establish an LUA that includes at least two utilities other than 
telephone. State agencies could offer individual standards to 
households that incur only one utility expense. We also proposed that 
State agencies could use different types of standards but could not 
allow households to use two standards that include the same expense. 
The State agency could vary the standards by factors such as household 
size, geographical area, or season. However, only utility costs 
identified in proposed paragraph (d)(6)(ii)(C) would be allowable 
expenses. States in which the cooling expense is minimal could continue 
to include the cooling cost in the LUA as part of the electricity 
component.
    We received one comment from a State agency on the proposed 
structure of the LUA. That State agency questioned why two utilities 
were required for a LUA, and why, if two were required, a telephone 
could not be

[[Page 70174]]

one of the two. We continue to believe that a household needs to have a 
minimum of two utility costs to qualify for an LUA. However, we agree 
with the State agency that telephone service should be allowed as one 
of the two. Accordingly, we are adopting paragraph (d)(6)(iii)(A), 
modified to allow a telephone service as one of the two utilities. We 
are also adding the additional utilities included in modified paragraph 
(d)(6)(ii)(C) as allowable expenses.

B. Updating Standards

    Current regulations at 7 CFR 273.9(d)(6)(iv) require State agencies 
to submit the methodology used in developing a standard to FNS for 
approval. These current rules also require State agencies to review and 
adjust the standard annually to reflect changes in the cost of 
utilities. We proposed to remove the requirement for annual submission 
of the amounts of the standards. As proposed, in new 7 CFR 
273.9(d)(6)(ii), State agencies would be required to review standards 
periodically, make adjustments, and notify FNS if the amount changes. 
They could, at their option, establish thresholds for making 
adjustments. We also proposed to require that methodologies be 
submitted for approval when a standard is developed or changed.
    We received comments from one State agency and many advocacy 
groups. The State agency believes that State agencies should only have 
to submit SUAs for approval when the methodology is being developed or 
changed. The advocacy groups suggested that State agencies be required 
to submit their SUAs for approval only once every five years as long as 
an annual inflation factor is included in the methodology. Further, the 
advocacy groups are opposed to allowing State agencies to establish a 
threshold for making adjustments based on cost increases. We agree with 
the State agency that State agencies should only have to submit their 
SUAs for approval when the methodology is being developed or changed. 
We agree with the advocacy groups that an annual review for cost 
increases is important, however. The proposed rule only required 
periodic reviews. Based on the comments, we have modified this final 
rule to require State agencies to submit an SUA for our approval 
whenever the methodology changes, to require annual reviews by State 
agencies to assess the need for cost-of-living adjustments, and to 
require State agencies to make adjustments based on cost increases by 
rounding to the nearest whole dollar. State agencies will be required 
to advise FNS whenever the amount of a standard changes.
    A number of State agencies have waivers for an LUA. If the State 
agency's LUA is not consistent with paragraph (d)(6)(iii)(A) in this 
final rule, it will need to submit a revised LUA for approval. State 
agencies with LUAs consistent with paragraph (d)(6)(iii)(A) do not need 
to resubmit them for approval.

C. Entitlement

    Section 5(e)(7)(iv) of the Act, as revised by section 809 of 
PRWORA, provides that recipients of LIHEA are entitled to use an HCSUA 
only if they incur out-of-pocket heating or cooling expenses in excess 
of the amount of the assistance paid on behalf of the household to an 
energy provider, that a State agency may use a separate HCSUA for 
households receiving LIHEA, and that the LIHEA must be considered to be 
prorated over the heating or cooling season. Section 2605(f)(2) of the 
LIHEA (42 U.S.C. 8624(f)) provides that LIHEA payments must be deemed 
to be expended by such household for heating or cooling expenses, 
without regard to whether such payments or allowances are provided 
directly to, or indirectly for the benefit of such household.
    Current regulations at 7 CFR 273.9(d)(6)(ii) provide that the 
standard utility allowance which includes a heating or cooling 
component must be made available only to households which incur heating 
and cooling costs separately and apart from their rent or mortgage. 
These households include residents of rental housing who are billed on 
a monthly basis by their landlords for actual usage as determined 
through individual metering, recipients of LIHEA, or recipients of 
indirect energy assistance payments other than LIHEA who continue to 
incur out-of-pocket heating or cooling expenses during any month 
covered by the certification period. Households in public or private 
housing with a central meter who are billed only for excess usage are 
not permitted to use the HCSUA. (Renters must be billed on a monthly 
basis by their landlords for actual usage as determined through 
individual metering to be entitled to use the HCSUA.) A household not 
entitled to the HCSUA may claim actual expenses.
    In the proposed 7 CFR 273.9(d)(6)(iii), we clarified and simplified 
the rules for determining entitlement to an HCSUA. (For more 
information regarding the background of the provisions governing 
entitlement to the HCSUA, readers may refer to the preamble to the 
proposed rule.) The following requirements of the Act and the LIHEA Act 
were included in proposed 7 CFR 273.9(d)(6)(iii) for clarity:
    (1) An allowance for a heating or cooling expense may not be used 
for a household that does not incur a heating or cooling expense.
    (2) A household that incurs a heating or cooling expense but is 
located in a public housing unit which has central utility meters and 
charges households only for excess heating or cooling costs is not 
entitled to a standard that includes heating or cooling costs. However, 
the State agency may use the excess costs in developing an overall LUA 
or develop a standard specifically for households which pay excess 
heating or cooling costs.
    (3) For purposes of determining any excess shelter expense 
deduction, the full amount of LIHEA energy assistance payments must be 
deemed to be expended by such household for heating or cooling 
expenses, without regard to whether such payments or allowances are 
provided directly or indirectly to the household.
    (4) An HCSUA must be made available to households receiving energy 
assistance (other than LIHEA) only if the household incurs out-of-
pocket heating or cooling expenses. A State agency may use a separate 
utility standard for these households.
    (5) An HCSUA may not be used for a household that shares the 
heating or cooling costs with and lives with another individual not 
participating in the Program, another participating household, or both, 
unless the HCSUA is prorated between the household and the other 
individual, household, or both.
    (6) A State agency that has not made the use of a standard 
mandatory (as provided in paragraph (d)(6)(iii)(E)) must allow a 
household to switch between the standard and a deduction based on 
actual utility costs at the end of any certification period.
    One proposed change would have extended use of the HCSUA to 
households that live in separate residences but share a single utility 
meter. Three State agencies and one State association supported this 
proposed change. No commenters opposed it. Accordingly, we are adopting 
it as proposed.
    Under another proposed change, the HCSUA would have been made 
available to households in private rental housing who are billed by 
their landlords on the basis of individual usage or who are charged a 
flat rate separately from their rent. One State agency commenter 
supported this

[[Page 70175]]

proposed change, and two State agency commenters opposed it. Although 
the advocacy groups did not directly address this proposal, we have 
inferred from related comments that they supported this change. One 
commenter misunderstood the proposal and thought that we were 
eliminating the use of the HCSUA for households residing in public 
housing who are billed separately on the basis of individual usage. 
This is incorrect; the proposal provides that the HCSUA is available to 
households that incur heating or cooling expenses separately from their 
rent or mortgage. We are adopting this provision as proposed. The State 
agencies opposing it were concerned about errors and disparate 
treatment between households residing in private and public housing. 
Section 5(e)(7)(C)(ii)(I) of the Act does not permit use of an HCSUA 
for a household that does not incur such a heating or cooling expense. 
However, we believe that the provision simplifies the determination of 
who is eligible for the HCSUA and makes it less error prone by making 
more households eligible for the HCSUA. State agencies concerned about 
errors or the disparate treatment may include the excess heating and 
cooling costs in its LUA as discussed elsewhere in this rule.
    The proposed rule in 7 CFR 273.9(d)(6)(iii) would also have allowed 
State agencies the discretion to develop and use whatever procedures 
they deem appropriate regarding anticipation of entitlement to an HCSUA 
so long as they complied with the requirements of the Act and the LIHEA 
regarding use of an HCSUA. The advocacy groups suggested that the final 
rules give states the flexibility to prorate in any manner that 
reasonably achieves the goal of not providing an inappropriately large 
SUA to such food stamp households. We believe that the provision as 
proposed accomplishes that goal, and therefore, we are adopting the 
provision as proposed.
    As indicated above, provisions of LIHEA control (without 
specifically repealing) sections 5(e)(7)(iv)(I) through (IV) of the 
Food Stamp Act which provide that: (1) Recipients of LIHEA are entitled 
to the HCSUA only if they incur expenses that exceed the LIHEA 
payments, (2) State agencies may use a separate standard for households 
that receive LIHEA, (3) State agencies using a single allowance are not 
required to reduce the allowance for households that receive LIHEA, and 
(4) the LIHEA must be prorated over the entire heating or cooling 
season. Section 2704(f)(2) of the LIHEA (42 U.S.C. 8624(f)) provides 
that LIHEA payments must be treated consistently regardless of whether 
the payments are received directly or indirectly and that the full 
amount of the payments must be considered to be expended by the 
household for heating or cooling expenses. These requirements were 
proposed to be included in new paragraph (d)(6)(ii)(C). We did not 
receive any comments on this provision and are adopting it as proposed.
    We also included in new paragraph (d)(6)(iii) the basic 
requirements for allowing a deduction when a household receives direct 
or indirect assistance in paying its shelter expenses. If a household 
receives direct assistance that is counted as income and incurs a 
deductible cost, the entire expense is included in the excess shelter 
deduction computation. If the household's bill is paid by a vendor 
payment that is counted as income, the household is likewise entitled 
to the expense. We did not receive any comments on this provision and 
are adopting it as proposed.
    We proposed to delete the last sentence in 7 CFR 273.2(f)(1)(iii) 
which prohibits a household that wishes to claim expenses for an 
unoccupied home from using the standard utility allowance. One State 
agency supported this change; we are adopting it as proposed. We 
proposed to add a sentence to 7 CFR 273.9(d)(6)(ii)(C) to provide that 
only one standard utility allowance can be allowed if the household has 
both an occupied home and an unoccupied home. We did not receive any 
comments on this provision and are adopting it as proposed.

D. Household Options

    Current regulations at 7 CFR 273.9(d)(6)(vii) provide that 
households may claim verified actual costs rather than a standard 
allowance (except for the telephone standard). Under current rules at 7 
CFR 273.9(d)(6)(viii), households have the right to switch between the 
use of actual utility costs and a standard at the time of 
recertification and one additional time during each 12-month period. 
Section 5(e)(7)(iii)(II) of the Act, as amended by section 809 of 
PRWORA, provides that a State agency that has not made use of a 
standard mandatory must allow a household to switch between actual 
expenses and the standard or vice versa only at recertification. 
Therefore, the option to switch one additional time during each 12-
month period is being removed. Since some households may be certified 
for 24 months under the certification period requirements of section 
3(c) of the Act, as amended by PRWORA, we propose that these households 
be allowed to switch at the time of the mandatory interim contact. 
Under the proposed reorganization of the regulations, the ``switching'' 
requirements would be included in 7 CFR 273.9(d)(6)(iii)(D). Although 
one State agency opposed the elimination of the household's right to 
switch one additional time during each 12-month period, we are adopting 
the provision as proposed because the option to switch one additional 
time was deleted from the Act by PRWORA.
    Current policy is that households may choose between actual 
expenses and a standard when they move. We proposed in new paragraph 
(d)(6)(iii)(D) that a household would have the opportunity to select 
either the standard or actual costs at the new address when that 
household moves. The advocate groups supported this provision. We are 
adopting it as proposed.

E. Mandatory Standards

    Section 809 of PRWORA amends section 5(d) of the Act to provide in 
section 5(d)(7)(C)(iii)(I) that a State agency may, at its option, make 
use of a standard utility allowance mandatory for all households with 
qualifying utility costs, provided:
    (a) The State agency has developed one or more standards that 
include the cost of heating and cooling and one or more standards that 
do not include the cost of heating and cooling, and
    (b) The standards will not increase Program costs.
    Households that are entitled to the standard will not be able to 
claim actual costs even if they are higher. Households not entitled to 
the standard will be able to claim actual allowable costs. Using 
mandatory standards does not bestow entitlement to a standard a 
household would not otherwise be entitled to receive. For example, 
households in public housing units which have central utility meters 
and charge households only for excess heating or cooling costs are not 
entitled to a standard that includes heating or cooling costs, but they 
may claim the LUA.
    We proposed to provide in paragraph (d)(6)(iii)(E) that States 
using both an HCSUA and LUA may mandate use of a standard, provided 
that use of the mandatory standard does not increase Program costs and 
the standards have been approved by FNS. Requests for approval to use a 
single standard for a utility (such as a water standard) would be 
required to include the figures upon which the standard is based. If a 
State wants to mandate use of utility standards but does not want 
individual standards for each utility, the State would be required to 
submit

[[Page 70176]]

information showing the approximate number of food stamp households 
that would be entitled to the nonheating and noncooling standard and 
their average utility costs before implementation of the mandatory 
standards, the standards the State proposes to use, and an explanation 
of how the standards were computed. Four State agencies and many 
advocacy groups submitted comments on the mandatory standards 
provisions. Two State agencies opposed allowing households that are not 
entitled to a standard to claim actual costs, as proposed in paragraph 
(d)(6)(iii)(E). The advocacy groups supported retaining the requirement 
that households not qualifying for any standard be permitted to claim 
actual costs because without this provision, these households would be 
denied any consideration for the real utility costs that they incur. We 
agree with the advocacy groups that the Act entitles households to 
claim shelter expenses and disallowing these actual costs would run 
counter to the entitlement.
    Three State agencies expressed concerns about the requirements in 
proposed paragraph (d)(6)(iii)(E) for the approval of mandatory 
standards by FNS. Two State agencies suggested that States who already 
have mandatory SUAs should not have to resubmit them for approval. One 
State agency felt that the requirements were overly proscriptive. We 
believe that the provisions as proposed are the minimum necessary to 
meet the requirement of ensuring no Program cost increase. State 
agencies with approved mandatory standards do not need to resubmit 
their standards for approval, provided their standards comply with the 
requirements in paragraph (d)(6)(iii)(A).
    Many advocacy groups commented that the prohibition about 
increasing Program costs because of use of a mandatory standard did not 
prohibit increasing the costs of standards to reflect increased utility 
costs and suggested that the regulation be clarified accordingly. We 
agree with the advocacy groups that a clarification is needed. 
Accordingly, we are adopting proposed paragraph (d)(6)(iii)(E) with a 
clarification.

F. Sharing

    Section 5(e)(7)(iii)(II) of the Act requires proration of an HCSUA 
when households live together and share the cost. Current regulations 
at 7 CFR 273.9(d)(6)(viii) provide that if a household lives with and 
shares utility expenses with another household, the State agency must 
prorate a standard among the households or allow the actual costs of 
each household. The State agency determines the proration method if a 
standard is used.
    Although the Act requires that an HCSUA be prorated among 
households that share the heating or cooling expense, it does not 
require that all standards be prorated and does not specify how the 
HCSUA should be prorated. Therefore, we did not propose to regulate in 
this area. Two State agencies supported giving State agencies the 
flexibility to determine the method of proration. Many advocacy groups 
suggested that the final regulations not require prorating of the SUA 
if all of the individuals who share utility expenses but are not in the 
food stamp household are excluded from the household only because they 
are ineligible. We are adopting this suggestion and have modified 
paragraph (d)(6)(iii)(F) accordingly.

G. Adjustment of Standard Deduction--7 CFR 273.9(d)(8)

    Current paragraph (d)(8) describes adjustments to be made to the 
standard deduction. Section 809 of PRWORA sets the amounts by year. We 
proposed removing this paragraph because the amounts are now specified 
in the law. We received no comments on this and are adopting it as 
proposed.

7 CFR 273.10

How Will State Agencies Prorate Benefits at Recertification?

    Under section 827 of PRWORA, State agencies must prorate benefits 
at initial certification and at recertification if there has been any 
break in certification following the last month of certification, 
except for migrant and seasonal farmworker households. For migrant and 
seasonal farmworkers, the term initial month means the first month for 
which the household is certified following any period of more than 30 
days during which the household was not certified. We proposed to amend 
7 CFR 273.10(a)(1)(ii) and 7 CFR 274.10(a)(2) to conform to the new 
statutory requirement.
    We received one comment on this provision from a State agency which 
suggested that for migrant and seasonal farmworker households, the term 
initial month should mean the first month for which the household is 
certified following any month during which the household was not 
certified for participation. This suggestion has merit as food stamp 
households participate on a calendar or fiscal month basis, not a daily 
basis. We are adopting this change in the final rule.
    We received one comment from an advocacy group which suggested that 
language be incorporated that prohibited proration if a State agency 
rather than a household was at fault for a gap in participation. We 
agree that a household should not be penalized for a State agency 
error. However, the Act is specific that any break in participation 
requires proration. In order to ensure that households are not 
penalized for State agency errors, we have added a reference in section 
273.10(a)(2) to provisions in section 273.14(e) concerning delayed 
processing of recertification applications. This issue is addressed 
further in the discussion on recertification.

How Will State Agencies Determine the Length of Certification Periods?

    Section 801 of PRWORA amended section 3(c) of the Act and 
eliminated specific certification periods by type of household. PRWORA 
now provides that the certification period cannot exceed 12 months, 
except that the certification period may be up to 24 months for 
households in which all adult household members are elderly or 
disabled. Section 801 requires that the State agency have at least one 
contact with each certified household every 12 months.
    We proposed to amend 7 CFR 273.10(f) to reflect the new 
certification period requirements of PRWORA. We proposed that State 
agencies may certify households for no more than 12 months. However, 
State agencies may certify households in which all adult members are 
elderly or disabled for no more than 24 months, provided the State 
agency makes at least one contact every 12 months with each such 
household. Therefore, if the State agency certifies a household in 
which all adult members are elderly or disabled for 18 months, there 
must be at least one contact with the household by the end of the first 
12 months. State agencies may use any method they choose for this 
contact, including a change report form or a telephone call.
    We included a special condition for treatment of one-time medical 
expenses as averaging an expense over more than 12 months could result 
in a very small expense each month. Therefore, we proposed to amend 7 
CFR 273.10(f)(1)(iii) as follows: Households certified for more than 12 
months that incur a one-time medical expense in the first 12 months of 
the certification period may elect to (1) Budget the expense in one 
month, (2) average the expense over the remainder of the first 12 
months of the certification period, or (3) average it over the 
remainder of the

[[Page 70177]]

certification period. One-time expenses reported after the 12th month 
of the certification period would be allowed in one month or averaged 
over the remainder of the certification period, at the household's 
option. We also proposed to add a reference to the budgeting options to 
7 CFR 273.10(d)(3) for conformity. As we received no adverse comments 
on this change, we are adopting the language as proposed.
    In addition to removing the provision of section 3(c) of the Act 
that the 12-month limit on certification periods could be waived, 
section 801 of PRWORA removed the requirement that the certification 
period of households in which all members received PA or GA must 
coincide with the period of the grant. It also removed the requirement 
that State agencies certify monthly reporting households for 6 or 12 
months, unless FNS granted a waiver. We proposed to revise 7 CFR 
273.10(f) and to remove 7 CFR 273.21(a)(3) to reflect these changes. We 
also proposed to include in the new 7 CFR 273.10(f)(2), the provision 
at 7 CFR 273.21(t) that State agencies must certify for 2 years monthly 
reporting households residing on reservations, unless a waiver is 
approved. This requirement is based on section 6(c)(1)(C)(iv) of the 
Act, which was not affected by the amendment to section 3(c). As we 
received no adverse comments on these changes, we are adopting the 
language as proposed.
    We proposed to include in revised 7 CFR 273.10(f)(3) the provision 
of current 7 CFR 273.10(f)(9) concerning the assignment of 
certification periods to households claiming a deduction for legally 
obligated child support payments. State agencies complained about the 
requirement to limit the certification periods of households claiming 
the child support deduction. Given the flexibility the Department 
otherwise provided State agencies to assign certification periods based 
on the stability of household circumstances in all other instances, 
they felt they were in the best position to determine the length of the 
certification period for these households. The advocacy groups 
supported more flexibility in this area. We agree with the commenters. 
The Department is dropping the current limitation from the final rule.
    However, the advocates also commented on the proposed deletion of 
certification period requirements in 7 CFR 273.10(f)(4). They felt that 
the elimination of guidelines for certification period length based on 
household circumstances would negatively affect households, 
particularly the working poor. Further, they felt that the increased 
use of 3-month certification periods as an error reduction tool has 
proven burdensome and may be part of the cause of the recent caseload 
reduction. The Department has considered these comments and has 
reviewed the changes made by PRWORA concerning mandatory certification 
period lengths. While PRWORA did remove certain mandated requirements, 
PRWORA did not create any requirements or prohibitions other than the 
12 and 24 month maximums. We share the advocates' concerns about the 
unexplained caseload reductions and the need to reduce the burden 
involved in participating in the program for low-income working 
families. Therefore, in response to the comments from the advocates, we 
have decided to maintain guidelines for assigning certification periods 
in the regulations. These guidelines are: that households should 
generally be assigned certification periods of 6 months or greater; 
that State agencies may assign 3 month certification periods for 
households with unstable circumstances, such as ABAWDs or household 
with zero net income; and that certain households may have 
circumstances that are so unstable or that may only be eligible for a 
very short period of time that a certification period of one or two 
months may be warranted. It is anticipated that very few households 
would be certified for one or two months.
    The Department recognizes that short certification periods pose a 
particular burden to working families by forcing more frequent 
reapplications that require more visits to the local office and more 
paperwork. In particular, many low-income workers do not enjoy fully 
predictable employment situations and their earnings fluctuate. The 
income reporting options announced by the Department in 1999--status 
reporting and quarterly reporting--aimed at more effective management 
of these cases. The new option announced in this regulation to only 
require reports of changes that make working households income-
ineligible is a much bolder step. The Department believes that 
fluctuating earned income should not force households into short 
certification periods intended for households with unstable 
circumstances, but rather that States should use these new reporting 
options announced in this rule and earlier guidance to successfully 
manage this portion of their caseload.
    Because the Department is aware that State agencies are reluctant 
to assign working households long certification periods because of 
potential vulnerability for quality control errors resulting from 
unreported changes, the Department is adopting in this final rule an 
optional reporting system for these households. Under this option, 
households with earned income assigned a six-month or longer 
certification period may be required to report only changes in income 
that result in gross monthly income exceeding 130 percent of the 
monthly poverty income guideline, in lieu of the requirement to report 
changes in the amount of gross monthly income that exceed $25. State 
agencies are provided this information by FNS each year, as it is the 
gross monthly eligibility income standard for households. State 
agencies should ensure that households understand that the reporting 
requirement is based on combining all countable sources of income, both 
earned and unearned, received by household members. This reporting 
requirement is consistent with Medicaid rules in many States which 
require families only to report if their income makes them ineligible 
for Medicaid. These households would not be subject to the remaining 
reporting requirements in 7 CFR 273.12(a)(1) unless they are certified 
for longer than six months. Households with earned income that are 
certified for longer than six months shall be required to submit a 
report at six months that includes all of the items subject to 
reporting under paragraph (a)(1).
    State agencies are discouraged from certifying migrant or seasonal 
farmworker households or households in which all members are homeless 
individuals under this option because these categories of households 
are exempt from any type of periodic reporting under Section 6(c)(1)(A) 
of the Food Stamp Act of 1977 (7 U.S.C. 2015(c)(1)(A)) and thus cannot 
be required to submit an interim report at six months. However, if the 
State opts to do so, it may not certify such households for longer than 
six months.
    The State agency shall act on changes reported by the household 
that increase benefits in accordance with 7 CFR 273.12(c) and on 
changes in public assistance and general assistance grants and other 
sources that are considered verified upon receipt by the State agency. 
For households certified for six months, State agencies may opt to 
waive every other face-to-face interview in accordance with 7 CFR 
273.2(e). This reporting option is incorporated into 7 CFR 273.12(a).
    We also proposed to make a conforming amendment to remove 7 CFR 
272.3(c)(5) from the regulations and renumber paragraphs (c)(6) and 
(c)(7).

[[Page 70178]]

Paragraph (c)(5), which authorized waivers of the certification period 
requirements in section 3(c) of the Act, is now obsolete. We also 
proposed to make a conforming amendment to remove 7 CFR 273.11(a)(5), 
which addresses certification period requirements for households with 
self-employment income. This paragraph is unnecessary because PRWORA 
removed from the Act the provision regarding certification period 
length for these households. As we received no adverse comments on 
these changes, we are adopting the language as proposed.

How May State Agencies Adjust the Length of Certification Periods?

    To provide more State agency flexibility in its day-to-day 
operation of the Program, we proposed to add a new section (7 CFR 
273.10(f)(4)) allowing State agencies to shorten a household's 
currently assigned certification period under certain circumstances 
with a notice of adverse action. Under current policy, State agencies 
may shorten certification periods (close the food stamp case) once 
established when a household leaves a PA or GA program, when the State 
agency needs to adjust the caseload to more evenly distribute the 
workload, when a household reports a change that indicates that the new 
circumstances are very unstable, or when the household fails to provide 
required information regarding a change in household circumstances. 
When a household's certification period is shortened under these 
circumstances, the State agency must send a notice of expiration (NOE), 
or for households subject to monthly reporting, the State agency must 
shorten the certification period with an adequate notice in accordance 
with 7 CFR 273.21(m).
    We proposed to consolidate in new paragraph (f)(4) most situations 
where shortening the certification period would be allowed. We proposed 
to eliminate the use of the NOE as a vehicle for shortening 
certification periods. In place of the NOE, State agencies would use 
the notice of adverse action (NOAA) for early case closure. The new 
paragraph would provide specific authority to shorten the certification 
period when the State agency has information indicating that the 
household is not reporting income properly, the household has become 
ineligible, a household reports a change that indicates that the new 
circumstances are very unstable, or the household fails to provide 
adequate information regarding a change in household circumstances 
other than income. Only in the instances set forth in the new paragraph 
could State agencies schedule a household for early termination of 
benefits.
    We proposed a two-step process for shortening certification 
periods. First, the State agency must provide the household written 
notice that it has reason to believe the household's circumstance have 
changed. The notice must clearly specify the basis for the State 
agency's belief and the actions the State agency expects the household 
to take. The notice must give the household at least 10 days to contact 
the State agency and clarify its situation. Second, at the end of the 
period allowed for responding to the notice, the State agency may issue 
a notice of adverse action to shorten the certification period if: (1) 
The household does not respond; (2) the household does not provide 
sufficient information to clarify its circumstances; or (3) the 
household agrees that changes in its circumstances warrant filing a new 
application. The notice of adverse action must meet the requirements of 
7 CFR 273.13 and explain the reason for the action. We also proposed a 
conforming amendment to 7 CFR 273.11(g)(5).
    The Department's proposal generated much adverse commentary. State 
agencies and advocacy groups objected to the proposal for shortening 
certification periods, but for different reasons. State agencies were 
accustomed to shortening certification periods with the NOE to require 
the household to clarify its circumstances with a full recertification. 
Accordingly, they complained of the complexity of the proposed 
requirement to specify in writing what issues they wanted the household 
to clarify. Some State agencies thought the two-step process 
unnecessarily lengthened the time for addressing problem cases. One 
State commenter questioned the need for a written request for 
clarification if the household were reporting the change directly to an 
eligibility worker. On the other hand, advocacy groups worried that 
State agencies would abuse the procedure by requiring households to 
recertify based on picayune changes in household income or expenses, or 
by applying an overly rigorous definition of reported ``unstable 
circumstances.'' Moreover, they viewed the proposal as inconsistent 
with the Department's initiatives encouraging State agencies to assign 
the longest possible certification periods to households. Some thought 
that the Department should curtail entirely or severely limit the 
ability of State agencies to shorten certification periods in the final 
rule.
    We are not swayed by the State agencies' objections. The NPRM 
presented a very strong legal argument for shortening certification 
periods with the NOAA instead of the NOE. We were very concerned by 
what has become the routine use of the NOE to shorten certification 
periods. It appears that eligibility workers have become inclined 
simply to close cases, without making the effort to determine if the 
household could continue participation in the Program absent a complete 
recertification. We believe that use of the proposed two-step process 
will reduce the number of costly recertifications and preclude 
households from making needless trips to the food stamp office. 
Finally, use of the NOAA will bring food stamp case closure procedures 
into closer conformance with the other Federal safety net programs and 
many TANF programs.
    Nor are we totally swayed by the advocacy groups' fears either. 
When State agencies assign a certification period to a household, there 
is no absolute guarantee that benefits will remain constant throughout 
the certification period, or that the household will remain eligible. 
Recipient households have an obligation to report changes during a 
certification period as required by the regulations. State agencies 
have an obligation to question a household's continued eligibility or 
benefit amount when eligibility workers receive reports indicating a 
significant change in household circumstances. We remain convinced that 
there are times when early closure of a household's case serves a 
legitimate purpose of preserving Program integrity or furthering 
payment accuracy. We believe that State agencies will find it is in 
their own best interest to assure that eligibility workers explore 
continuing eligibility with households before taking steps to close the 
food stamp case. Finally, the requirement to use the NOAA prior to 
closing the case affords the household the protection of requesting a 
fair hearing and continuation of benefits up to the end of its original 
certification period.
    The Department is retaining the basic proposal, with some 
modifications reflecting the comments received. The final rule adds a 
new paragraph (4) to section 273.10(f), which provides only two basic 
instances when the State agency may shorten a certification period. 
These are: (1) When the State agency receives information which 
indicates that the household is ineligible and (2) when the household 
does not cooperate in clarifying its circumstances. State agencies must 
use the NOAA in any instance where it is necessary to terminate 
benefits during

[[Page 70179]]

the certification period. A prohibition against using the NOE to 
shorten certification periods has been added to section 273.10(f)(4). 
Henceforth, State agencies will use the NOE only in the manner 
originally envisioned in the Act, that is, simply as a vehicle for 
notifying households that their assigned certification period is coming 
to an end, and outlining the procedures for continuing their 
participation in the Program. The Department decided that it would be 
extremely difficult, if not impossible, to develop criteria for early 
closure of cases which eligibility workers could apply fairly and 
consistently. In letter after letter, commenters pointed out the 
difficulty households have in simply contacting local agencies, much 
less getting an appointment for an interview, if their case is closing. 
Case closure places households where the adult members are either 
workers or care givers particularly at risk of becoming non-
participants, even though they continue to be eligible. The Department 
wishes State agencies to apply a consistent policy that a household 
must be ineligible for benefits before its case is closed, either 
because it no longer meets the criteria for participation or because it 
does not cooperate in clarifying its circumstances. Loss of public 
assistance benefits or a change in employment could not be considered 
sufficient in and of itself to meet the conditions for shortening a 
certification period. Accordingly, we took the approach in the final 
rule that State agencies must work with households to clarify their 
circumstances and adjust benefit amounts, in accordance with sections 
273.12(c)(1) and 273.12(c)(2), without requiring a complete 
recertification. If an eligibility worker feels that a household's 
circumstances are ``unstable,'' then the worker should emphasize 
reporting requirements with the household.
    We are also adopting the conforming amendment to 7 CFR 
273.11(g)(5), with a modification to include a reference to changes 
reported in accordance with the provisions of 7 CFR 273.21.
    We are addressing the procedural aspects of processing unclear 
information in a new section 273.12(c)(3). We direct readers to that 
section of the preamble for further discussion of shortening 
certification periods.
    Finally, in paragraph (f)(5), we proposed to continue to prohibit 
lengthening of a household's current certification period once it is 
established. State agencies commented that the proposal was 
antithetical to other provisions in the proposed rule which allowed 
greater flexibility in setting the length of certification periods. 
Advocacy groups felt that the Department should allow State agencies to 
extend certification periods. An extension of the food stamp 
certification period to align the case with review dates of other 
State-administered assistance could avoid more frequent and possibly 
redundant food stamp reviews. The final rule allows State agencies to 
extend certification periods. This authority to lengthen certification 
periods gives States broad flexibility to extend certification periods, 
such as to align the food stamp certification period with the Medicaid 
certification period. However, PRWORA limits certification periods to 
24 months for households in which all adult members are elderly or 
disabled, or 12 months for other households. The final language 
stipulates that the total months of the certification period cannot 
exceed the statutory limits. We are also requiring that the household 
must receive proper notification if the State agency extends the 
certification period. State agencies must advise the household of the 
new certification ending date with a notice containing the same 
information as the notice of eligibility set forth in section 
273.10(g)(1)(i)(A). This will assure that the household is aware of its 
extended certification period, as well as its rights and 
responsibilities during the extended period.

Self-Employment Expenses--7 CFR 273.11(a)(4) and (b)(2)

    Current regulations at 7 CFR 273.11(a)(4) contain requirements for 
determining the allowable costs that can be excluded in determining the 
amount of self-employment income to be counted. Paragraph (a)(4)(i) 
provides that the allowable costs of producing self-employment income 
include, but are not limited to, certain identifiable costs. Section 
273.11(b)(1) provides that households with income from boarders may 
elect from among several methods of determining the cost of doing 
business, including a flat amount or fixed percentage of the gross 
income, provided that the method used to determine the flat amount or 
fixed percentage is objective and justifiable and is stated in the 
State's food stamp manual. Paragraph (b)(2) provides that households 
with income from day care may choose one of the following in 
determining the cost of meals provided to the individuals: the actual 
documented costs of meals, a standard per-day amount based on estimated 
per-meal costs, or the current reimbursement amounts used in the Child 
and Adult Care Food Program. We proposed to consolidate allowable costs 
of producing self-employment income and include them in a revised 
paragraph (b). We did not receive any comments on the proposed 
reorganization and are adopting it as proposed.
    To simplify the certification process and respond to State agency 
requests for increased flexibility, we proposed to add in new paragraph 
(b)(3)(iv) (mistakenly identified as paragraph (b)(3)(iii) in the 
preamble of the proposed rule) an option for State agencies to use the 
same standard self-employment expense amounts or percents established 
for households receiving TANF benefits under Title 
IV-A of the Social Security Act. We received comments from three State 
agencies and one State association supporting this proposal. We are 
adopting it as proposed.
    In addition, section 812 of PRWORA required the Department to 
establish by August 22, 1997, a procedure by which a State may submit a 
method for producing a reasonable estimate of the cost of producing 
self-employment income in place of calculating actual costs. FNS issued 
a guidance memorandum in compliance with the statutory requirement on 
August 1, 1997. The method proposed by the State agency and submitted 
to FNS for approval must be designed so that it does not increase 
Program costs. The method may be different for different types of self-
employment.
    To implement the provisions of section 812 of PRWORA, we proposed 
to amend 7 CFR 273.11 to provide in new paragraph (b)(3)(iv) that State 
agencies may submit requests to FNS to use a simplified method of 
calculating self-employment expenses for specified categories of 
businesses. The request must include a description of the proposed 
method, information concerning the number and type of households 
affected, and documentation indicating that the proposed procedure 
would not increase Program costs. We received comments from one State 
association and three State agencies recommending that FNS develop the 
standards rather than the individual State agencies. Section 812 of 
PRWORA provides that States agencies are to submit the methods. 
Therefore, we are not adopting the commenters' suggestion.
    We also received comments from advocates that recommended that the 
rules allow a State agency to include in any standardized figure an 
amount that represents the typical capital costs associated with self-
employment. Current policy at 7 CFR 273.11(a)(4)(ii) precludes allowing 
the cost of capital

[[Page 70180]]

assets in determining self-employment income. In response to this 
comment, we are taking the opportunity to revise our policy to allow 
capital costs in determining self-employment income. We believe that 
this change recognizes that capital costs are a legitimate expense in 
producing self-employment income and that the change will support the 
self-employed working poor. Accordingly we have revised the proposal to 
delete proposed paragraph (b)(2)(i) and have redesignated proposed 
paragraphs (b)(2)(ii) and (iii) as paragraph (b)(2)(i) and (ii) 
respectively. We have modified paragraph (b)(1) to include capital 
assets as an allowable cost.
    Current regulations allow households to choose between a standard 
amount or actual costs in claiming expenses incurred in producing 
boarder and day-care income. However, section 812 of PRWORA requires 
FNS to establish a procedure whereby States may request to use a method 
of producing a reasonable estimate of excludable expenses ``in lieu of 
calculating the actual cost of producing self-employment income.'' In 
accordance with this provision, we proposed in new paragraph (b)(3) 
that State agencies, rather than households, must determine whether to 
use actual costs or another approved method to determine self-
employment expenses. We received comments from two States agencies and 
one State association supporting this proposed change. We are adopting 
it as proposed.
    We also proposed to take this opportunity to completely revise 7 
CFR 273.11(a) to simplify the regulations and increase State agency 
flexibility. Currently, 7 CFR 273.11(a) contains special procedures for 
determining a household's income from self-employment. Current 
regulations provide that income received from self-employment is offset 
by the cost of producing the self-employment income. The remaining 
income is then averaged over the number of months it is intended to 
cover. We proposed to revise and combine portions of paragraphs (a)(1), 
(a)(2), and (a)(3) and remove superfluous language and examples without 
changing any policy contained in those provisions. In addition to the 
comments discussed above concerning capital costs, we received comments 
from one State agency supporting the revision of 7 CFR 273.11(a) and 
one State agency suggesting that State agencies be allowed to determine 
what allowable costs could be excluded. As discussed above, we have 
changed the policy concerning capital costs. Other than this 
modification, we are adopting the revisions as proposed.
    To increase State agency flexibility, we would eliminate some 
prescriptive requirements in the current regulations at 7 CFR 273.11(b) 
regarding the treatment of shelter expenses paid by boarders. 
Currently, paragraph (b)(1)(i) specifies that contributions made by the 
boarder to the household to cover its shelter expenses are included as 
income to the household. The current provision further specifies that 
expenses paid by the boarder to someone outside of the household cannot 
be counted as income to the proprietor household. In addition, the 
current regulation in paragraph (b)(1)(iii) provides requirements 
addressing whether costs paid by the boarder count in determining the 
proprietor household's entitlement to a shelter deduction. We proposed 
to eliminate these prescriptive requirements in favor of letting State 
agencies determine the appropriate way to handle these shelter 
expenses. Two State agencies and one State association supported the 
proposed revision. Accordingly we are adopting paragraph (b)(3)(ii) as 
proposed.

Treatment of the Income and Resources of Ineligible Aliens--7 CFR 
273.11(c)(2)

    Current regulations at 7 CFR 273.11(c)(2) provide that the benefits 
of a household containing either a person disqualified for failure to 
provide a social security number or an ineligible alien must be 
determined as follows: the resources of the ineligible member count in 
their entirety to the rest of the household; all but a pro rata share 
of the ineligible household member's income is counted; and the 20 
percent earned income deduction is applied to the prorated income 
earned by the ineligible member, and all but the ineligible member's 
pro rata share of the household's allowable shelter, child support, and 
dependent care expenses which are either paid by or billed to the 
ineligible member is allowed as a deductible expense for the household. 
We proposed to renumber paragraph (c)(3) as (c)(4), to remove the 
provisions regarding ineligible aliens from (c)(2), and to add a new 
paragraph (c)(3) for ineligible aliens.
    Section 818 of PRWORA amended section 6(f) of the Act (7 U.S.C. 
2015(f)) and grants State agencies the statutory authority to count all 
or all but a pro rata share of the income of an alien who is in an 
ineligible category listed under the alien provisions of 6(f) of the 
Act, i.e., those ineligible prior to PRWORA. They are primarily 
visitors, tourists, diplomats, students, and undocumented aliens. 
Proposed paragraph (c)(3) would provide that State agencies must count 
all of the resources and either all or all but a pro rata share of the 
income and deductions of these ineligible aliens. Excluded from the 
provisions of (c)(3)(i) are the categories of aliens eligible under the 
Act listed in new paragraphs (3)(i)(A) through (E).
    One State agency asked if it could count all of the alien's income 
for purposes of applying the gross income test and only all but a pro 
rata share for other purposes. The State agency was concerned that 
counting a pro rata share of the alien's income could result in some 
households with ineligible aliens being eligible whereas a similar 
household made up of citizens with the same income would be ineligible 
based on gross income. To remedy this situation, we proposed to allow 
the State agency to count all of the alien's income for purposes of 
applying the gross income test for eligibility purposes but only count 
a pro rata share for applying the net income test and determining the 
level of benefits. This State agency option applies to aliens who do 
not meet the alien eligibility requirements in section 6(f) of the Food 
Stamp Act.
    PRWORA made additional categories of aliens ineligible for food 
stamp benefits, beyond those ineligible under section 6(f) of the Act. 
The majority of these aliens are refugees and asylees who have been in 
this country for more than 7 years and lawful permanent residents 
except those who can be credited with 40-quarters of work or who were 
living in this country on August 22, 1996, and were elderly on that 
date or are now disabled or under age 18. PRWORA did not address the 
treatment of the income and resources of these additional categories of 
ineligible aliens. Congress did not grant State agencies statutory 
authority to count all or all but a pro rata share of the income of 
PRWORA-ineligible aliens. Further, the amended version of subsection 
6(f) of the Act is explicitly limited by its plain language to aliens 
in categories ineligible prior to the enactment of PRWORA. In the 
preamble of the NPRM, we examined various options for counting the 
resources and income of those categories of PRWORA-ineligible aliens 
and selected two options for comment.
    We proposed to allow the State agency to pick one State-wide option 
for determining the eligibility and benefit level of households with 
members who are aliens made ineligible under PRWORA. State agencies may 
either: (1) Count all of the aliens' resources and a pro-rated share of 
the aliens' income and deductions; or (2) count all of the

[[Page 70181]]

aliens' resources, not count the aliens' income and deductions, but cap 
the resulting allotment for the eligible members at the allotment 
amount the household would receive were it not for the PRWORA 
eligibility restrictions. Option (1) merely continues the policy that 
most State agencies are pursuing with respect to PRWORA-ineligible 
aliens. State agencies operating State Option Programs under section 
8(j) of the Act may find option (2) attractive in terms of simplifying 
administration. This option would require two benefit calculations. In 
calculation (1), the State agency would determine eligibility and 
benefit level as if all PRWORA-ineligible aliens could still receive 
Federal benefits. In calculation (2), the State agency would determine 
eligibility and level of benefits for the eligible members, excluding 
the income and deductions of the PRWORA-ineligible aliens; however, the 
benefit amount could not exceed the amount determined in calculation 
(1). In State Option Programs, the difference between calculation (1) 
and calculation (2) would be the State's share of benefits payable to 
FNS. Funding for state-to-state technical assistance visits will be 
available through our State Exchange program for States wishing to 
learn about the automation procedures necessary for implementation of 
this option. We proposed to allow a second variance exclusion period 
under 7 CFR 275.12(d)(2)(vii) for States which implement option 1, and 
then decide at a later date to implement option 2. For aliens 
ineligible under section 6(f) of the Act and for those unable or 
unwilling to document their alien status, the proposed rule would 
reflect the statute which permits the State agency the option to count 
all or all but a pro rata share of such an alien's income and require 
that all of such an alien's resources be counted.
    The Department's proposals generated a great many comments. Many 
State agencies thought the proposal to distinguish between aliens 
ineligible under the Act and those ineligible under PRWORA was too 
complex. They felt that Congress intended to allow State agencies to 
apply the same options for treatment of income and deductions to all 
aliens. Several State agencies praised the Department's decision to 
allow the ``option 2'' treatment. Other State agencies decried this 
option, stating that they might feel pressure to implement ``option 
2,'' should the Department offer that option in the final rule. One 
State agency stated that its State Option Program provides benefits to 
all qualified aliens, not just the categories of aliens set forth in 
proposed paragraphs (3)((i)(A) through (E). Accordingly, the State 
agency suggested that the Department adjust the proposed language to 
provide simply that all qualified aliens are excluded from the 
provisions of (3)(i). On the other hand, advocacy groups generally 
favored the options offered; however, some had reservations. One such 
group worried that State agencies would find ``option 2'' complex to 
administer and error-prone. Thus, State agencies would be reluctant to 
implement an otherwise helpful option. The group suggested that the 
Department modify ``option 2'' as follows. The State agency would apply 
the gross income test to the household, including the PRWORA-ineligible 
alien members. If the household passed the gross income test, the State 
agency would exclude the PRWORA-ineligible alien's income and 
deductions to determine the benefit amount. At its discretion, the 
State agency could add a second calculation as in ``option 2'' to 
prevent an increase in benefits.
    After carefully considering the comments on this issue, the 
Department has decided to adopt the proposed language in the final 
rule, with some modifications. We are not changing the options 
available to State agencies for treatment of the income and deductions. 
We believe the rationale provided in the preamble to the NPRM for 
proposing these options still remains valid. As is always the case when 
the Department offers options in the regulations, or chooses not to 
regulate a certain matter, State agencies must be prepared to defend 
the decisions taken with respect to choosing a particular option or 
dealing with the unregulated matter. The Department is not adopting the 
State agency's suggestion to exempt only qualified aliens from the 
provision allowing a State agency to count all of the ineligible 
alien's income and deductions, but excluding that member from the 
household for the eligibility and benefit calculation. The purpose of 
the provision in the proposed rule was to give some degree of 
protection to now-ineligible aliens who were eligible prior to the 
PRWORA amendments. To that end we are adding to the final rule two 
groups of aliens we inadvertently omitted from the proposed language, 
aged, blind, or disabled aliens admitted for temporary or permanent 
residence under section 245A(b)(1) of the INA; and special agricultural 
workers admitted for temporary residence under section 210(a) of the 
INA. Further, the Department feels that the rulemaking process is not 
the most appropriate venue for dealing with the intricacies of State 
Option Programs. FNS will work with State agencies through the plan 
approval process to give State agencies the maximum possible latitude 
to craft State Option Programs which are responsive to each State's 
unique situation. Finally, the Department is not adopting the advocacy 
group's suggestion for modifying ``option 2.'' We considered and 
discarded similar options in formulating the NPRM. The Department wants 
to avoid creating a regulatory scheme where similarly situated 
households in which all members are either U.S. citizens or eligible 
aliens would receive less benefits than a household in which some 
members are in food stamp eligible status and others are not.
    To conform to the changes the Department is making to the 
provisions for deeming of sponsor income and resources, we are changing 
paragraph (c)(3)(v) to specify that State agencies must not include the 
resources and income of the sponsor and the sponsor's spouse in 
determining the resources and income of an ineligible sponsored alien.

Residents of Drug and Alcohol Treatment and Rehabilitation 
Centers--7 CFR 273.11(e)

    Current rules at 7 CFR 273.11(e) set forth the procedures for 
certifying residents of a drug addict or alcoholic treatment and 
rehabilitation (DAA) centers for Program participation. In the NPRM, 
the Department proposed to revise the title of paragraph (e) and 
paragraphs (e)(1) through (5) to make the procedures clearer, to add 
two new provisions contained in section 830 of PRWORA, and to take into 
account electronic benefit transfer (EBT) issuances.
    Paragraph (e)(1) of current rules provides that individuals in DAA 
centers may individually apply for food stamp benefits, but 
certification must be accomplished through an authorized representative 
who is an employee of the treatment center. Section 830 of PRWORA 
amended section 8 of the Act (7 U.S.C. 2017(f)) to allow the State 
agency the option of requiring households to designate the DAA center 
as their authorized representative for the purpose of receiving 
allotments on behalf of the households. In the NPRM, we proposed that 
this change be included in new paragraph (e)(1) and that it apply only 
with regard to obtaining and using benefits on behalf of the household. 
The current regulatory requirement in paragraph (e)(1) that households 
residing in treatment centers must apply and be certified through an 
authorized representative would continue to apply.

[[Page 70182]]

    Paragraph (e)(5)(i) of current rules provides that if a resident 
leaves the DAA center, the center must provide the household with its 
full allotment if the allotment has been issued and no portion of the 
allotment has been spent by the center on behalf of the household. If a 
resident household leaves the center prior to the 16th of the month and 
a portion of the allotment has already been spent by the center on 
behalf of the household, the center must provide the departing 
household with one-half of its monthly allotment. If the household 
leaves the center on or after the 16th of the month, the household is 
not entitled to any portion of the allotment. The center must return 
any unspent benefits of a household that has left the center to the 
State agency. Section 830 of PRWORA amended section 8 of the Act to 
allow State agencies the option of providing an allotment for the 
individual to: (a) The center as an authorized representative for a 
period that is less than 1 month; and (b) the individual, if the 
individual leaves the center. Since State agencies will generally not 
know in advance when a resident is going to leave the center, we 
proposed to allow State agencies to routinely issue allotments for 
household's in DAA centers on a semi-monthly basis, e.g., half of the 
allotment could be issued on the first of the month and half could be 
issued on the 16th of the month.
    We also proposed to amend current regulations at 7 CFR 273.11(e)(2) 
to take into account various EBT systems being used. We did not endorse 
any single EBT design, but did require that any design or State 
procedures used as part of the design used to accommodate DAA 
facilities assure that a household has access to one-half of its 
allotment when it leaves the center before the 16th of the month.
    We also proposed to delete current paragraphs (e)(3)(i) through 
(iii) which provide that the expedited and regular processing standards 
apply to residents of DAA centers as well as other households and the 
requirement for the State agency to process changes in circumstances 
and recertification for these households the same as other households. 
These provisions still apply, but it is not necessary to specifically 
mention them.
    We received two comments on our proposed revisions to 7 CFR 
273.11(e), both supportive of the proposed changes. One commenter 
submitted a suggestion for a new system of issuance for DAA centers. 
That suggestion is outside the purview of this regulation and cannot be 
addressed at this time. However, we have forwarded the suggestion to 
the proper area in the Department for its consideration. We are 
adopting the proposed revisions to 7 CFR 273.11(e) as final.

Reporting Changes--7 CFR 273.12

How Will State Agencies Process Reported but Unclear Information on 
Case Changes?

    As stated before in the discussion of changes to 7 CFR 273.10, we 
are clarifying the circumstances under which a State agency must send a 
NOAA to shorten an assigned certification period. To emphasize that 
State agencies must determine if a household is in fact ineligible 
before the State agency may close its case, the final rule adds a new 
section 273.12(c)(3), which sets forth the procedure for acting on 
unclear information. During the certification period, the State agency 
may obtain information about changes in a household's circumstances 
from which the State agency cannot readily determine the effect of the 
change on the household's benefit amount. The State agency might 
receive such unclear information from a third party or from the 
household itself. The State agency must pursue clarification and 
verification of household circumstances by issuing a written request 
for contact (RFC) which clearly advises the household of the 
verification it must provide or the actions it must take to clarify its 
circumstances. The RFC must allow the household at least 10 days to 
respond and to clarify its circumstances, either by telephone or by 
correspondence, as the State agency directs. The RFC must also state 
the consequences if the household fails to respond to the RFC, that is, 
case closure. Consistent with the existing procedure at 7 CFR 
273.2(f)(9)(v) for independent verification of information received 
from IEVS, the State agency must issue a NOAA if the household does not 
respond at all to the notice requesting that it contact the food stamp 
office to clarify its circumstances. Once the household has contacted 
the State agency, it must refuse to cooperate with requests to clarify 
its circumstances before the State agency may close its case. When the 
household responds to the RFC and provides sufficient information, the 
State agency must act on the new circumstances in accordance with 
normal change processing time frames.
    One State agency suggested that we allow a procedure it employs in 
its TANF program. Instead of outright termination of cases where 
families do not respond to requests to clarify circumstances, the 
State's TANF program suspends such cases for 1 month before 
termination. The TANF case receives a NOAA stating that after the 
adverse action period expires, the State agency will suspend cash 
assistance for 1 month. If the family responds satisfactorily during 
the suspension period, the State issues the payment for the month of 
suspension, and, if necessary adjusts the cash payment with a 
subsequent NOAA. This procedure fits well with the proposed two-step 
procedure and has merit as the State agency reinstates households 
without their needing to file an application, if they responded 
satisfactorily during the suspension period. The final rule allows this 
procedure as a State agency option.

How Will TANF Leavers Transition to Nonassistance Food Stamps?

    We proposed to retain the long-standing procedure for adjusting the 
certification periods of households leaving the TANF rolls, with a 
modification. Current 7 CFR 273.12(f)(4) requires that State agencies 
adjust food stamp participation of TANF leavers with a NOAA when it is 
clear that changes in the household's circumstances require a reduction 
or termination of benefits. Current 7 CFR 273.12(f)(5) outlines the 
procedures a State agency must follow when TANF leavers do not fully 
apprise the State agency of their new circumstances and the State 
agency does not possess enough information to make an informed 
determination about their continuing food stamp eligibility. In this 
instance, the State agency closes the food stamp case with a NOE. 
Despite our concerns over the legal sufficiency of using the NOE in 
lieu of the NOAA, we provided a rationale for continuing its use in 
this limited instance. However, we recognized that in some cases, the 
State agency might need only one or two pieces of information or 
documentation to determine continuing food stamp eligibility, depending 
on the level of information available in the case file. We believed it 
would be preferable to avoid requiring the household to report for a 
full recertification, if a response to a notice to the household 
requesting information could clear up a few remaining points of 
eligibility. Thus adjusting the household's participation with a NOAA 
would be appropriate. Accordingly, we proposed an option which would 
allow State agencies to close cases with a notice of adverse action, 
provided the State agency has sent the household a notice clearly 
specifying the actions the household must take to continue its 
eligibility.

[[Page 70183]]

    The few State agencies that commented on the proposal thought the 
Department should not change the current procedure. However, many 
advocacy groups commented that, in many cases, local agencies simply 
terminate the food stamp cases of TANF leavers without any effort to 
explore their continuing eligibility for food stamps. Advocacy groups 
felt that TANF leavers have the impression that cash assistance and 
food stamps are inextricably connected and that filing an application 
for food stamps after cash assistance ends would be futile. Sadly, a 
Mathematica Policy Research review of the recent literature on access 
and participation in food stamps and Medicaid by TANF leavers study 
(Dion and Pavetti, pp 14-15, 23 and 32) had similar findings. The 
Department of Health and Human Services funded this review with 
financial assistance from the Department.
    Upon reviewing the public comments on this provision, it became 
clear to us that the requirements of 7 CFR 273.12(f)(4) are honored 
more in the breach. With or without the sanction of the State agency, 
eligibility workers seem to issue routinely a NOE to all TANF leavers, 
without exploring the household's continuing eligibility for food 
stamps. This inappropriate use of the provisions of 7 CFR 273.12(f)(5) 
might account for at least a part of the decline in food stamp 
participation in some States. Failure to follow the requirements of 7 
CFR 273.12(f)(4) violates a clear mandate of the Act. Section 11(i)(2) 
of the Act (7 U.S.C. 2020(i)(2)), which remains unchanged by PRWORA, 
stipulates that: ``* * * [N]o household shall have * * * its benefits 
under the food stamp program terminated solely on the basis that * * * 
its benefits have been terminated under any of the programs carried out 
under the statutes specified in the second sentence of section 5(a) 
[TANF, SSI and AABD programs] and without a separate determination by 
the State agency that the household fails to satisfy the eligibility 
requirements for participation in the food stamp program.'' [Emphasis 
added.]
    In the final rule the Department is taking firm action to implement 
the statutory mandate. As stated previously in the discussion of the 
amendment to 7 CFR 273.10(f)(4), the final rule eliminates entirely the 
use of the NOE to shorten certification periods. We are collapsing 
current 7 CFR 273.12(f)(4) and 7 CFR 273.12(f)(5) into one paragraph 
which sets forth the procedures for reviewing the participation of food 
stamp households who are leaving cash assistance. There is no change in 
the procedure for adjusting food stamp participation when the State 
agency is fully aware of the household's circumstances. However, if 
circumstances are unclear, the State agency must attempt to contact the 
household to elicit enough information to make a determination on the 
household's continuing food stamp eligibility. Using the two-step 
procedure set forth at 7 CFR 273.12(c)(3) will assure that TANF leavers 
receive a thorough review of their food stamp case contemporaneously 
with the TANF closure action and an opportunity to present or clarify 
its circumstances prior to any action to close the food stamp case.
    The revised procedure dovetails with the Medicaid policies 
stipulating that States may not deny Medicaid eligibility to a family 
or family member simply because the family is ineligible for TANF. Nor 
may a State deny Medicaid eligibility because a family member loses 
eligibility under a particular Medicaid eligibility category. Under the 
Medicaid program, States are prohibited from denying or terminating 
Medicaid eligibility unless all possible avenues to Medicaid 
eligibility have been affirmatively explored and exhausted. The final 
rule makes it clear that the Federal government expects State agencies 
to assure that eligibility workers evaluate TANF leavers for continuing 
eligibility in the Federal safety net programs to which they are 
entitled.

Transitional Food Stamps for TANF Leavers

    Several advocacy groups put forth a suggestion for providing TANF 
leavers ``transitional food stamp benefits,'' much in the same way 
families receive transitional Medicaid after leaving the TANF rolls. 
Transitional food stamp benefits would serve several purposes. First, 
providing a known amount of food stamp benefits assistance would 
provide a critical work support that helps a household meet its 
nutritional needs while making the transition from TANF cash 
assistance. Second, transitional food stamp benefits provide time for 
household circumstances to stabilize before the State agency attempts 
to redetermine eligibility and benefit levels. Further, providing 
transitional food stamps would reinforce with households the fact that 
food stamp participation is not dependent upon eligibility for TANF. 
The Department agrees with this suggestion. In the final rule we are 
offering State agencies an alternative procedure for issuing 
transitional benefits. The details are set forth below.

What Is the Transitional Benefits Alternative (TBA)?

    The gist of the new policy is that the State agency would freeze 
food stamp benefits of households leaving TANF rolls for up to 3 
months, depending on the period of time since the household's last 
certification. Near the close of the transition period, the State 
agency would act on information collected from the household, either 
adjusting the benefit level, or closing the household's food stamp case 
because it is no longer eligible or it has failed to provide sufficient 
information to continue its eligibility for the Program. In some cases, 
the State agency would have to conduct a full recertification of 
eligibility, if it was not possible to extend the household's 
certification period beyond the statutory maximum for its 
circumstances. As the household would have no reporting requirement 
during the transitional period, the State agency would incur no QC 
liability for unreported changes in household circumstances during the 
period of time benefits are frozen.
    Providing States the ability to offer transitional benefits is 
consistent with those provisions of the Act which give the Secretary 
broad authority to determine the most expedient way of moving families 
from participating as recipients of both TANF and food stamps to 
participating in food stamps without cash assistance. Congress 
generally left it to the Secretary's discretion to define through 
regulations the establishment of reporting systems and action time 
frames.

Is TBA Mandatory or Optional?

    While the Department encourages State agencies to offer TBA to 
households leaving the TANF rolls, in order to ease the transition from 
PA, we did not offer this procedure in the NPRM. State agencies had no 
opportunity to comment, either to raise objections or to provide 
suggestions. For this reason, the final rule establishes TBA as a State 
agency option, not a mandatory provision of the regulations. As noted 
previously, State agencies electing the TBA would incur no QC liability 
for unreported changes in household circumstances during the period of 
time benefits are frozen.

How Would It Work?

    When the State agency takes action to close a household's TANF 
case, it would freeze the household's food stamp benefit amount for a 
maximum of 3 months. This is the household's transition period. The 
State agency could extend the household's

[[Page 70184]]

certification period, if necessary, to provide the 3-month transition 
period. The end of the transition period does not require 
recertification, so State agencies can also extend the certification 
period beyond the 3-month transition period. However, the State agency 
must not exceed the statutory maximum, usually 12 months since the last 
certification.
    Any freezing of benefits presupposes some degree of suspending 
action on reported changes. Freezing benefit amounts could be 
accomplished in several different ways. The commenters suggested 
freezing benefits by switching TANF leavers from prospective 
eligibility and budgeting to retrospective budgeting and eligibility. 
However, the Department did not adopt this suggestion. Instead, in the 
final rule we adopted the approach of lengthening the time frame State 
agencies have to act on changes in household circumstances. Families 
leaving TANF would receive a ``Transition Notice'' (TN) advising the 
household that due to the closure of cash assistance, food stamp 
participation will need reevaluation; the food stamp allotment is 
stabilized at the pre-TANF closure amount; and the household will not 
have to report changes to the food stamp office. However, by a date 
certain, the State agency must have enough information to keep the 
household's certification in force. In this regard, the TN would act 
very much like the RFC process described previously. Also, if the 
household will lose income as a result of the closure of its TANF case, 
the State agency must notify the household the frozen benefit amount 
reflects the loss of cash assistance. In some cases, the State agency 
would have to schedule the household for a full recertification because 
the household could receive no more extensions of its certification 
period. In such circumstances the TN would look very much like a NOE. 
If the household does report changes in its circumstances during the 
transition period, the State agency must adjust the household's benefit 
amount in accordance with normal procedures if the change would 
increase benefits. For example, the household might lose a source of 
income or incur a new expense. However, if the reported change would 
decrease benefits, the State agency would defer acting on that change 
until the month after the last month of the transition period. The 
Department believes that the final rule gives State agencies maximum 
flexibility to address notice requirements for the various 
circumstances under which food stamp household leaving the TANF program 
may have their food stamp participation reevaluated and continued, if 
eligible.
    As the transition period ends, the State agency would close the 
food stamp case or adjust the household's benefit level with a NOAA 
based on the information collected through the TN process during the 
transition period, recertify the household after issuing a NOE if it 
has reached the maximum number of months in its certification period 
during the transition period, or close the case with a NOAA, if the 
household had not provided sufficient information through the TN 
process during the transition period to determine continuing 
eligibility. At the end of the transition period, the State agency may 
extend the household's certification period in accordance with 
Sec. 273.10(f)(5).

What Groups of TANF Leavers Would Get TBA?

    Families generally leave TANF when they go to work, exceed the 
income or assets limits (due to employment or other factors), fail to 
comply with the behavioral or procedural requirements of TANF, reach 
the Federally or State-defined time limit, lose technical eligibility, 
or leave voluntarily to ``bank'' their TANF months. For State agencies 
electing the TBA, the Department has structured the final rule to allow 
maximum flexibility in deciding which families leaving TANF would be 
eligible for TBA. The final rule requires State agencies, at a minimum, 
to provide TBA to all families with earnings who leave TANF. If the 
household is losing income as a result of leaving TANF, the State 
agency must adjust the food stamp benefit amount before freezing the 
benefit amount. For example, such treatment might be appropriate when a 
TANF family leaves cash assistance because it has reached the time 
limit for such assistance and has gained no source of income which 
would replace the lost cash assistance. On the other hand, under the 
final rule State agencies may not provide TBA to households which are 
leaving TANF because: A household member has violated a TANF provision 
and the State is imposing a comparable food stamp sanction in 
accordance with sections 819, 829, or 911 of PRWORA; a household member 
has violated a food stamp work requirement; a household member has 
committed an intentional Program violation; or the TANF case is closing 
because the State agency is taking action in response to information 
indicating the household failed to comply with food stamp reporting 
requirements, e.g., the State agency discovered unreported income or 
assets through computer matching indicating noncompliance with food 
stamp reporting requirements. The Department chose not to allow 
participation of such households in TBA for several reasons. First, it 
would not be fair to households who have broken no food stamp rules and 
are compliant with food stamp reporting requirements to provide a 
special treatment to households which are under sanction for food stamp 
noncompliance or which are not complying with food stamp reporting 
requirements. Second, the State agency is well aware of the 
circumstances of households which are noncompliant with cash assistance 
requirements and which are incurring a comparable food stamp sanction, 
or have violated other food stamp requirements, or food stamp reporting 
requirements. Beyond the groups the Department has determined must or 
must not participate in TBA, the State agency is free to specify any 
additional group or groups of TANF leavers for participation in TBA. 
However, it is important to point out that households that are 
ineligible for transitional benefits based on these restrictions may 
still be eligible for food stamps. State agencies must determine their 
continued eligibility based on procedures at Sec. 273.12(f)(3).

How Would QC Review These Cases?

    QC will determine whether the State agency correctly selected the 
household for TBA. If the State agency incorrectly assigned the 
household to TBA, QC will review the case following standard QC 
procedures. If the State agency terminated a household's benefits and 
the State agency should have assigned the household to TBA, the QC 
reviewer will cite an invalid negative action. If the State agency 
correctly assigned and issued the household TBA, then the QC reviewer 
will continue to determine the appropriate benefit level according to 
the following procedures:
    1. The QC reviewer will cite in the error determination any errors 
that exist at the time the benefits are frozen for the 3 additional 
transitional months.
    2. The QC reviewer will do a comparison between the certification 
of the sample month versus the actual sample month circumstances to 
determine if the case is within the $25 tolerance for citing an error.
    3. The QC reviewer will focus on the circumstances in the last 
month prior to issuance of TBA to determine the benefit amount for the 
sample month.
    4. The QC reviewer will determine if the State agency appropriately 
processed any reported circumstances

[[Page 70185]]

that would result in an increase in benefits.

Notice of Adverse Action--7 CFR 273.13

    We proposed to amend 7 CFR 273.13(a)(1) to clarify that the Notice 
of Adverse Action (NOAA) is considered timely if the advance notice 
period conforms to that period of time defined by the State agency as 
an adequate notice for its public assistance caseload, provided that 
the notice period is a set period of time which is no less than 10 days 
and no more than 18 days from the date the notice is mailed to the date 
the notice period expires. We did not propose any change to current 
regulations which provide that the adverse action take effect in the 
month following the month in which the notice expires, unless the 
household has requested a continuation of benefits pending the outcome 
of a fair hearing. The few State agencies that commented on this 
provision opposed it. They believe that the current rule accommodates 
State flexibility in setting advance notice periods to conform with 
TANF and warrants no change. One State agency felt that tying the food 
stamp advance notice period to the TANF period would limit access to 
the program because TANF time frames are more stringent. One State 
agency commented that its current advance notice period could be longer 
than 18 days because of a court-ordered settlement. Advocate groups 
favored maintaining the 10-day floor on the minimum advance notice 
period, but urged us to allow State agencies to conform the advance 
notice period with the Medicaid, even if the Medicaid advance notice 
period is more than 18 days. In response to the commenters' concerns, 
we have decided to retain the current rule to maintain the current 
level of flexibility for State agencies. The rule continues to allow 
State agencies to conform food stamp and Medicaid NOAA time frames with 
TANF, so long as there is a minimum of 10 days. As we noted in the 
preamble to the proposed rule, most State agencies currently have a 
notice period of 10 to 18 days. Thus the proposed change would have 
little impact on current Program costs.

Recertification--7 CFR 273.14

    We proposed to amend 7 CFR 273.14 to conform the recertification 
application process to the changes made pursuant to PRWORA relative to 
the initial application process (discussed earlier in this preamble). 
More specifically, we proposed to:
    (1) eliminate reference to a model notice of expiration (NOE).
    (2) remove the sentence encouraging State agencies to send a 
recertification form, interview appointment letter, and statement of 
required verification with the NOE.
    (3) remove certain requirements about the application form for 
recertification and replaced these with general requirements, 
specifically: (a) That the recertification process must only be used 
for those households applying for recertification prior to the end of 
the current certification period; (b) that the State agency must, at a 
minimum, obtain sufficient information that, when added to information 
already contained in the casefile, will ensure an accurate 
determination of eligibility; (c) that the method of obtaining and 
recording information from the applicant household must be established 
by the State agency and may include a specially designed 
recertification application or the State agency may choose to simply 
annotate changes since the last certification on an existing 
application; (d) that the State agency must issue a notice of required 
verification, which would provide a clear written statement of the acts 
a household must perform to cooperate with the application process, 
identify potential sources of verification, and offer assistance to 
special needs households; and (e) that a new signature, whether 
handwritten or electronic, be obtained from the applicant at the time 
of each recertification.
    (4) remove the option allowing State agencies to request the 
household to bring the recertification form to the interview or return 
it by a specified date because it is unnecessary.
    (5) require only one face-to-face interview once every 12 months, 
regardless of the number of interim certification periods. Further, if 
the State agency conducts a telephone interview, the State agency must 
mail the application to the household to obtain the necessary 
signature.
    (6) eliminate the requirement that the State agency conduct an 
annual face-to-face interview at the same time as the PA or GA 
interview.
    (7) remove the option that the State agency may schedule an 
interview prior to the recertification application filing date, 
provided that the household was not denied for failure to attend such 
an interview and remove the requirement that the State agency schedule 
an interview on or after the date the application was filed if an 
interview was not previously scheduled and that the State agency 
reschedule any missed interview scheduled prior to receipt of an 
application. We proposed to retain the requirement that the State 
agency schedule interviews so that the household has at least 10 days 
to provide the required verification before the certification period 
expires.
    (8) remove the requirements regarding the notice of required 
verification and clarify that benefits cannot be prorated if the time 
period for providing verification extended beyond the end of the 
certification period.
    (9) revise and simplify the language regarding delays in 
application processing but retain the current State agency options. For 
a more detailed explanation of the proposed changes, the reader should 
refer to the proposed rule.
    We received comments from one State association, four State 
agencies, and many advocacy groups. The State association and the 
States generally supported the proposed changes as more flexible. The 
advocacy groups felt that the current rules better protected 
recipients, particularly the working poor, and recommended that a 
number of the current regulatory provisions be retained, including the 
requirement that the household be given at least 10 days to provide 
verification, barring procedural denials of households that have not 
refused to cooperate, and requiring the State agency to reschedule the 
first missed interview.
    We have considered the comments received carefully. In response to 
the comments, in recognition of the need to carefully balance State 
flexibility and recipient rights, and in recognition of the concerns 
about unexplained and excessive caseload drops, we decided to adopt 
certain proposed revisions, to keep some existing regulations, and to 
modify some of the proposed changes.
    We are adopting the proposed changes to paragraph (b)(1) to 
eliminate the references to the model notice of expiration (NOE). FNS 
no longer has a model NOE so the reference is outdated. However, after 
due consideration of the comments we received about the importance of 
ensuring that recipients are aware of their rights and their 
responsibilities, we have decided not to adopt the proposal to delete 
the sentence encouraging State agencies to send the recertification 
form, interview appointment letter, and statement of required 
verification with the NOE. Although State agencies send out their 
notices and other correspondence consistent with their automated system 
and the options they choose on waiving interviews and scheduling 
appointments, the provision is not binding on State agencies. Further, 
it

[[Page 70186]]

codifies the Department's viewpoint that the interests of recipients 
are best served by providing all the pertinent information about 
recertification at one time. Paragraph 273.14(b)(1)(iii) has been 
modified to incorporate the requirement addressed elsewhere about 
advising households of their right to request a telephone interview.
    We are adopting the revisions to paragraph (b)(2) concerning the 
requirements for the recertification form. There was general support by 
the State agencies for the proposed flexibility in design of 
recertification forms. There were no negative comments received about 
this flexibility.
    We proposed requiring only one face-to-face interview yearly, 
regardless of the number of interim recertifications. However, the 
proposal did not eliminate the requirement for some type of interview 
for the interim recertifications. Some commenters felt that any interim 
interview was unnecessary and indicated that they believed that the 
requirement for an interview at interim recertifications within a 12 
month period was eliminated in the proposed section 273.2(e). We agree 
with the commenters that one interview within a 12 month period is 
sufficient and have revised the rule accordingly to allow State 
agencies the option to require only one interview within a 12 month 
period. In order to ensure that households are aware of their options 
concerning interviews, we have revised paragraph (b)(3)(i) to provide 
the same protections incorporated into 7 CFR 273.2(e) relating to 
interviews.
    One commenter questioned why there was a requirement to mail an 
application to the household to obtain its signature if a telephone 
interview was conducted. We have eliminated the proposed requirement in 
paragraph (b)(3)(i) to mail the application to the household in this 
instance because it is unnecessary. Paragraph (b)(2) already requires 
that each new application for recertification be signed and dated by 
the applicant household. Accordingly we are revising paragraph 
(b)(3)(i) as discussed above.
    We are adopting the proposal to eliminate the requirement in 
paragraph (b)(3)(ii) to schedule the face-to-face interview at the same 
time the household receives a face-to-face interview for PA/GA 
purposes. PRWORA eliminated the requirement for a joint interview, and 
certification periods are no longer necessarily aligned.
    We proposed to delete the first two sentences in paragraph 
(b)(3)(iii) concerning scheduling of interviews. These sentences 
provided: that the State agency may schedule an interview prior to the 
recertification application filing date, as long as the household was 
not denied for failure to attend such an interview; that the State 
agency schedule an interview on or after the date the application was 
filed if an interview was not previously scheduled; and that the State 
agency reschedule any missed interview scheduled prior to receipt of an 
application. We proposed to retain the requirement that the State 
agency schedule interviews so that the household has at least 10 days 
to provide the required verification before the certification period 
expires. One State agency opposed keeping the requirement to schedule 
interviews so that the household has at least 10 days to provide the 
required verification before the certification period expires because 
the provision is unworkable if the household files an application very 
shortly before the certification period closes. An advocacy group 
recommended that the rule provide safeguards for scheduling and 
rescheduling of office interviews, including requiring State agencies 
to reschedule a missed first interview for working households. We 
believe that flexibility has been provided to State agencies in 
scheduling interviews for recertification in those instances where 
face-to-face interviews are being required. Households are considered 
to have timely applied if they apply by the 15th day of the last month 
of the certification period. State agencies should schedule interviews 
such that households that timely reapply are recertified by the end of 
their certification period in accordance with 7 CFR 273.14(d)(2). State 
agencies are not currently required to reschedule a missed first 
interview for recertification unless a household requests a new 
interview. We are not establishing a requirement to do so in this rule. 
If a household requests that an interview be rescheduled, the State 
agency is required to schedule a second interview. A clarification 
stating this has been added to paragraph (b)(3)(iii). Also, consistent 
with 7 CFR 273.2, we have added a sentence to paragraph (b)(3)(iii) to 
require that the State agency send any household that misses its 
scheduled interview a Notice of Missed Interview. For recertification 
interviews the Notice of Missed Interview may be combined with the 
notice of denial.
    We proposed to remove the requirements in paragraph (b)(4) 
regarding the notice of required verification and clarify that benefits 
cannot be prorated if the time period for providing verification 
extended beyond the end of the certification period. An advocacy group 
recommended that we maintain the current provisions of 7 CFR 
273.14(b)(4) in order to ensure there were no unnecessary procedural 
denials. We agree with the commenter that there may be confusion that 
could result in inappropriate denials, and therefore, have decided not 
to adopt the proposed removal of the first two sentences. We are adding 
the clarification that benefits cannot be prorated if the time period 
for providing verification extended beyond the end of the certification 
period.
    We proposed to revise and simplify the language in paragraph (e) 
regarding delays in application processing but retain the current State 
agency options. Both State agencies and advocates commented on the 
revision. States approved of the flexibility but were confused about 
some of the meaning. The advocates felt that the revisions were overly 
harsh and could result in inappropriate denials. In response to the 
comments received, we have revised paragraph (e) to provide recipients 
protection from inappropriate denials, intrusive interviews, and 
excessive verification requirements, while continuing to provide State 
agencies with flexibility in administration of its recertification 
process. If a household files an application by the end of its 
certification period, attends any required interview, and submits any 
required verification timely, the household shall be recertified and 
its benefits shall not be prorated. If the household reapplies before 
the end of its certification period, but does not attend a required 
interview and does not request that it be rescheduled and then attend 
the rescheduled interview, or does not provide any required 
verification timely, the household may be denied at the time of the 
failure, at the end of the certification period, or at the end of 30 
days. If the State agency opts to deny a case at the time of the 
failure, and the household completes the missing requirements prior to 
the end of its certification period, the case shall be reopened and 
benefits shall be provided for the full month. If the household 
complies with the missing requirements after the end of its 
certification period, the State agency shall determine whether the 
fault for the delay was the household's or the State agency's. If the 
delay was the fault of the household, benefits shall be prorated from 
the date of compliance. If the State agency was at fault, benefits 
shall be provided for the full month. If the

[[Page 70187]]

household applies within 30 days after the end of its certification 
period, its application would be treated as an application for 
recertification; however benefits would be prorated from the date of 
the application. Further, we have added to paragraph (e)(1) and (2) a 
sentence stating that the procedures in 7 CFR 273.2(h)(1) on 
determining cause of delays in processing of initial applications also 
apply to delays in processing applications for recertification. 
Finally, we are also adding a requirement in paragraph (e)(3) that 
provides that if a household's application for recertification is 
delayed beyond the first of the month of what would have been its new 
certification period thorough the fault of the State agency, the 
household's benefits for the new certification period shall be prorated 
based on the date of the new application; however, the State agency 
shall also provide restored benefits to the household back to the date 
the household's certification period should have begun had the State 
agency not erred and the household been able to apply timely.

Fair Hearings--7 CFR 273.15

    Under section 11(e)(10) of the Act (7 U.S.C. 2020(e)(10)) and the 
current rules at 7 CFR 273.15(a), the State agency must provide a fair 
hearing to any household aggrieved by any action of the State agency 
which affects the participation of the household in the Program. Until 
the enactment of PRWORA, current rules at 7 CFR 273.15(j) did not allow 
the State agency to accept an oral withdrawal of a fair hearing request 
from a household. Under 7 CFR 273.15(j), State agencies are required to 
accept only written withdrawals of fair hearing requests from the 
household or the household's representative (e.g., authorized 
representative).
    Section 839 of PRWORA amended section 11(e)(10) of the Act to 
provide State agencies with the option of accepting an oral withdrawal 
of the fair hearing request from the household. However, if the 
withdrawal request is an oral request, section 839 requires the State 
agency to provide a written notice to the household confirming the 
withdrawal and providing the households with an opportunity to request 
a hearing. To implement section 839 of PRWORA, the proposed rule would 
amend 7 CFR 273.15(j) to allow a State agency the option of accepting 
an oral request to withdraw a fair hearing from the household, which 
would be followed by the State's written confirmation of the withdrawal 
and an offer of a hearing opportunity.
    Numerous comments were received on this proposal. The majority of 
comments were from legal aid organizations and advocacy groups which 
strongly opposed the PRWORA provision permitting State agencies the 
option to accept oral withdrawals from households. The comments from 
these groups are discussed in more detail in the following paragraphs. 
A few State agencies provided comments that, in general, support the 
option provided by PRWORA to States.
    Legal aid organizations and advocacy groups requested that either 
the proposal be withdrawn or that the Department include additional 
protections to ensure households are properly notified of their right 
to a fair hearing. Many of the these commenters recommended that the 
final rules prohibit State agencies from soliciting or suggesting oral 
withdrawals of hearing requests. Legal aid organizations and advocacy 
groups also recommended that the required notice from the State agency 
to the household confirming its oral withdrawal should allow the 
household to reinstate the hearing request within 10 days of receipt of 
the notice.
    Under current rules at 7 CFR 273.15(c)(1), within 60 days of 
receipt of a request, the State agency must assure that the hearing is 
conducted, a decision is reached, and the household and local agency 
are notified of the decision. If the household advises the State agency 
that its oral withdrawal was incorrect and that it in fact wants the 
fair hearing process to continue (i.e., be reinstated), legal aid 
organizations and advocacy groups suggested that State agencies be 
given a modest amount of time, in addition to the original 60 day time 
frame, to schedule, conduct and render a decision. Therefore, rather 
than allowing the State agency an additional 60 days from the date the 
State agency receives notice from the household to continue the fair 
hearing, commenters recommend that the initial 60 day time frame (i.e., 
the date of the household's original request) be extended by the time 
between the date the State agency sent the confirming notice and the 
time it received the request from the household, or its representative, 
for reinstatement of the fair hearing. For instance, assume a household 
receives a NOAA on May 1 and submits the request for a fair hearing May 
5. By May 15th, the State agency and household agree that there is no 
basis for a fair hearing. The household member advises the State agency 
verbally of his or her desire to withdraw the hearing request. On May 
20th, the State agency sends the household a Notice, as required in 
this final rule, advising the household of its requested withdrawal and 
of its right to request a hearing. On May 26th, the household returns a 
notice to its caseworker explaining that it still wants the fair 
hearing. The State agency receives the household's request on May 30, 
ten days from the date it sent the household the notice. As proposed by 
the commenters, the initial 60-day time frame, which, in this example 
would be until July 1, would be extended by 10 days, until July 10. The 
legal aid organizations and advocacy groups argue that without these 
revised time frames, some households would lose their right to 
continued benefits.
    As specified under 7 CFR 273.15(g), a household shall be allowed to 
request a hearing on any action by the State agency, including loss of 
benefits, which occurred in the prior 90 days. Under 7 CFR 273.15(k), a 
State agency must allow a household to continue to participate in the 
FSP and receive continued benefits at the level of benefits being 
provided to the household prior to the NOAA, when the household 
requests a fair hearing within the period provided by the NOAA, usually 
10 days. Continued benefits must be provided unless the household's 
certification period has expired or the continued benefits are not 
allowed as specified under 7 CFR 273.15(k)(2). Continued benefits are 
not provided when the State agency's adverse action was a termination 
of the household's participation, even though the State agency must 
provide a fair hearing of this action if requested by the household.
    Finally, some legal aid and advocacy groups objected to allowing 
the State agency to accept an oral withdrawal from the household's 
authorized representative. To be consistent with current rules at 7 CFR 
273.15, the Department proposed to allow a household's authorized 
representative to make the oral withdrawal.
    The Department concurs that more guidance is necessary to ensure 
that, in State agencies electing to accept an oral withdrawal of their 
request to a fair hearing, households are properly informed of their 
rights and the procedures for reinstating a fair hearing if the 
household believes the State agency misinterpreted its oral statement 
or if the household reverses its decision. The Department further 
agrees that certain time frames must be identified to ensure State 
agencies process fair hearings in a timely manner. At the same time, 
the Department is interested in providing State agencies with 
flexibility to better administer the

[[Page 70188]]

Program without excessive or burdensome requirements.
    Accordingly, the Department is amending its proposal at section 
273.15 to include the following. First, the Department is amending its 
proposal at section 273.15(j)(2) to specify that a State agency may 
notify the household, or its representative, about the option of orally 
withdrawing the fair hearing request when the State agency and 
household reach agreement about issues related to the fair hearing 
request. However, the final rule at section 273.15(j)(2) explicitly 
prohibits the State agency from coercion or actions which would 
influence the household or its representative to withdraw the 
household's fair hearing request. While we are aware that this 
provision duplicates current law prohibiting State agencies from 
denying a household of its right to a fair hearing, we believe that an 
explicit statement in the fair hearing section of Program regulations 
is appropriate and necessary.
    Second, the final rule amends section 273.15(j)(2) to specify that 
State agencies electing to accept an oral expression from the household 
or its representative to withdraw a fair hearing must provide written 
confirmation notice to the household within 10 days of receiving the 
request for withdrawal as per the request of commenters.
    Third, 7 CFR 273.15(j)(2) is amended in this final rule to specify 
that the written notice must also advise the household, or its 
representative, that it must notify the State agency within 10 days of 
receiving the State agency's confirming notice if it wishes to continue 
with the fair hearing process. The Department is establishing this time 
frame to ensure that households are aware of what action must be taken 
and to be consistent with other programmatic time frames provided to 
households.
    Fourth, should a household advise the State agency that it wishes 
to reinstate its initial request for a fair hearing, the Department is 
specifying at section 273.15(j)(2) that, as required under 7 CFR 
273.15(c)(1) or (2), the State agency must complete the fair hearing 
process within 60 days, or 45 days, as appropriate, of receiving notice 
from the household that it wishes to continue the fair hearing. The 
Department is not structuring the time frame for completing the hearing 
process in the manner suggested by commenters because the time frame 
may not provide State agencies with sufficient time to process and 
render a complete hearing decision. State agencies, at their option, 
may establish time frames designed to expedite the fair hearing process 
as proposed by commenters, but they are not required to do so.
    Fifth, to ensure that the household's rights to continued benefits 
are not adversely affected, the Department is amending section 
273.15(k)(2) to clarify that, once continued or reinstated, benefits 
must be continued until the expiration of the 10-day period for 
advising the State agency that it wishes to continue with the fair 
hearing. Thus, unless the household is not eligible to receive 
continued benefits or if continued benefits are terminated for another 
reason specified under 7 CFR 273.15(k)(2), the household is assured of 
continued benefits until all opportunity for a fair hearing has been 
given to the household, or its representative.
    Finally, the Department is including an additional amendment at 
section 273.15(j)(2) to clarify that the household has one opportunity 
to request a reinstatement of a fair hearing after the household 
withdraws its request orally. The Department believes that one 
reinstatement assures the household its right to a fair hearing while 
preventing prolonged administrative actions. The Department wishes to 
clarify that this requirement in no way prohibits the household from 
requesting a fair hearing over an adverse action unrelated to the 
reinstated fair hearing. State agencies are encouraged to design 
notices which clearly advise the household of its right to a fair 
hearing whenever it believes it is aggrieved by an action of the State 
agency.
    The Department is not taking action in response to commenters who 
expressed concern about the State agency accepting an oral withdrawal 
of a fair hearing from a household representative. The Department 
proposed this amendment to establish consistent procedures between 
State agencies accepting either written or oral withdrawal of a fair 
hearing request and current rules under which State agencies may accept 
written requests to withdraw the household's fair hearing request. An 
authorized representative is chosen by the household to assist the 
household in matters related to the household's participation in the 
FSP. Commenters did not offer compelling justification to exclude the 
authorized representative, who otherwise speaks for the household in 
all FSP-related matters, from this particular action. Furthermore, 
should the household disagree with its representative's oral request to 
withdraw the fair hearing, it is assured the opportunity to reinstate 
the request. Thus, the Department is adopting the proposed provision 
allowing the household's representative to orally withdraw the 
household's request in this final rule.

Simplified Food Stamp Program--7 CFR 273.25

    In writing the proposed rule, the Department limited the 
regulations to those areas of the statute where the Department has 
explicit authority to establish rules for the operation of a Simplified 
Food Stamp Program (SFSP) or where clarification is needed. Since the 
purpose of an SFSP is to simplify the administration of the Food Stamp 
Program for States while maintaining the nutritional safety net for 
applicants or recipients, the Department chose not to regulate many 
features of the SFSP so that States would have the flexibility to 
design programs that best serve their particular needs and the needs of 
the low-income families they are serving. The Department intends to 
maintain these goals in final regulations.
    One hundred and eighteen (118) organizations commented on the 
proposed regulations for the SFSP.
1. Clarification of Households Eligible To Participate in an SFSP
    Approximately one third of the commenters suggested that final 
regulations should make it clear that participation in the SFSP is 
limited to households in which at least one member is receiving 
``assistance'' under a program funded through the Temporary Assistance 
for Needy Families (TANF) grant to distinguish such households from 
those who are receiving other benefits not categorized as assistance. 
As the statute specifically restricts participation in an SFSP to 
households receiving ``assistance'' under a TANF program, the final 
rule clarifies this point by adding the term ``assistance'' to the 
definition section with a cross-reference to the definition of 
assistance as provided in TANF regulations at 45 CFR 260.31. Unless a 
form of support to a household qualifies as ``assistance'' under the 
TANF program, the household is not eligible to participate in an SFSP.
    Approximately one-third of the commenters suggested the Department 
clarify that the SFSP is applicable only to those households in which a 
member is receiving TANF assistance and not to households that are 
jointly applying for TANF assistance and food stamps. Consequently, 
State agencies cannot use the SFSP to lengthen application processing 
time frames for these households. As legislation governing the SFSP 
restricts participation to those households with members receiving TANF 
assistance, the final rule adds a new paragraph (c) to clarify that 
State

[[Page 70189]]

agencies must use regular Food Stamp Program procedures when a 
household applies for benefits under the SFSP and is not authorized to 
receive TANF assistance.
2. Restrictions on Eligibility
    Approximately one-third of the commenters suggested the final rule 
should clarify that the SFSP cannot import new restrictions on 
eligibility from its TANF program such as the family cap policies that 
make certain household members ineligible for benefits or policies that 
prevent a family from qualifying for cash assistance. The Department 
believes the statute sufficiently addresses these situations; 
consequently, regulatory clarification is not necessary. Legislation 
governing SFSP operations at 7 U.S.C. 2035(f)(3)(B) stipulates that the 
value of food stamp allotments issued under a simplified program must 
be based on the Thrifty Food Plan (TFP) reduced by 30 percent of net 
income. As the TFP is based on household size, the Department would not 
allow a State to reduce the size of a household under the SFSP through 
a family cap or other similar policies. In addition, the legislation 
requires a household to be receiving TANF assistance to be eligible to 
participate in the SFSP. If a State agency determines that a household 
is ineligible for TANF assistance, the household would not be able to 
participate in an SFSP and could not be subject to SFSP rules. State 
agencies would use regular FSP rules and procedures to determine 
eligibility for such households. In situations where an individual 
member of the household is ineligible for TANF, the household is 
considered a mixed-household and subject, therefore, to the limit on 
benefit reductions for these households.
3. Households With High Shelter Costs
    Approximately one-third of the commenters suggested the final rule 
set minimum standards for preserving the effect of the excess shelter 
deduction. Legislation governing the SFSP at 7 U.S.C. 2020(e)(25)(B) 
stipulates that State plans for operating SFSPs must ``address the 
needs of households that experience high shelter costs in relation to 
the incomes of the households''. Neither the legislative history nor 
the statute itself provides further direction in the application of 
this requirement. The Department anticipates that States can achieve 
the legislative mandate in numerous ways; therefore, it is not 
appropriate for the Department to regulate this provision. To meet the 
statutory requirements, a State could use, for example, multiple 
standards for households with high, medium, low and no shelter costs or 
a standard for households residing in public housing and another for 
non-public housing. Since the legislation specifically requires 
differential treatment for households with high shelter costs versus 
those with low shelter costs, the Department would not allow a State to 
use a single standard based on average shelter costs for all households 
participating in an SFSP. The final rule adds a new paragraph (d) to 
clarify limitations on the use of standards for shelter costs.
4. Opportunity for Public Comment
    The majority of comments addressed the need for public input on 
proposed SFSPs prior to the Department's approval. 101 of the 118 
organizations commenting on the proposed SFSP regulation suggested that 
the Department allow the public an opportunity to comment on State SFSP 
plans prior to their approval either through a comment period or public 
hearings since simplified programs can fundamentally change the food 
stamp benefit calculation in ways unanticipated by legislation or 
regulations. Public input could improve the quality of State plans and 
increase the accountability of State officials submitting simplified 
proposals. In many States, changes to a State's Medicaid or cash 
assistance programs of the magnitude allowed under the SFSP would 
require public hearings or a notice and comment prior to 
implementation. Since the majority of commenters support a process for 
public input on proposed SFSP plans, the Department has decided to 
require that States provide a public comment period or hold public 
hearings or meetings with groups representing recipients' interests on 
their SFSP plans. The Department, however, will not regulate the 
process States must follow for public comments, hearings or meetings. 
The Department is requiring that a State solicit public opinion about 
its SFSP proposal--particularly the portion that deals with changes in 
rules that will affect benefits so that the public understands how cost 
neutrality requirements may result in benefit losses to finance other 
benefit increases. States are encouraged to consult with the Department 
prior to seeking public comments. While the Department is requiring a 
public comment period before final approval of its SFSP plan, the 
statute governing the SFSP requires the Department to approve plans for 
pure-TANF households so long as these plans comply with statutory 
requirements. The final rule adds a new paragraph (e) requiring that a 
State allow a period for the public to comment or hold public hearings 
or meetings with groups representing participants' interests on SFSP 
plans, and to submit a review of these comments with its final SFSP 
plan for Departmental approval.
5. Benefit Reductions for Mixed-TANF Households
    A majority of commenters believe the operation of an SFSP for 
``mixed'' households (in which at least one member, but not all 
members, receive assistance from a TANF funded program) should not 
result in a reduction of benefits for these households. One of the 
statutory requirements governing the simplified program mandates that 
operation of these programs must not increase Federal costs for any 
fiscal year (7 U.S.C. 2035(d)(2)(B)). A program that allows all 
participating households to receive more benefits than they are 
eligible for under the regular Food Stamp Program would increase costs 
to the Federal government and would, therefore, violate statutory 
requirements. States operating SFSPs are not able to meet the statutory 
provisions for cost containment unless the increases in benefits to 
some households are offset by decreases in benefits to other 
households.
    While the Department does not have the authority to limit the 
amount of benefit loss for pure-TANF households, it does have 
discretion in this area with respect to mixed-TANF households. As 
discussed in the proposed rule and our interim guidance on this issue, 
the Department's primary concern is that mixed-TANF households do not 
lose nutritional support while participating in an SFSP. At the same 
time, we recognize that States need flexibility in program design to 
achieve simplification given the constraints of cost containment. To 
meet these objectives, FNS chose not to impose criteria for mixed-TANF 
households that are overly prescriptive and developed a single 
criterion that it believes will achieve the appropriate balance between 
these competing priorities. If a State's SFSP reduces benefits for 
mixed-TANF households, then no more than 5 percent of these 
participating households can have benefit reductions of 10 percent or 
more of the amount they are eligible to receive under the regular Food 
Stamp Program and no mixed-household can have benefit reductions of 25 
percent or more of the amount they are eligible to receive under the 
regular Program

[[Page 70190]]

(commonly called the 5/10/25 percent benefit reduction requirement).
    In developing the 5/10/25 percent benefit reduction requirement 
above, the Department recognized that small reductions in monthly 
allotments could result in changes exceeding this threshold. 
Consequently, the Department proposed to disregard benefit reductions 
of $10 or less from this requirement. Several commenters want to 
increase the amount of the benefit reduction from $10 to $25. The 
Department believes the $10 disregard maintains the appropriate balance 
between State flexibility and safeguarding the nutritional needs of 
participating households. Any reduction, regardless of how small, 
limits a household's access to a nutritious, healthy diet. Since 
benefit loss under a SFSP is permanent, unless the household becomes 
ineligible to participate in a SFSP or the SFSP is terminated, 
disregards above $10 could severely impact a household's ability to 
meet its nutritional needs. To prevent this, the Department plans to 
maintain the benefit reduction disregard at the $10 limit.
    A commenter suggested that the Department substitute the 5/10/25 
percent benefit reduction for a rule that would limit the reductions in 
benefits to mixed-TANF households by no greater percentage amount, and 
to no greater proportion of households, than it reduces benefits to 
pure-TANF households. Legislation governing the SFSP requires the 
Department to approve any State plan for the operation of an SFSP so 
long as the plan does not increase costs to the Federal government and 
it complies with the statutory requirements for operating such 
programs. The legislation further allows the Department to establish 
guidelines for the approval of mixed-TANF households, but not for pure-
TANF households. As the legislation does not limit the amount that 
States can reduce benefits for pure-TANF households, States can reduce 
benefit amounts for these households by any amount. As previously 
discussed, the Department chose to use its discretionary authority to 
ensure that mixed-TANF households do not experience a reduction in 
benefits severe enough to endanger their ability to meet their 
nutritional needs. Therefore, the Department has decided to adopt the 
5/10/25 rule as final.
    Several commenters want to simplify the benefit loss methodology by 
using a single measurement or allow States more flexibility in deciding 
the mechanism for achieving the desired results. The Department 
believes using a standard with incremental limits on the amount that 
States can reduce provides States with greater flexibility in program 
design than does a methodology with a single standard. At the same 
time, this methodology ensures protection of the nutritional safety-net 
for households. In addition, a national standard applied across all 
States ensures equitable treatment for households participating in 
SFSPs.
    A few commenters said the proposed benefit loss methodology is too 
complex. FNS should provide actual methodologies to measure benefit 
reduction of mixed-TANF households. The Department believes that 
regulating a specific methodology for measuring benefit loss for mixed-
TANF households is contrary to the goals of simplification and would 
result in less flexibility for States. Rather than regulating what 
measurement systems States should use, FNS will work with States on an 
individual basis to design a measurement system that fits the scope of 
individual programs.
6. Conforming Language Regarding Benefit Reductions for Pure-TANF 
Households Participating in an SFSP
    The proposed rule described guidelines for reduction of benefits 
for mixed-TANF households. Conforming language containing guidelines 
for reduction of benefits for pure-TANF households should be included 
in the final rule. As previously discussed, legislation governing the 
SFSP requires the Department to approve State plans for pure-TANF 
households so long as it complies with statutory requirements and does 
not increase costs for the Federal government. Since the legislation 
does not establish limits on the amount of benefit loss for pure-TANF 
households, the Department would exceed its authority if it implemented 
conforming guidelines regarding benefit reductions for pure-TANF 
households.
7. Other
    Several commenters suggested States should be given authority to 
develop SFSPs that serve local needs without being constrained by rigid 
and arbitrary requirements. FNS should review SFSP applications on a 
case-by-case basis with minimal advance restriction and should give 
great deference to a State's efforts to fulfill the simplification 
objectives of the law. The Department believes the proposed rule 
provides States with flexibility in designing SFSPs that fit their 
individual administrative needs while preserving the nutritional safety 
net for participating households. To ensure flexibility, the Department 
limited the regulations to those areas of the statute where regulatory 
standards are essential to ensure that simplified programs fulfill the 
mission of the FSP. The Food and Nutrition Service reviews State plans 
for operating SFSPs on a case-by-case basis and approves all plans 
complying with requirements.

Issuance and Use of Coupons--Mail Issuance 7 CFR 274.2

    Prior to the enactment of PRWORA, section 11(e)(25) of the Act (7 
U.S.C. 2020(e)(25)) required State agencies to issue food stamp 
benefits through a mail issuance system in rural areas where households 
generally experience transportation difficulties in obtaining benefits. 
Section 835 of PRWROA deleted direct-mail issuance requirements.
    Current rules at 7 CFR 274.2(g) specify the requirements that State 
agencies must meet in determining the rural areas in need of mail 
issuance. The current regulations at 7 CFR 272.2(g) also require State 
agencies to submit an attachment to the State Plan of Operation 
describing mail issuance requirements.
    To implement this provision, the Department proposed to remove the 
mandatory mail issuance requirements and State plan requirements at 7 
CFR 274.2(g)(1) and (g)(2) and 7 CFR 272.2(d)(1)(xi). However, to 
ensure fair and timely issuance to rural households, the proposed rule 
retained basic provisions at 7 CFR 274.2(g) requiring State agencies to 
issue food stamp benefits through a direct mail issuance system in 
rural areas where households experience transportation difficulties in 
obtaining benefits. These provisions would apply unless an EBT system 
is in place. In areas where direct mail issuance would continue, the 
State agency would determine if any households or geographic areas 
would be granted an exception. These exceptions would be reported to 
FNS as required at 7 CFR 272.3(a)(2) and (b)(2). These sections require 
State agencies to prepare and provide staff with operating guidelines 
and to submit their operating guidelines to FNS.
    The Department did not receive comments on its mail issuance 
proposal. Thus, we are adopting the proposed rules at 7 CFR 
272.2(d)(1)(xi) and 7 CFR 274.2(g) in this final rule without change.

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

    Section 11(e)(1) of the Food Stamp Act and the regulations at 7 CFR 
272.5(c) allow State agencies, at their option, to conduct activities 
designed to

[[Page 70191]]

inform low-income households about the availability, eligibility 
requirements, application procedures, and benefits of the FSP. States 
electing to conduct Program informational activities must submit a 
State plan for FNS approval as specified in the current rule at 7 CFR 
272.2(d)(1)(ix). State agencies with approval from FNS are reimbursed 
at the standard 50 percent rate under section 16(a) of the Food Stamp 
Act (7 U.S.C. 2025(a)) and 7 CFR Part 277 of the corresponding 
regulations.
    Section 847 of PRWORA amended section 16(a)(4) of the Food Stamp 
Act to specify that Federal reimbursement funding not include 
``recruitment activities.'' To implement section 847, the Department 
proposed to amend 7 CFR 277.4(b) to prohibit Federal reimbursement for 
recruitment activities. State agencies could continue to seek 
reimbursement from FNS for Program informational and educational 
activities if they provide a plan to FNS as specified at 7 CFR 
272.2(d)(1)(ix). The Department also requested comments about the 
usefulness of this plan and ideas about how to make the plan approval 
process more efficient.
    Very few comments were received in response to this proposal. One 
commenter suggested that the final rule should include a simple, narrow 
definition of ``recruitment'' to eliminate confusion that may arise 
during the review and approval of a State agency's Outreach Plan. The 
commenter suggested the definition for recruitment as, ``activities 
designed to persuade an individual who has made an informed choice not 
to apply for food stamps to change his or her decision and apply.'' The 
Department is adopting this suggested definition in this final rule 
because it is consistent with the policy FNS has applied when approving 
State plans for conducting Program informational activities. The 
Department intends to encourage and support State outreach activities 
that inform and encourage potentially eligible households to apply for 
food stamp benefits without improperly recruiting applicants.
    Accordingly, the Department is amending section 277.4 in this final 
rule to define recruitment activities.

Implementation

    The greater part of the final rule is effective on January 20, 
2001, 60 days after the date of publication; however, there are some 
exemptions. At 7 CFR 273.2(b)(4)(iv), the final rule is amending a 
provision of another final rule which is not yet effective. The final 
rule ``Food Stamp Program: Recipient Claim Establishment and Collection 
Standards'' published on July 6, 2000 (65 FR 41752) is not effective 
until August 1, 2001. Accordingly, the amendment to 
Sec. 273.2(b)(2)(iv) in this final rule is effective August 1, 2001. 
Moreover, the final rule contains a group of amendments which are not 
effective until OMB approves the associated information collection 
burden. The paragraphs affected are: Sec. 273.2(c)(2)(i), 
Sec. 273.2(e)(1), Sec. 273.2(e)(2)(i), Sec. 273.2(e)(2)(ii), 
Sec. 273.2(e)(3), Sec. 273.4(c)(3)(iv); Sec. 273.12(c)(3); and 
Sec. 273.12(f)(4). FNS will publish a document in the Federal Register 
announcing the effective date of these amendments after approval of the 
information collection requirements by OMB.
    The final rule incorporates at 7 CFR 272.1(g), the implementation 
dates as follows. State agencies may implement the following amendments 
at their discretion at any time on or after the effective date: 
Sec. 272.8; Sec. 272.11(a); Sec. 273.2(f)(10); Sec. 273.2(j)(2)(ii); 
Sec. 273.9(d)(6)(i); Sec. 273.9(d)(6)(iii)(E); Sec. 273.11(a)(3)(v); 
Sec. 273.12(a)(1)(vii); Sec. 273.25; and Sec. 277.4(b). State agencies 
may implement the amendment to Sec. 273.12(f)(4) at their discretion at 
any time after the effective date established by OMB approval of the 
associated information collection burden. State agencies must implement 
the amendments to Sec. 273.2(c)(2)(i), Sec. 273.2(e)(1), 
Sec. 273.2(e)(2)(i), Sec. 273.2(e)(2)(ii), Sec. 273.2(e)(3), 
Sec. 273.4(c)(3)(iv); and Sec. 273.12(c)(3) no later than 180 days 
after the effective date established by OMB approval of the associated 
information collection burden for all households newly applying for 
Program benefits. State agencies must convert current caseloads no 
later than the next recertification following the implementation date. 
State agencies must implement all remaining amendments no later than 
June 1, 2001, for all households newly applying for Program benefits.
    State agencies must convert current caseloads no later than the 
next recertification following the implementation date. Any variances 
would be excluded from quality control analysis in accordance with 7 
CFR 275.12(d)(2)(vii) and 7 U.S.C. 2025(c)(3)(A). The final rule allow 
a second variance exclusion period under 7 CFR 275.12(d)(2)(vii) for 
States which first implement option 1 under 7 CFR 273.11(c)(3)(ii), and 
then decide at a later date to implement option 2.

List of Subjects

7 CFR Part 272

    Alaska, Civil rights, Claims, Food stamps, Grant programs, Social 
programs, Reporting and recordkeeping requirements, Unemployment 
compensation, Wages.

7 CFR Part 273

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

7 CFR Part 274

    Food stamps, Fraud, Grant programs, Social programs, Reporting and 
recordkeeping requirements.

7 CFR Part 277

    Administrative practice and procedure, Food stamps, Fraud, Grant 
programs, Social programs, Penalties.

    Accordingly, 7 CFR Parts 272, 273, 274, and 277 are amended as 
follows:
    1. The authority citation for Parts 272, 273, 274, and 277 
continues to read as follows:

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

PART 272--REQUIREMENTS FOR PARTICIPATING STATE AGENCIES

    2. In Sec. 272.1, add paragraph (g)(161) to read as follows:


Sec. 272.1  General terms and conditions.

* * * * *
    (g) * * *
    (161) Amendment No. 388 The provisions of Amendment No. 388 are 
implemented as follows:
    (i) State agencies may implement the following amendments at their 
discretion at any time on or after the effective date: Sec. 272.8; 
Sec. 272.11(a); Sec. 273.2(f)(9)(i); Sec. 273.2(f)(10); 
Sec. 273.2(j)(2)(ii); Sec. 273.9(d)(6)(i); Sec. 273.9(d)(6)(iii)(E); 
Sec. 273.11(a)(3)(v); Sec. 273.12(a)(1)(vii); Sec. 273.25; and 
Sec. 277.4(b).
    (ii) State agencies may implement the following amendment at their 
discretion at any time after the effective date established by OMB 
approval of the associated information collection burden: 
Sec. 273.12(f)(4).
    (iii) State agencies must implement the following amendments no 
later than 180 days after the effective date established by OMB 
approval of the associated information collection burden for all 
households newly applying for Program benefits: Sec. 273.2(c)(2)(i), 
Sec. 273.2(e)(1),

[[Page 70192]]

Sec. 273.2(e)(2)(i), Sec. 273.2(e)(2)(ii), Sec. 273.2(e)(3), 
Sec. 273.4(c)(3)(iv); and Sec. 273.12(c)(3). State agencies must 
convert current caseloads no later than the next recertification 
following the implementation date.
    (iv) State agencies must implement the amendment to 
Sec. 273.2(b)(4)(iv) no later than August 1, 2001, for all households 
newly applying for Program benefits.
    (v) State agencies must implement all remaining amendments no later 
than June 1, 2001, for all households newly applying for Program 
benefits. State agencies must convert current caseloads no later than 
the next recertification following the implementation date.
    (vi) Acting under policy guidance the Department issued previous to 
the publication of this final rule, several State agencies that have 
identified programs to confer categorical eligibility for food stamps 
that do not meet the criteria established at Secs. 273.2(j)(2)(i)(B), 
273.2(j)(2)(i)(C), 273.2(j)(2)(ii)(A), or 273.2(j)(2)(ii)(B) of this 
chapter. Any such State agency may continue to use these programs to 
confer categorical eligibility for food stamp purposes until September 
30, 2001.
    (vii) A State agency which first implements option 1 under 7 CFR 
273.11(c)(3)(ii), and then decides at a later date to implement option 
2 under that same paragraph is entitled to a second variance exclusion 
period under 7 CFR 275.12(d)(2)(vii).
* * * * *


Sec. 272.2  [Amended]

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

    4. In Sec. 272.4:
    a. Paragraph (d) is removed.
    b. Paragraphs (e), (f), (g), and (h) are redesignated as paragraphs 
(d), (e), (f), and (g) respectively; and
    c. Newly redesignated paragraph (f) is revised to read as follows:


Sec. 272.4  Program administration and personnel requirements.

* * * * *
    (f) Hours of operation. State agencies are responsible for setting 
the hours of operation for their food stamp offices. In doing so, State 
agencies must take into account the special needs of the populations 
they serve including households containing a working person.
* * * * *

    5. In Sec. 272.5:
    a. Paragraph (b)(1)(i) is redesignated as the text of (b)(1) and is 
revised;
    b. Paragraphs (b)(1)(ii) and (b)(1)(iii) are removed;
    c. Paragraphs (b)(2) and (b)(3) are redesignated as paragraphs 
(b)(3) and (b)(4), respectively; and
    d. Paragraph (b)(1)(iv) is redesignated as paragraph (b)(2).
    The revision reads as follows:


Sec. 272.5  Program informational activities.

* * * * *
    (b) * * *
    (1) Nutrition information. FNS must encourage State agencies to 
develop Nutrition Education Plans as specified at Sec. 272.2(d)(2) to 
inform applicant and participant households about the importance of a 
nutritious diet and the relationship between diet and health.
* * * * *
    6. Section 272.8 is revised to read as follows:


Sec. 272.8  State income and eligibility verification system.

    (a) General. (1) State agencies may maintain and use an income and 
eligibility verification system (IEVS), as specified in this section. 
By means of the IEVS, State agencies may request wage and benefit 
information from the agencies identified in this paragraph (a)(1) and 
use that information in verifying eligibility for and the amount of 
food stamp benefits due to eligible households. Such information may be 
requested and used with respect to all household members, including any 
considered excluded household members as specified in Sec. 273.11(c) of 
this chapter whenever the SSNs of such excluded household members are 
available to the State agency. If not otherwise documented, State 
agencies must obtain written agreements from these information provider 
agencies affirming that they must not record any information about 
individual food stamp households and that staff in those agencies are 
subject to the disclosure restrictions of the information provider 
agencies and Sec. 272.1(c). The information provider agencies, at a 
minimum, are:
    (i) The State Wage Information Collection Agency (SWICA) which 
maintains wage information;
    (ii) The Social Security Administration (SSA) which maintains 
information about net earnings from self-employment, wages, and 
payments of retirement income, which is available pursuant to section 
6103(1)(7)(A) of the Internal Revenue Service (IRS) Code; and 
information which is available from SSA regarding Federal retirement, 
and survivors, disability, SSI and related benefits;
    (iii) The IRS from which unearned income information is available 
pursuant to section 6103(1)(7)(B) of the IRS Code; and
    (iv) The agency administering Unemployment Insurance Benefits (UIB) 
which maintains claim information and any information in addition to 
information about wages and UIB available from the agency which is 
useful for verifying eligibility and benefits, subject to the 
provisions and limitations of section 303(d) of the Social Security 
Act.
    (2) State agencies may exchange with State agencies administering 
certain other programs in the IEVS information about food stamp 
households' circumstances which may be of use in establishing or 
verifying eligibility or benefit amounts under the Food Stamp Program 
and those programs. State agencies may exchange such information with 
these agencies in other States when they determine that the same 
objectives are likely to be met. These programs are:
    (i) Temporary Assistance for Needy Families;
    (ii) Medicaid;
    (iii) Unemployment Compensation (UC);
    (iv) Food Stamps; and
    (v) Any State program administered under a plan approved under 
title I, X, or XIV (the adult categories), or title XVI of the Social 
Security Act.
    (3) State agencies must provide information to those administering 
the Child Support Program (title IV-D of the Social Security Act) and 
titles II (Federal Old Age, Survivors, and Disability Insurance 
Benefits) and XVI (Supplemental Security Income for the Aged, Blind, 
and Disabled) of the Social Security Act.
    (4) Prior to requesting or exchanging information with other 
agencies, State agencies must execute data exchange agreements with 
those agencies. The agreements must specify the information to be 
exchanged and the procedures which will be used in the exchange of 
information. These agreements are not part of the State agency's Plan 
of Operation.
    (b) Alternate data sources. A State agency may continue to use 
income information from an alternate source or sources to meet any 
requirement under paragraph (a) of this section.
    (c) Actions on recipient households. (1) State agency action on 
information items about recipient households shall include:
    (i) Review of the information and comparison of it to case record 
information;
    (ii) For all new or previously unverified information received, 
contact with the households and/or collateral

[[Page 70193]]

contacts to resolve discrepancies as specified in Secs. 273.2(f)(4)(iv) 
and 273.2 (f)(9)(iii) and (f)(9)(iv); and
    (iii) If discrepancies warrant reducing benefits or terminating 
eligibility, notices of adverse action.
    (2) State agencies must initiate and pursue the actions on 
recipient households specified in paragraph (c)(1) of this section so 
that the actions are completed within 45 days of receipt of the 
information items. Actions may be completed later than 45 days from the 
receipt of information if:
    (i) The only reason that the actions cannot be completed is the 
nonreceipt of verification requested from collateral contacts; and
    (ii) The actions are completed as specified in Sec. 273.12 of this 
chapter when verification from a collateral contact is received or in 
conjunction with the next case action when such verification is not 
received, whichever is earlier.
    (3) When the actions specified in paragraph (c)(1) of this section 
substantiate an overissuance, State agencies must establish and take 
actions on claims as specified in Sec. 273.18 of this chapter.
    (4) State agencies must use appropriate procedures to monitor the 
timeliness requirements in paragraph (c)(2) of this section.
    (5) Except for the claims actions specified in paragraph (c)(3) of 
this section, State agencies may exclude from the actions required in 
paragraph (c) of this section information items pertaining to household 
members who are participating in one of the other programs listed in 
paragraph (a)(2) of this section.
    (d) IEVS information and quality control. The requirements of this 
section do not relieve the State agency of its responsibility for 
determining erroneous payments and/or its liability for such payments 
as specified in part 275 of this chapter (which pertains to quality 
control) and in guidelines on quality control established under that 
part.
    (e) Documentation. The State agency must document, as required by 
Sec. 273.2(f)(6) of this chapter, information obtained through the IEVS 
both when an adverse action is and is not instituted.


Sec. 272.11  [Amended]

    7. In 272.11:
    a. Paragraph (a) is amended by removing the word, ``shall'' and 
adding the word ``may'' in its place;
    b. Paragraphs (b)(2)(iii), (b)(2)(iv), and (d) are revised; and
    c. Paragraph (e)(2) is removed, and paragraph (e)(1) is 
redesignated as the text of paragraph (e).
    The revisions read as follows:


Sec. 272.11  Systematic Alien Verification for Entitlements (SAVE) 
Program.

* * * * *
    (b) * * *
    (2) * * *
    (iii) For automated SAVE verification through access to the Alien 
Status Verification Index (ASVI), a description of the access method 
and procedures;
    (iv) For secondary verification as described in paragraph (d) of 
this section, the locations of INS District Offices to which 
verification requests will be directed;
* * * * *
    (d) Method of verification. The State agency may verify the 
documentation presented by an alien applicant by completing INS Form G-
845 and submitting photocopies of such documentation to the INS for 
verification as described in Sec. 273.2(f)(10) of this chapter. In 
States that participate in SAVE, the State agency must use this 
secondary verification procedure whenever the applicant-individual's 
documented alien status has not been verified through automated access 
to the ASVI or significant discrepancies exist between the data on the 
ASVI and the information provided by the alien applicant.
* * * * *

PART 273--CERTIFICATION OF ELIGIBLE HOUSEHOLDS


Sec. 273.1  [Amended]

    8. In Sec. 273.1, paragraph (f) is removed.

    9. In Sec. 273.2:
    a. The section heading is revised, and paragraphs (a), (b)(1), 
(b)(2), and (b)(3) are revised.
    b. Paragraph (b)(4)(iv), added at 65 FR 41775 on July 6, 2000, and 
effective August 1, 2001, is revised.
    c. Paragraph (c)(1) is amended by revising the first sentence and 
by adding four new sentences after the first sentence.
    d. Paragraphs (c)(2)(i), (c)(2)(ii), and (c)(3) are revised.
    e. Paragraph (d)(1) is amended by revising the fifth sentence.
    f. Paragraph (e), paragraph (f) introductory text and paragraph 
(f)(1)(ii) are revised.
    g. Paragraph (f)(1)(xi) is removed, and paragraphs (f)(1)(xii) and 
(f)(1)(xiii) are redesignated as paragraphs (f)(1)(xi) and (f)(1)(xii), 
respectively.
    h. Paragraph (f)(2)(ii) is revised.
    i. Paragraph (f)(2)(iii) is added.
    j. Paragraphs (f)(4)(ii), (f)(4)(iii), and (f)(5)(i) are revised.
    k. Paragraph (f)(5)(ii) is amended by adding the words ``in 
accordance with paragraph (f)(4) of this section'' after the word 
``visit'' in the first sentence.
    l. Paragraph (f)(9) heading and paragraph (f)(9)(i) are revised.
    m. Paragraph (f)(10) heading and introductory text are revised.
    n. Paragraph (g)(3) is amended by removing the words ``two 
scheduled interviews'' in the second sentence and adding in their place 
the words ``a scheduled interview.''
    o. Paragraphs (h)(1)(i)(B) and (h)(1)(i)(D) are revised.
    p. Paragraph (i)(4)(i) is amended by adding, in the third sentence 
of the undesignated text following paragraph (i)(4)(i)(B), the words 
``applying for benefits'' after the word ``person'' both times it 
appears in that sentence.
    q. Paragraph (j) introductory text, and paragraphs (j)(1)(i), 
(j)(1)(ii),(j)(1)(iii), and (j)(1)(v) are revised.
    r. Paragraph (j)(1)(iv) is amended by adding the words `` in 
accordance with Sec. 273.12(c)'' after the word ``eligible'' in the 
eighth sentence.
    s. Paragraph (j)(2) is amended by revising paragraph (j)(2)(i), 
redesignating paragraphs (j)(2)(ii) through (j)(2)(vii) as (j)(2)(vi) 
through (j)(2)(xi), respectively, and adding new paragraphs (j)(2)(ii), 
(j)(2)(iii), (j)(2)(iv), and (j)(2)(v).
    t. Newly redesignated paragraph (j)(2)(xi)(F) is removed.
    u. Paragraph (j)(3)(i) is amended by removing the word ``shall'' in 
the first sentence and adding in its place the word ``may.''
    v. Paragraph (j)(3)(iii) is removed.
    w. Paragraph (j)(4)(iii)(C) is amended by removing the first 
sentence.
    x. A new paragraph (n) is added.
    The revisions and additions read as follows:


Sec. 273.2  Office operations and application processing.

    (a) Operation of food stamp offices and processing of 
applications--(1) Office operations. State agencies must establish 
procedures governing the operation of food stamp offices that the State 
agency determines best serve households in the State, including 
households with special needs, such as, but not limited to, households 
with elderly or disabled members, households in rural areas with low-
income members, homeless individuals, households residing on 
reservations, households with adult members who are not proficient in 
English, and households with earned income (working households). The 
State agency must provide timely, accurate, and fair service to 
applicants for, and participants in, the Food Stamp Program. The State 
agency cannot, as a

[[Page 70194]]

condition of eligibility, impose additional application or application 
processing requirements. The State agency must have a procedure for 
informing persons who wish to apply for food stamps about the 
application process and their rights and responsibilities. The State 
agency must base food stamp eligibility solely on the criteria 
contained in the Act and this part.
    (2) Application processing. The application process includes filing 
and completing an application form, being interviewed, and having 
certain information verified. The State agency must act promptly on all 
applications and provide food stamp benefits retroactive to the month 
of application to those households that have completed the application 
process and have been determined eligible. The State agency must make 
expedited service available to households in immediate need. Specific 
responsibilities of households and State agencies in the application 
process are detailed below.
    (b) * * * (1) Content. Each application form shall contain:
    (i) In prominent and boldface lettering and understandable terms a 
statement that the information provided by the applicant in connection 
with the application for food stamp benefits will be subject to 
verification by Federal, State and local officials to determine if such 
information is factual; that if any information is incorrect, food 
stamps may be denied to the applicant; and that the applicant may be 
subject to criminal prosecution for knowingly providing incorrect 
information;
    (ii) In prominent and boldface lettering and understandable terms a 
description of the civil and criminal provisions and penalties for 
violations of the Food Stamp Act;
    (iii) A statement to be signed by one adult household member which 
certifies, under penalty of perjury, the truth of the information 
contained in the application, including the information concerning 
citizenship and alien status of the members applying for benefits;
    (iv) A place on the front page of the application where the 
applicant can write his/her name, address, and signature.
    (v) In plain and prominent language on or near the front page of 
the application, notification of the household's right to immediately 
file the application as long as it contains the applicant's name and 
address and the signature of a responsible household member or the 
household's authorized representative. Regardless of the type of system 
the State agency uses (paper or electronic), it must provide a means 
for households to immediately begin the application process with name, 
address and signature;
    (vi) In plain and prominent language on or near the front page of 
the application, a description of the expedited service provisions 
described in paragraph (i) of this section;
    (vii) In plain and prominent language on or near the front page of 
the application, notification that benefits are provided from the date 
of application; and
    (viii) The following nondiscrimination statement on the application 
itself even if the State agency uses a joint application form:

    ``In accordance with Federal law and U.S. Department of 
Agriculture policy, this institution is prohibited from 
discriminating on the basis of race, color, national origin, sex, 
age, religion, political beliefs, or disability.
    ``To file a complaint of discrimination, write USDA, Director, 
Office of Civil Rights, Room 326-W, Whitten Building, 1400 
Independence Avenue, S.W., Washington, D.C. 20250-9410 or call (202) 
720-5964 (voice and TDD). USDA is an equal opportunity provider and 
employer.''; and

    (ix) For multi-program applications, contain language which clearly 
affords applicants the option of answering only those questions 
relevant to the program or programs for which they are applying.
    (2) Income and eligibility verification system (IEVS). If the State 
agency chooses to use IEVS in accordance with paragraph (f)(9) of this 
section, it must notify all applicants for food stamp benefits at the 
time of application and at each recertification through a written 
statement on or provided with the application form that information 
available through IEVS will be requested, used and may be verified 
through collateral contact when discrepancies are found by the State 
agency, and that such information may affect the household's 
eligibility and level of benefits. The regulations at 
Sec. 273.2(f)(4)(ii) govern the use of collateral contacts. The State 
agency must also notify all applicants on the application form that the 
alien status of applicant household members may be subject to 
verification by INS through the submission of information from the 
application to INS, and that the submitted information received from 
INS may affect the household's eligibility and level of benefits.
    (3) Jointly processed cases. If a State agency has a procedure that 
allows applicants to apply for the food stamp program and another 
program at the same time, the State agency shall notify applicants that 
they may file a joint application for more than one program or they may 
file a separate application for food stamps independent of their 
application for benefits from any other program. All food stamp 
applications, regardless of whether they are joint applications or 
separate applications, must be processed for food stamp purposes in 
accordance with food stamp procedural, timeliness, notice, and fair 
hearing requirements. No household shall have its food stamp benefits 
denied solely on the basis that its application to participate in 
another program has been denied or its benefits under another program 
have been terminated without a separate determination by the State 
agency that the household failed to satisfy a food stamp eligibility 
requirement. Households that file a joint application for food stamps 
and another program and are denied benefits for the other program shall 
not be required to resubmit the joint application or to file another 
application for food stamps but shall have its food stamp eligibility 
determined based on the joint application in accordance with the food 
stamp processing time frames from the date the joint application was 
initially accepted by the State agency.
    (4) * * *
    (iv) Providing the requested information, including the SSN of each 
household member, is voluntary. However, failure to provide an SSN will 
result in the denial of food stamp benefits to each individual failing 
to provide an SSN. Any SSNs provided will be used and disclosed in the 
same manner as SSNs of eligible household members.
    (c) * * * (1) Household's right to file. Households must file food 
stamp applications by submitting the forms to the food stamp office 
either in person, through an authorized representative, by fax or other 
electronic transmission, by mail, or by completing an on-line 
electronic application. The State agency must provide households that 
complete an on-line electronic application in person at the food stamp 
office the opportunity to review the information that has been recorded 
electronically and must provide them with a copy of that information 
for their records. Applications signed through the use of electronic 
signature techniques or applications containing a handwritten signature 
and then transmitted by fax or other electronic transmission are 
acceptable. State agencies must document the date the application was 
filed by recording the date of receipt at the food stamp office. When a 
resident of an institution is jointly applying for

[[Page 70195]]

SSI and food stamps prior to leaving the institution, the filing date 
of the application that the State agency must record is the date of 
release of the applicant from the institution. * * *
    (2) * * *
    (i) State agencies shall encourage households to file an 
application form the same day the household or its representative 
contacts the food stamp office in person or by telephone and expresses 
interest in obtaining food stamp assistance or expresses concerns which 
indicate food insecurity. If the State agency attempts to discourage 
households from applying for cash assistance, it shall make clear that 
the disadvantages and requirements of applying for cash assistance do 
not apply to food stamps. In addition, it shall encourage applicants to 
continue with their application for food stamps. The State agency shall 
inform households that receiving food stamps will have no bearing on 
any other program's time limits that may apply to the household. If a 
household contacting the food stamp office by telephone does not wish 
to come to the appropriate office to file the application that same day 
and instead prefers receiving an application through the mail, the 
State agency shall mail an application form to the household on the 
same day the telephone request is received. An application shall also 
be mailed on the same day a written request for food assistance is 
received.
    (ii) Where a project area has designated certification offices to 
serve specific geographic areas, households may contact an office other 
than the one designated to service the area in which they reside. When 
a household contacts the wrong certification office within a project 
area in person or by telephone, the certification office shall, in 
addition to meeting other requirements in paragraph (c)(2)(i) of this 
section, give the household the address and telephone number of the 
appropriate office. The certification office shall also offer to 
forward the household's application to the appropriate office that same 
day if the household has completed enough information on the 
application to file or forward it the next day by any means that 
ensures the application arrives at the application office the day it is 
forwarded. The household shall be informed that its application will 
not be considered filed and the processing standards shall not begin 
until the application is received by the appropriate office. If the 
household has mailed its application to the wrong office within a 
project area, the certification office shall mail the application to 
the appropriate office on the same day, or forward it the next day by 
any means that ensures the application arrives at the application 
office the day it is forwarded.
* * * * *
    (3) Availability of the application form. The State agency shall 
make application forms readily accessible to potentially eligible 
households. The State agency shall also provide an application form to 
anyone who requests the form. Regardless of the type of system the 
State agency uses (paper or electronic), the State agency must provide 
a means for applicants to immediately begin the application process 
with name, address and signature.
* * * * *
    (d) * * *
    (1) * * * If there is any question as to whether the household has 
merely failed to cooperate, as opposed to refused to cooperate, the 
household shall not be denied, and the agency shall provide assistance 
required by paragraph (c)(5) of this section. * * *
* * * * *
    (e) Interviews. (1) Except for households certified for longer than 
12 months, and except as provided in paragraph (e)(2) of this section, 
households must have a face-to-face interview with an eligibility 
worker at initial certification and at least once every 12 months 
thereafter. State agencies may not require households to report for an 
in-office interview during their certification period, though they may 
request households to do so. For example, State agencies may not 
require households to report en masse for an in-office interview during 
their certification periods simply to review their case files, or for 
any other reason. Interviews may be conducted at the food stamp office 
or other mutually acceptable location, including a household's 
residence. If the interview will be conducted at the household's 
residence, it must be scheduled in advance with the household. If a 
household in which all adult members are elderly or disabled is 
certified for 24 months in accordance with Sec. 273.10(f)(1), or a 
household residing on a reservation is required to submit monthly 
reports and is certified for 24 months in accordance with 
Sec. 273.10(f)(2), a face-to-face interview is not required during the 
certification period. The individual interviewed may be the head of 
household, spouse, any other responsible member of the household, or an 
authorized representative. The applicant may bring any person he or she 
chooses to the interview. The interviewer must not simply review the 
information that appears on the application, but must explore and 
resolve with the household unclear and incomplete information. The 
interviewer must advise households of their rights and responsibilities 
during the interview, including the appropriate application processing 
standard and the households' responsibility to report changes. The 
interviewer must advise households that are also applying for or 
receiving PA benefits that time limits and other requirements that 
apply to the receipt of PA benefits do not apply to the receipt of food 
stamp benefits, and that households which cease receiving PA benefits 
because they have reached a time limit, have begun working, or for 
other reasons, may still qualify for food stamp benefits. The 
interviewer must conduct the interview as an official and confidential 
discussion of household circumstances. The State agency must protect 
the applicant's right to privacy during the interview. Facilities must 
be adequate to preserve the privacy and confidentiality of the 
interview.
    (2) The State agency must notify the applicant that it will waive 
the face-to-face interview required in paragraph (e)(1) of this section 
in favor of a telephone interview on a case-by-case basis because of 
household hardship situations as determined by the State agency. These 
hardship conditions include, but are not limited to: Illness, 
transportation difficulties, care of a household member, hardships due 
to residency in a rural area, prolonged severe weather, or work or 
training hours which prevent the household from participating in an in-
office interview. The State agency must document the case file to show 
when a waiver was granted because of a hardship. The State agency may 
opt to waive the face-to-face interview in favor of a telephone 
interview for all households which have no earned income and all 
members of the household are elderly or disabled. Regardless of any 
approved waivers, the State agency must grant a face-to-face interview 
to any household which requests one. The State agency has the option of 
conducting a telephone interview or a home visit that is scheduled in 
advance with the household if the office interview is waived.
    (i) Waiver of the face-to-face interview does not exempt the 
household from the verification requirements, although special 
procedures may be used to permit the household to provide verification 
and thus obtain its benefits in a timely manner, such as substituting a 
collateral contact in cases where

[[Page 70196]]

documentary verification would normally be provided.
    (ii) Waiver of the face-to-face interview may not affect the length 
of the household's certification period.
    (3) The State agency must schedule an interview for all applicant 
households who are not interviewed on the day they submit their 
applications. To the extent practicable, the State agency must schedule 
the interview to accommodate the needs of groups with special 
circumstances, including working households. The State agency must 
schedule all interviews as promptly as possible to insure eligible 
households receive an opportunity to participate within 30 days after 
the application is filed. The State agency must notify each household 
that misses its interview appointment that it missed the scheduled 
interview and that the household is responsible for rescheduling a 
missed interview. If the household contacts the State agency within the 
30 day application processing period, the State agency must schedule a 
second interview. The State agency may not deny a household's 
application prior to the 30th day after application if the household 
fails to appear for the first scheduled interview. If the household 
requests a second interview during the 30-day application processing 
period and is determined eligible, the State agency must issue prorated 
benefits from the date of application.
    (f) Verification. Verification is the use of documentation or a 
contact with a third party to confirm the accuracy of statements or 
information. The State agency must give households at least 10 days to 
provide required verification. Paragraph (i)(4) of this section 
contains verification procedures for expedited service cases.
    (1) * * *
    (ii) Alien eligibility. (A) The State agency must verify the 
eligible status of applicant aliens. If an alien does not wish the 
State agency to contact INS to verify his or her immigration status, 
the State agency must give the household the option of withdrawing its 
application or participating without that member. The Department of 
Justice (DOJ) Interim Guidance On Verification of Citizenship, 
Qualified Alien Status and Eligibility Under Title IV of the Personal 
Responsibility and Work Opportunity Reconciliation Act of 1996 (Interim 
Guidance) (62 FR 61344, November 17, 1997) contains information on 
acceptable documents and INS codes. State agencies should use the 
Interim Guidance until DOJ publishes a final rule on this issue. 
Thereafter, State agencies should consult both the Interim Guidance and 
the DOJ final rule. Where the Interim Guidance and the DOJ final rule 
conflict, the latter should control the verification of alien 
eligibility. As provided in Sec. 273.4, the following information may 
also be relevant to the eligibility of some aliens: date of admission 
or date status was granted; military connection; battered status; if 
the alien was lawfully residing in the United States on August 22, 
1996; membership in certain Indian tribes; if the person was age 65 or 
older on August 22, 1996; if a lawful permanent resident can be 
credited with 40 qualifying quarters of covered work and if any Federal 
means-tested public benefits were received in any quarter after 
December 31, 1996; or if the alien was a member of certain Hmong or 
Highland Laotian tribes during a certain period of time or is the 
spouse or unmarried dependent of such a person. The State agency must 
also verify these factors, if applicable to the alien's eligibility. 
The SSA Quarters of Coverage History System (QCHS) is available for 
purposes of verifying whether a lawful permanent resident has earned or 
can receive credit for a total of 40 qualifying quarters. However, the 
QCHS may not show all qualifying quarters. For instance, SSA records do 
not show current year earnings and in some cases the last year's 
earnings, depending on the time of request. Also, in some cases, an 
applicant may have work from uncovered employment that is not 
documented by SSA, but is countable toward the 40 quarters test. In 
both these cases, the individual, rather than SSA, would need to 
provide the evidence needed to verify the quarters.
    (B) An alien is ineligible until acceptable documentation is 
provided unless:
    (1) The State agency has submitted a copy of a document provided by 
the household to INS for verification. Pending such verification, the 
State agency cannot delay, deny, reduce or terminate the individual's 
eligibility for benefits on the basis of the individual's immigration 
status; or
    (2) The applicant or the State agency has submitted a request to 
SSA for information regarding the number of quarters of work that can 
be credited to the individual, SSA has responded that the individual 
has fewer than 40 quarters, and the individual provides documentation 
from SSA that SSA is conducting an investigation to determine if more 
quarters can be credited. If SSA indicates that the number of 
qualifying quarters that can be credited is under investigation, the 
State agency must certify the individual pending the results of the 
investigation for up to 6 months from the date of the original 
determination of insufficient quarters; or
    (3) The applicant or the State agency has submitted a request to a 
Federal agency for verification of information which bears on the 
individual's eligible alien status. The State agency must certify the 
individual pending the results of the investigation for up to 6 months 
from the date of the original request for verification.
    (C) The State agency must provide alien applicants with a 
reasonable opportunity to submit acceptable documentation of their 
eligible alien status as of the 30th day following the date of 
application. A reasonable opportunity must be at least 10 days from the 
date of the State agency's request for an acceptable document. When the 
State agency fails to provide an alien applicant with a reasonable 
opportunity as of the 30th day following the date of application, the 
State agency must provide the household with benefits no later than 30 
days following the date of application, provided the household is 
otherwise eligible.
* * * * *
    (2) * * *
    (ii) If a member's citizenship or status as a non-citizen national 
is questionable, the State agency must verify the member's citizenship 
or non-citizen national status in accordance with attachment 4 of the 
DOJ Interim Guidance. After DOJ issues final rules, State agencies 
should consult both the Interim Guidance and the final rule. Where the 
Interim Guidance and the DOJ final rule conflict, the latter should 
control the eligibility determination. The State agency must accept 
participation in another program as acceptable verification if 
verification of citizenship or non-citizen national status was obtained 
for that program. If the household cannot obtain the forms of 
verification suggested in attachment 4 of the DOJ Interim Guidance and 
the household can provide a reasonable explanation as to why 
verification is not available, the State agency must accept a signed 
statement, under penalty of perjury, from a third party indicating a 
reasonable basis for personal knowledge that the member in question is 
a U.S. citizen or non-citizen national. The signed statement must 
contain a warning of the penalties for helping someone commit fraud. 
Absent verification or third party attestation of U.S. citizenship or 
non-citizen national status, the member whose citizenship or non-
citizen national status is in question is ineligible to participate 
until

[[Page 70197]]

the issue is resolved. The member whose citizenship or non-citizen 
national status is in question will have his or her income and 
resources considered available to any remaining household members as 
set forth in Sec. 273.11(c).
    (iii) Homeless households claiming shelter expenses may provide 
verification of their shelter expenses to qualify for the homeless 
shelter deduction if the State agency has such a deduction. If a 
homeless household has difficulty in obtaining traditional types of 
verification of shelter costs, the caseworker shall use prudent 
judgment in determining if the verification obtained is adequate. For 
example, if a homeless individual claims to have incurred shelter costs 
for several nights and the costs are comparable to costs typically 
incurred by homeless people, for shelter, the caseworker may decide to 
accept this information as adequate information and not require further 
verification.
* * * * *
    (4) * * *
    (ii) Collateral contacts. A collateral contact is an oral 
confirmation of a household's circumstances by a person outside of the 
household. The collateral contact may be made either in person or over 
the telephone. The State agency may select a collateral contact if the 
household fails to designate one or designates one which is 
unacceptable to the State agency. Examples of acceptable collateral 
contacts may include employers, landlords, social service agencies, 
migrant service agencies, and neighbors of the household who can be 
expected to provide accurate third-party verification. When talking 
with collateral contacts, State agencies should disclose only the 
information that is absolutely necessary to get the information being 
sought. State agencies should avoid disclosing that the household has 
applied for food stamps, nor should they disclose any information 
supplied by the household, especially information that is protected by 
Sec. 273.1(c), or suggest that the household is suspected of any wrong 
doing.
    (iii) Home visits. Home visits may be used as verification only 
when documentary evidence is insufficient to make a firm determination 
of eligibility or benefit level, or cannot be obtained, and the home 
visit is scheduled in advance with the household. Home visits are to be 
used on a case-by-case basis where the supplied documentation is 
insufficient. Simply because a household fits a profile of an error-
prone household does not constitute lack of verification. State 
agencies shall assist households in obtaining sufficient verification 
in accordance with paragraph (c)(5) of this section.
* * * * *
    (5) * * *
    (i) The household has primary responsibility for providing 
documentary evidence to support statements on the application and to 
resolve any questionable information. The State agency must assist the 
household in obtaining this verification provided the household is 
cooperating with the State agency as specified under paragraph (d)(1) 
of this section. Households may supply documentary evidence in person, 
through the mail, by facsimile or other electronic device, or through 
an authorized representative. The State agency must not require the 
household to present verification in person at the food stamp office. 
The State agency must accept any reasonable documentary evidence 
provided by the household and must be primarily concerned with how 
adequately the verification proves the statements on the application.
* * * * *
    (9) Optional use of IEVS. (i) The State agency may obtain 
information through IEVS in accordance with procedures specified in 
Sec. 272.8 of this chapter and use it to verify the eligibility and 
benefit levels of applicants and participating households.
* * * * *
    (10) Optional use of SAVE. Households are required to submit 
documents to verify the immigration status of applicant aliens. State 
agencies that verify the validity of such documents through the INS 
SAVE system in accordance with Sec. 272.11 of this chapter must use the 
following procedures:
* * * * *
    (h) * * *
    (1) * * *
    (i) * * *
    (B) If one or more members of the household have failed to register 
for work, as required in Sec. 273.7, the State agency must have 
informed the household of the need to register for work, determined if 
the household members are exempt from work registration, and given the 
household at least 10 days from the date of notification to register 
these members.
* * * * *
    (D) For households that have failed to appear for an interview, the 
State agency must notify the household that it missed the scheduled 
interview and that the household is responsible for rescheduling a 
missed interview. If the household contacts the State agency within the 
30 day processing period, the State agency must schedule a second 
interview. If the household fails to schedule a second interview, or 
the subsequent interview is postponed at the household's request or 
cannot otherwise be rescheduled until after the 20th day but before the 
30th day following the date the application was filed, the household 
must appear for the interview, bring verification, and register members 
for work by the 30th day; otherwise, the delay shall be the fault of 
the household. If the household has failed to appear for the first 
interview, fails to schedule a second interview, and/or the subsequent 
interview is postponed at the household's request until after the 30th 
day following the date the application was filed, the delay shall be 
the fault of the household. If the household has missed both scheduled 
interviews and requests another interview, any delay shall be the fault 
of the household.
* * * * *
    (j) PA, GA and categorically eligible households. The State agency 
must notify households applying for public assistance (PA) of their 
right to apply for food stamp benefits at the same time and must allow 
them to apply for food stamp benefits at the same time they apply for 
PA benefits. The State agency must also notify such households that 
time limits or other requirements that apply to the receipt of PA 
benefits do not apply to the receipt of food stamp benefits, and that 
households which cease receiving PA benefits because they have reached 
a time limit, have begun working, or for other reasons, may still 
qualify for food stamp benefits. If the State agency attempts to 
discourage households from applying for cash assistance, it shall make 
clear that the disadvantages and requirements of applying for cash 
assistance do not apply to food stamps. In addition, it shall encourage 
applicants to continue with their application for food stamps. The 
State agency shall inform households that receiving food stamps will 
have no bearing on any other program's time limits that may apply to 
the household. The State agency may process the applications of such 
households in accordance with the requirements of paragraph (j)(1) of 
this section, and the State agency must base their eligibility solely 
on food stamp eligibility criteria unless the household is 
categorically eligible, as provided in paragraph (j)(2) of this 
section. If a State has a single Statewide GA application form, 
households in which all members

[[Page 70198]]

are included in a State or local GA grant may have their application 
for food stamps included in the GA application form. State agencies may 
use the joint application processing procedures described in paragraph 
(j)(1) of this section for GA recipients in accordance with paragraph 
(j)(3) of this section. The State agency must base eligibility of 
jointly processed GA households solely on food stamp eligibility 
criteria unless the household is categorically eligible as provided in 
paragraph (j)(4) of this section. The State agency must base the 
benefit levels of all households solely on food stamp criteria. The 
State agency must certify jointly processed and categorically eligible 
households in accordance with food stamp procedural, timeliness, and 
notice requirements, including the 7-day expedited service provisions 
of paragraph (i) of this section and normal 30-day application 
processing standards of paragraph (g) of this section. Individuals 
authorized to receive PA, SSI, or GA benefits but who have not yet 
received payment are considered recipients of benefits from those 
programs. In addition, individuals are considered recipients of PA, 
SSI, or GA if their PA, SSI, or GA benefits are suspended or recouped. 
Individuals entitled to PA, SSI, or GA benefits but who are not paid 
such benefits because the grant is less than a minimum benefit are also 
considered recipients. The State agency may not consider as recipients 
those individuals not receiving GA, PA, or SSI benefits who are 
entitled to Medicaid only.
    (1) * * * (i) If a joint PA/food stamp application is used, the 
application may contain all the information necessary to determine a 
household's food stamp eligibility and level of benefits. Information 
relevant only to food stamp eligibility must be contained in the PA 
form or must be an attachment to it. The joint PA/food stamp 
application must clearly indicate that the household is providing 
information for both programs, is subject to the criminal penalties of 
both programs for making false statements, and waives the notice of 
adverse action as specified in paragraph (j)(1)(iv) of this section.
    (ii) The State agency may conduct a single interview at initial 
application for both public assistance and food stamp purposes. A 
household's eligibility for food stamp out-of-office interview 
provisions in paragraph (e)(2) of this section does not relieve the 
household of any responsibility for a face-to-face interview to be 
certified for PA.
    (iii) For households applying for both PA and food stamps, the 
State agency must follow the verification procedures described in 
paragraphs (f)(1) through (f)(8) of this section for those factors of 
eligibility which are needed solely for purposes of determining the 
household's eligibility for food stamps. For those factors of 
eligibility which are needed to determine both PA eligibility and food 
stamp eligibility, the State agency may use the PA verification rules. 
However, if the household has provided the State agency sufficient 
verification to meet the verification requirements of paragraphs (f)(1) 
through (f)(8) of this section, but has failed to provide sufficient 
verification to meet the PA verification rules, the State agency may 
not use such failure as a basis for denying the household's food stamp 
application or failing to comply with processing requirements of 
paragraph (g) of this section. Under these circumstances, the State 
agency must process the household's food stamp application and 
determine eligibility based on its compliance with the requirements of 
paragraphs (f)(1) through (f)(8) of this section.
* * * * *
    (v) The State agency may not require households which file a joint 
PA/food stamp application and whose PA applications are denied to file 
new food stamp applications. Rather, the State agency must determine or 
continue their food stamp eligibility on the basis of the original 
applications filed jointly for PA and food stamp purposes. In addition, 
the State agency must use any other documented information obtained 
subsequent to the application which may have been used in the PA 
determination and which is relevant to food stamp eligibility or level 
of benefits.
    (2) * * *
    (i) The following households are categorically eligible for food 
stamps unless the entire household is institutionalized as defined in 
Sec. 273.1(e) or disqualified for any reason from receiving food 
stamps.
    (A) Any household (except those listed in paragraph (j)(2)(vii) of 
this section) in which all members receive or are authorized to receive 
cash through a PA program funded in full or in part with Federal money 
under Title IV-A or with State money counted for maintenance of effort 
(MOE) purposes under Title IV-A;
    (B) Any household (except those listed in paragraph (j)(2)(vii) of 
this section) in which all members receive or are authorized to receive 
non-cash or in-kind benefits or services from a program that is more 
than 50 percent funded with State money counted for MOE purposes under 
Title IV-A or Federal money under Title IV-A and that is designed to 
forward purposes one and two of the TANF block grant, as set forth in 
Section 401 of P.L. 104-193.
    (C) Any household (except those listed in paragraph (j)(2)(vii) of 
this section) in which all members receive or are authorized to receive 
non-cash or in-kind benefits or services from a program that is more 
than 50 percent funded with State money counted for MOE purposes under 
Title IV-A or Federal money under Title IV-A and that is designed to 
further purposes three and four of the TANF block grant, as set forth 
in Section 401 of P.L. 104-193, and requires participants to have a 
gross monthly income at or below 200 percent of the Federal poverty 
level.
    (D) Any household in which all members receive or are authorized to 
receive SSI benefits, except that residents of public institutions who 
apply jointly for SSI and food stamp benefits prior to their release 
from the institution in accordance with Sec. 273.1(e)(2), are not 
categorically eligible upon a finding by SSA of potential SSI 
eligibility prior to such release. The State agency must consider the 
individuals categorically eligible at such time as SSA makes a final 
SSI eligibility and the institution has released the individual.
    (E) Any household in which all members receive or are authorized to 
receive PA and/or SSI benefits in accordance with paragraphs 
(j)(2)(i)(A) through (j)(2)(i)(D) of this section.
    (ii) The State agency, at its option, may extend categorical 
eligibility to the following households only if doing so will further 
the purposes of the Food Stamp Act:
    (A) Any household (except those listed in paragraph (j)(2)(vii) of 
this section) in which all members receive or are authorized to receive 
non-cash or in-kind services from a program that is less than 50 
percent funded with State money counted for MOE purposes under Title 
IV-A or Federal money under Title IV-A and that is designed to further 
purposes one and two of the TANF block grant, as set forth in Section 
401 of P.L. 104-193. States must inform FNS of the TANF services under 
this paragraph that they are determining to confer categorical 
eligibility.
    (B) Subject to FNS approval, any household (except those listed in 
paragraph (j)(2)(vii) of this section) in which all members receive or 
are authorized to receive non-cash or in-kind services from a program 
that is less than 50 percent funded with State money counted for MOE 
purposes under Title IV-A or Federal money under Title IV-A and that is 
designed to further purposes three and four of the

[[Page 70199]]

TANF block grant, as set forth in Section 401 of P.L 104-193, and 
requires participants to have a gross monthly income at or below 200 
percent of the Federal poverty level.
    (iii) Any household in which one member receives or is authorized 
to receive benefits according to paragraphs (j)(2)(i)(B), (j)(2)(i)(C), 
(j)(2)(ii)(A) and (j)(2)(ii)(B), of this section and the State agency 
determines that the whole household benefits.
    (iv) For purposes of paragraphs (j)(2)(i), (j)(2)(ii),and 
(j)(2)(iii) of this section, ``authorized to receive'' means that an 
individual has been determined eligible for benefits and has been 
notified of this determination, even if the benefits have been 
authorized but not received, authorized but not accessed, suspended or 
recouped, or not paid because they are less than a minimum amount.
    (v) The eligibility factors which are deemed for food stamp 
eligibility without the verification required in paragraph (f) of this 
section because of PA/SSI status are the resource, gross and net income 
limits; social security number information, sponsored alien 
information, and residency. However, the State agency must collect and 
verify factors relating to benefit determination that are not collected 
and verified by the other program if these factors are required to be 
verified under paragraph (f) of this section. If any of the following 
factors are questionable, the State agency must verify, in accordance 
with paragraph (f) of this section, that the household which is 
considered categorically eligible:
    (A) Contains only members that are PA or SSI recipients as defined 
in the introductory paragraph (j) of this section;
    (B) Meets the household definition in Sec. 273.1(a);
    (C) Includes all persons who purchase and prepare food together in 
one food stamp household regardless of whether or not they are separate 
units for PA or SSI purposes; and
    (D) Includes no persons who have been disqualified as provided for 
in paragraph (j)(2)(vi) of this section.
* * * * *
    (n) Authorized representatives. Representatives may be authorized 
to act on behalf of a household in the application process, in 
obtaining food stamp benefits, and in using food stamp benefits.
    (1) Application processing and reporting. The State agency shall 
inform applicants and prospective applicants that indicate that they 
may have difficulty completing the application process, that a 
nonhousehold member may be designated as the authorized representative 
for application processing purposes. The household member or the 
authorized representative may complete work registration forms for 
those household members required to register for work. The authorized 
representative designated for application processing purposes may also 
carry out household responsibilities during the certification period, 
such as reporting changes in the household's income or other household 
circumstances in accordance with Sec. 273.12(a) and Sec. 273.21. Except 
for those situations in which a drug and alcohol treatment center or 
other group living arrangement acts as the authorized representative, 
the State agency must inform the household that the household will be 
held liable for any overissuance that results from erroneous 
information given by the authorized representative.
    (i) A nonhousehold member may be designated as an authorized 
representative for the application process provided that the person is 
an adult who is sufficiently aware of relevant household circumstances 
and the authorized representative designation has been made in writing 
by the head of the household, the spouse, or another responsible member 
of the household. Paragraph (n)(4) of this section contains further 
restrictions on who can be designated an authorized representative.
    (ii) Residents of drug or alcohol treatment centers must apply and 
be certified through the use of authorized representatives in 
accordance with Sec. 273.11(e). Residents of group living arrangements 
have the option to apply and be certified through the use of authorized 
representatives in accordance with Sec. 273.11(f).
    (2) Obtaining food stamp benefits. An authorized representative may 
be designated to obtain benefits. Even if the household is able to 
obtain benefits, it should be encouraged to name an authorized 
representative for obtaining benefits in case of illness or other 
circumstances which might result in an inability to obtain benefits. 
The name of the authorized representative must be recorded in the 
household's case record and on the food stamp identification (ID) card, 
as provided in Sec. 274.10(a)(1) of this chapter. The authorized 
representative for obtaining benefits may or may not be the same 
individual designated as an authorized representative for the 
application process or for meeting reporting requirements during the 
certification period. The State agency must develop a system by which a 
household may designate an emergency authorized representative in 
accordance with Sec. 274.10(c) of this chapter to obtain the 
household's benefits for a particular month.
    (3) Using benefits. A household may allow any household member or 
nonmember to use its ID card and benefits to purchase food or meals, if 
authorized, for the household. Drug or alcohol treatment centers and 
group living arrangements which act as authorized representatives for 
residents of the facilities must use food stamp benefits for food 
prepared and served to those residents participating in the Food Stamp 
Program (except when residents leave the facility as provided in 
Sec. 273.11(e) and (f)).
    (4) Restrictions on designations of authorized representatives. (i) 
The State agency must restrict the use of authorized representatives 
for purposes of application processing and obtaining food stamp 
benefits as follows:
    (A) State agency employees who are involved in the certification or 
issuance processes and retailers who are authorized to accept food 
stamp benefits may not act as authorized representatives without the 
specific written approval of a designated State agency official and 
only if that official determines that no one else is available to serve 
as an authorized representative.
    (B) An individual disqualified for an intentional Program violation 
cannot act as an authorized representative during the disqualification 
period, unless the State agency has determined that no one else is 
available to serve as an authorized representative. The State agency 
must separately determine whether the individual is needed to apply on 
behalf of the household, or to obtain benefits on behalf of the 
household.
    (C) If a State agency has determined that an authorized 
representative has knowingly provided false information about household 
circumstances or has made improper use of coupons, it may disqualify 
that person from being an authorized representative for up to one year. 
The State agency must send written notification to the affected 
household(s) and the authorized representative 30 days prior to the 
date of disqualification. The notification must specify the reason for 
the proposed action and the household's right to request a fair 
hearing. This provision is not applicable in the case of drug and 
alcoholic treatment centers and those group homes which act as 
authorized representatives for their residents. However, drug and 
alcohol treatment centers and the heads of group living

[[Page 70200]]

arrangements that act as authorized representatives for their 
residents, and which intentionally misrepresent households 
circumstances, may be prosecuted under applicable Federal and State 
statutes for their acts.
    (D) Homeless meal providers, as defined in Sec. 271.2 of this 
chapter, may not act as authorized representatives for homeless food 
stamp recipients.
    (ii) In order to prevent abuse of the program, the State agency may 
set a limit on the number of households an authorized representative 
may represent.
    (iii) In the event employers, such as those that employ migrant or 
seasonal farmworkers, are designated as authorized representatives or 
that a single authorized representative has access to a large number of 
authorization documents or coupons, the State agency should exercise 
caution to assure that each household has freely requested the 
assistance of the authorized representative, the household's 
circumstances are correctly represented, the household is receiving the 
correct amount of benefits and that the authorized representative is 
properly using the benefits.

    10. Sec. 273.4 is revised to read as follows:


Sec. 273.4  Citizenship and alien status.

    (a) Household members meeting citizenship or alien status 
requirements. No person is eligible to participate in the Program 
unless that person is:
    (1) A U.S. citizen \1\;
---------------------------------------------------------------------------

    \1\ For guidance, see the DOJ Interim Guidance published 
November 17, 1997 (62 FR 61344).
---------------------------------------------------------------------------

    (2) A U.S. non-citizen national \1\
    (3) An individual who is:
    (i) An American Indian born in Canada who possesses at least 50 per 
centum of blood of the American Indian race to whom the provisions of 
section 289 of the Immigration and Nationality Act (INA) (8 U.S.C. 
1359) apply; or
    (ii) A member of an Indian tribe as defined in section 4(e) of the 
Indian Self-Determination and Education Assistance Act (25 U.S.C. 
450b(e)) which is recognized as eligible for the special programs and 
services provided by the U.S. to Indians because of their status as 
Indians;
    (4) An individual who is:
    (i) Lawfully residing in the U.S. and was a member of a Hmong or 
Highland Laotian tribe at the time that the tribe rendered assistance 
to U.S. personnel by taking part in a military or rescue operation 
during the Vietnam era beginning August 5, 1964, and ending May 7, 
1975;
    (ii) The spouse, or surviving spouse of such Hmong or Highland 
Laotian who is deceased, or
    (iii) An unmarried dependent child of such Hmong or Highland 
Laotian who is under the age of 18 or if a full-time student under the 
age of 22; an unmarried child under the age of 18 or if a full time 
student under the age of 22 of such a deceased Hmong or Highland 
Laotian provided the child was dependent upon him or her at the time of 
his or her death; or an unmarried disabled child age 18 or older if the 
child was disabled and dependent on the person prior to the child's 
18th birthday. For purposes of this paragraph (a)(4)(iii), child means 
the legally adopted or biological child of the person described in 
paragraph (a)(4)(i) of this section, or
    (5) An individual who is both a qualified alien as defined in 
paragraph (a)(5)(i) of this section and an eligible alien as defined in 
paragraph (a)(5)(ii) of this section.
    (i) A qualified alien is:
    (A) An alien who is lawfully admitted for permanent residence under 
the INA;
    (B) An alien who is granted asylum under section 208 of the INA;
    (C) A refugee who is admitted to the United States under section 
207 of the INA;
    (D) An alien who is paroled into the U.S. under section 212(d)(5) 
of the INA for a period of at least 1 year;
    (E) An alien whose deportation is being withheld under section 
243(h) of the INA as in effect prior to April 1, 1997, or whose removal 
is withheld under section 241(b)(3) of the INA;
    (F) an alien who is granted conditional entry pursuant to section 
203(a)(7) of the INA as in effect prior to April 1, 1980;
    (G) an alien who has been battered or subjected to extreme cruelty 
in the U.S. by a spouse or a parent or by a member of the spouse or 
parent's family residing in the same household as the alien at the time 
of the abuse, an alien whose child has been battered or subjected to 
battery or cruelty, or an alien child whose parent has been battered 
\2\; or
    (H) an alien who is a Cuban or Haitian entrant, as defined in 
section 501(e) of the Refugee Education Assistance Act of 1980.
    (ii) A qualified alien, as defined in paragraph (a)(5)(i) of this 
section, must also be at least one of the following to be eligible to 
receive food stamps:
---------------------------------------------------------------------------

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

    (A) An alien lawfully admitted for permanent residence under the 
INA who has 40 qualifying quarters as determined under title II of the 
Social Security Act, including qualifying quarters of work not covered 
by Title II of the Social Security Act, based on the sum of: quarters 
the alien worked; quarters credited from the work of a parent of the 
alien before the alien became 18 (including quarters worked before the 
alien was born or adopted); and quarters credited from the work of a 
spouse of the alien during their marriage if they are still married or 
the spouse is deceased.
    (1) A spouse may not get credit for quarters of a spouse when the 
couple divorces prior to a determination of food stamp eligibility. 
However, if the State agency determines eligibility of an alien based 
on the quarters of coverage of the spouse, and then the couple 
divorces, the alien's eligibility continues until the next 
recertification. At that time, the State agency must determine the 
alien's eligibility without crediting the alien with the former 
spouse's quarters of coverage.
    (2) After December 31, 1996, a quarter in which the alien actually 
received any Federal means-tested public benefit, as defined by the 
agency providing the benefit, or actually received food stamps is not 
creditable toward the 40-quarter total. Likewise, a parent's or 
spouse's quarter is not creditable if the parent or spouse actually 
received any Federal means-tested public benefit or actually received 
food stamps in that quarter. The State agency must evaluate quarters of 
coverage and receipt of Federal means-tested public benefits on a 
calendar year basis. The State agency must first determine the number 
of quarters creditable in a calendar year, then identify those quarters 
in which the alien (or the parent(s) or spouse of the alien) received 
Federal means-tested public benefits and then remove those quarters 
from the number of quarters of coverage earned or credited to the alien 
in that calendar year. However, if the alien earns the 40th quarter of 
coverage prior to applying for food stamps or any other Federal means-
tested public benefit in that same quarter, the State agency must allow 
that quarter toward the 40 qualifying quarters total.
    (B) An alien admitted as a refugee under section 207 of the INA. 
Eligibility is limited to 7 years from the date of the alien's entry 
into the U.S.
    (C) An alien granted asylum under section 208 of the INA. 
Eligibility is limited to 7 years from the date asylum was granted.
    (D) An alien whose deportation is withheld under section 243(h) of 
the INA as in effect prior to April 1, 1997, or whose removal is 
withheld under

[[Page 70201]]

section 241(b)(3) or the INA. Eligibility is limited to 7 years from 
the date deportation or removal was withheld.
    (E) An alien granted status as a Cuban or Haitian entrant (as 
defined in section 501(e) of the Refugee Education Assistance Act of 
1980). Eligibility is limited to 7 years from the date the status as a 
Cuban or Haitian entrant was granted.
    (F) An Amerasian admitted pursuant to section 584 of Public Law 
100-202, as amended by Public Law 100-461. Eligibility is limited to 7 
years from the date admitted as an Amerasian.
    (G) An alien with one of the following military connections:
    (1) A veteran who was honorably discharged for reasons other than 
alien status, who fulfills the minimum active-duty service requirements 
of 38 U.S.C. 5303A(d), including an individual who died in active 
military, naval or air service. The definition of veteran includes an 
individual who served before July 1, 1946, in the organized military 
forces of the Government of the Commonwealth of the Philippines while 
such forces were in the service of the Armed Forces of the U.S. or in 
the Philippine Scouts, as described in 38 U.S.C. 107;
    (2) An individual on active duty in the Armed Forces of the U.S. 
(other than for training); or
    (3) The spouse and unmarried dependent children of a person 
described in paragraphs (a)(5)(ii)(G)(1) or (G)(2) of this section, 
including the spouse of a deceased veteran, provided the marriage 
fulfilled the requirements of 38 U.S.C. 1304, and the spouse has not 
remarried. An unmarried dependent child for purposes of this paragraph 
(a)(5)(ii)(G)(3) is: a child who is under the age of 18 or, if a full-
time student, under the age of 22; such unmarried dependent child of a 
deceased veteran provided such child was dependent upon the veteran at 
the time of the veteran's death; or an unmarried disabled child age 18 
or older if the child was disabled and dependent on the veteran prior 
to the child's 18th birthday. For purposes of this paragraph 
(a)(5)(ii)(G)(3), child means the legally adopted or biological child 
of the person described in paragraph (a)(5)(ii)(G)(1) or (G)(2) of this 
section.
    (H) An individual who on August 22, 1996, was lawfully residing in 
the U.S., and is now receiving benefits or assistance for blindness or 
disability (as specified in Sec. 271.2 of this chapter).
    (I) An individual who on August 22, 1996, was lawfully residing in 
the U.S., and was born on or before August 22, 1931; or
    (J) An individual who on August 22, 1996, was lawfully residing in 
the U.S. and is now under 18 years of age.
    (iii) Each category of eligible alien status stands alone for 
purposes of determining eligibility. Subsequent adjustment to a more 
limited status does not override eligibility based on an earlier less 
rigorous status. Likewise, if eligibility expires under one eligible 
status, the State agency must determine if eligibility exists under 
another status.
    (6) For purposes of determining eligible alien status in accordance 
with paragraphs (a)(4) and (a)(5)(ii)(H) through (a)(5)(ii)(J) of this 
section ``lawfully residing in the U.S.'' means that the alien is 
lawfully present as defined at 8 CFR 103.12(a).
    (b) Reporting illegal aliens. (1) The State agency must inform the 
local INS office immediately whenever personnel responsible for the 
certification or recertification of households determine that any 
member of a household is ineligible to receive food stamps because the 
member is present in the U.S. in violation of the INA. The State agency 
may meet this requirement by conforming with the Interagency Notice 
providing guidance for compliance with PRWORA section 404 published on 
September 28, 2000 (65 FR 58301).
    (2) When a household indicates inability or unwillingness to 
provide documentation of alien status for any household member, the 
State agency must classify that member as an ineligible alien. When a 
person indicates inability or unwillingness to provide documentation of 
alien status, the State agency must classify that person as an 
ineligible alien. In such cases the State agency must not continue 
efforts to obtain that documentation.
    (c) Households containing sponsored alien members--(1) Definition. 
A sponsored alien is an alien for whom a person (the sponsor) has 
executed an affidavit of support (INS Form I-864 or I-864A) on behalf 
of the alien pursuant to section 213A of the INA.
    (2) Deeming of sponsor's income and resources. For purposes of this 
paragraph (c)(2), only in the event a sponsored alien is an eligible 
alien in accordance with paragraph (a) of this section will the State 
agency consider available to the household the income and resources of 
the sponsor and spouse. For purposes of determining the eligibility and 
benefit level of a household of which an eligible sponsored alien is a 
member, the State agency must deem the income and resources of sponsor 
and the sponsor's spouse, if he or she has executed INS Form I-864 or 
I-864A, as the unearned income and resources of the sponsored alien. 
The State agency must deem the sponsor's income and resources until the 
alien gains U. S. citizenship, has worked or can receive credit for 40 
qualifying quarters of work as described in paragraph (a)(5)(ii)(A) of 
this section, or the sponsor dies.
    (i) The monthly income of the sponsor and sponsor's spouse (if he 
or she has executed INS Form I-864 or I-864A) deemed as that of the 
eligible sponsored alien must be the total monthly earned and unearned 
income, as defined in Sec. 273.9(b) with the exclusions provided in 
Sec. 273.9(c) of the sponsor and sponsor's spouse at the time the 
household containing the sponsored alien member applies or is 
recertified for participation, reduced by:
    (A) A 20 percent earned income amount for that portion of the 
income determined as earned income of the sponsor and the sponsor's 
spouse; and
    (B) An amount equal to the Program's monthly gross income 
eligibility limit for a household equal in size to the sponsor, the 
sponsor's spouse, and any other person who is claimed or could be 
claimed by the sponsor or the sponsor's spouse as a dependent for 
Federal income tax purposes.
    (ii) If the alien has already reported gross income information on 
his or her sponsor in compliance with the sponsored alien rules of 
another State agency administered assistance program, the State agency 
may use that income amount for Food Stamp Program deeming purposes. 
However, the State agency must limit allowable reductions to the total 
gross income of the sponsor and the sponsor's spouse prior to 
attributing an income amount to the alien to amounts specified in 
paragraphs (c)(2)(i)(A) and (c)(2)(i)(B) of this section.
    (iii) The State agency must consider as income to the alien any 
money the sponsor or the sponsor's spouse pays to the eligible 
sponsored alien, but only to the extent that the money exceeds the 
amount deemed to the eligible sponsored alien in accordance with 
paragraph (c)(2)(i) of this section.
    (iv) The State agency must deem as available to the eligible 
sponsored alien the total amount of the resources of the sponsor and 
sponsor's spouse as determined in accordance with Sec. 273.8, reduced 
by $1,500.
    (v) If a sponsored alien can demonstrate to the State agency's 
satisfaction that his or her sponsor is the sponsor of other aliens, 
the State agency must divide the income and resources deemed under the 
provisions of paragraphs (c)(2)(i) and (c)(2)(iii) of this

[[Page 70202]]

section by the number of such sponsored aliens.
    (3) Exempt aliens. The provisions of paragraph (c)(2) of this 
section do not apply to:
    (i) An alien who is a member of his or her sponsor's food stamp 
household;
    (ii) An alien who is sponsored by an organization or group as 
opposed to an individual;
    (iii) An alien who is not required to have a sponsor under the 
Immigration and Nationality Act, such as a refugee, a parolee, an 
asylee, or a Cuban or Haitian entrant;
    (iv) An indigent alien that the State agency has determined is 
unable to obtain food and shelter taking into account the alien's own 
income plus any cash, food, housing, or other assistance provided by 
other individuals, including the sponsor(s). For purposes of this 
paragraph (c)(3)(iv), the phrase ``is unable to obtain food and 
shelter'' means that the sum of the eligible sponsored alien's 
household's own income, the cash contributions of the sponsor and 
others, and the value of any in-kind assistance the sponsor and others 
provide, does not exceed 130 percent of the poverty income guideline 
for the household's size. The State agency must determine the amount of 
income and other assistance provided in the month of application. If 
the alien is indigent, the only amount that the State agency must deem 
to such an alien will be the amount actually provided for a period 
beginning on the date of such determination and ending 12 months after 
such date. Each indigence determination is renewable for additional 12-
month periods. The State agency must notify the Attorney General of 
each such determination, including the names of the sponsor and the 
sponsored alien involved;
    (v) A battered alien spouse, alien parent of a battered child, or 
child of a battered alien, for 12 months after the State agency 
determines that the battering is substantially connected to the need 
for benefits, and the battered individual does not live with the 
batterer.\3\ After 12 months, the State agency must not deem the 
batterer's income and resources if the battery is recognized by a court 
or the INS and has a substantial connection to the need for benefits, 
and the alien does not live with the batterer.
---------------------------------------------------------------------------

    \3\ For guidance, see Exhibit B to Attachment 5 of the DOJ 
Interim Guidance published November 17, 1997 (62 FR 61344).
---------------------------------------------------------------------------

    (4) Eligible sponsored alien's responsibilities. During the period 
the alien is subject to deeming, the eligible sponsored alien is 
responsible for obtaining the cooperation of the sponsor and for 
providing the State agency at the time of application and at the time 
of recertification with the information and documentation necessary to 
calculate deemed income and resources in accordance with paragraphs 
(c)(2)(i) through (c)(2)(v) of this section. The eligible sponsored 
alien is responsible for providing the names and other identifying 
factors of other aliens for whom the alien's sponsor has signed an 
affidavit of support. The State agency must attribute the entire amount 
of income and resources to the applicant eligible sponsored alien until 
he or she provides the information specified under this paragraph 
(c)(4). The eligible sponsored alien is also responsible for reporting 
the required information about the sponsor and sponsor's spouse should 
the alien obtain a different sponsor during the certification period 
and for reporting a change in income should the sponsor or the 
sponsor's spouse change or lose employment or die during the 
certification period. The State agency must handle such changes in 
accordance with the timeliness standards described in Sec. 273.12 or 
Sec. 273.21, as appropriate.
    (5) Awaiting verification. Until the alien provides information or 
verification necessary to carry out the provisions of paragraph (c)(2) 
of this section, the sponsored alien is ineligible. The State agency 
must determine the eligibility of any remaining household members. The 
State agency must consider available to the remaining household members 
the income and resources of the ineligible alien (excluding the deemed 
income and resources of the alien's sponsor and sponsor's spouse) in 
determining the eligibility and benefit level of the remaining 
household members in accordance with Sec. 273.11(c). If the sponsored 
alien refuses to cooperate in providing information or verification, 
other adult members of the alien's household are responsible for 
providing the information or verification required in accordance with 
the provisions of Sec. 273.2(d). If the State agency subsequently 
receives information or verification, it must act on the information as 
a reported change in household membership in accordance with the 
timeliness standards in Sec. 273.12 or Sec. 273.21, as appropriate. If 
the same sponsor is responsible for the entire household, the entire 
household is ineligible until such time as the household provides the 
needed sponsor information or verification. The State agency must 
assist aliens in obtaining verification in accordance with the 
provisions of Sec. 273.2(f)(5).
    (6) Demands for restitution. The State agency must exclude any 
sponsor who is participating in the Program from any demand made under 
8 CFR 213a.4(a) for the value of food stamp benefits issued to an 
eligible sponsored alien he or she sponsors.

    11. In Sec. 273.8:
    a. A new paragraph (e)(3)(i)(G) is added.
    b. Paragraphs (c)(3), (e)(17), (e)(18), and (f)(2) are revised.
    The addition and revisions read as follows:


Sec. 273.8  Resource eligibility standards.

* * * * *
    (c) * * *
    (3) For a household containing a sponsored alien, the State agency 
must deem the resources of the sponsor and the sponsor's spouse in 
accordance with Sec. 273.4(c)(2).
* * * * *
    (e) * * *
    (3) * * *
    (i) * * *
    (G) The value of the vehicle is inaccessible, in accordance with 
paragraph (e)(18) of this section, because its sale would produce an 
estimated return of not more than $1,500.
* * * * *
    (17) The resources of a household member who receives SSI or PA 
benefits. A household member is considered a recipient of these 
benefits if the benefits have been authorized but not received, if the 
benefits are suspended or recouped, or if the benefits are not paid 
because they are less than a minimum amount. For purposes of this 
paragraph (e)(17), if an individual receives non-cash or in-kind 
services from a program specified in Secs. 273.2(j)(2)(i)(B), 
273.2(j)(2)(i)(C), 273.2(j)(2)(ii)(A), or 273.2(j)(2)(ii)(B), the State 
agency must determine whether the individual or the household benefits 
from the assistance provided, in accordance with Sec. 273.2(j)(2)(iii). 
Individuals entitled to Medicaid benefits only are not considered 
recipients of SSI or PA.
    (18) The State agency must develop clear and uniform standards for 
identifying kinds of resources that, as a practical matter, the 
household is unable to sell for any significant return because the 
household's interest is relatively slight or the costs of selling the 
household's interest would be relatively great. The State agency must 
so identify a resource if its sale or other disposition is unlikely to 
produce any

[[Page 70203]]

significant amount of funds for the support of the household or the 
cost of selling the resource would be relatively great. This provision 
does not apply to financial instruments such as stocks, bonds, and 
negotiable financial instruments. The determination of whether any part 
of the value of a vehicle is included as a resource must be made in 
accordance with the provisions of paragraphs (e)(3) and (f) of this 
section. The State agency may require verification of the value of a 
resource to be excluded if the information provided by the household is 
questionable. The State agencies must use the following definitions in 
developing these standards:
    (i) ``Significant return'' means any return, after estimating costs 
of sale or disposition, and taking into account the ownership interest 
of the household, that the State agency determines are more than 
$1,500; and
    (ii) ``Any significant amount of funds'' means funds amounting to 
more than $1,500.
    (f) * * *
    (2) Only the following vehicles are exempt from the equity value 
test outlined in paragraph (f)(1)(iii) of this section:
    (i) Vehicles excluded under paragraph (e)(3)(i) of this section;
    (ii) One licensed vehicle per adult household member (or an 
ineligible alien or disqualified household member whose resources are 
being considered available to household), regardless of the use of the 
vehicle; and
    (iii) Any other vehicle a household member under age 18 (or an 
ineligible alien or disqualified household member under age 18 whose 
resources are being considered available to household) drives to 
commute to and from employment, or to and from training or education 
which is preparatory to employment, or to seek employment. This equity 
exclusion applies during temporary periods of unemployment to a vehicle 
which a household member under age 18 customarily drives to commute to 
and from employment.
* * * * *

    12. In Sec. 273.9:
    a. Paragraphs (b)(1)(v) and (b)(4) are revised.
    b. Paragraph (c)(1)(i)(E) is removed and paragraphs (c)(1)(i)(F) 
and (c)(1)(i)(G) are redesignated as paragraphs (c)(1)(i)(E) and 
(c)(1)(i)(F), respectively.
    c. Paragraphs (c)(1)(ii)(A) and (c)(1)(ii)(E) are removed and 
paragraphs (c)(1)(ii)(B), (c)(1)(ii)(C), (c)(1)(ii)(D), (c)(1)(ii)(F) 
and (c)(1)(ii)(G) are redesignated as paragraphs (c)(1)(ii)(A), 
(c)(1)(ii)(B), (c)(1)(ii)(C), (c)(1)(ii)(D) and (c)(1)(ii)(E), 
respectively.
    d. The first sentence of paragraph (c)(7) is amended by removing 
the number ``22'' and adding the number ``18'' in its place.
    e. A new sentence is added before the last sentence in paragraph 
(c)(8).
    f. Paragraph (c)(11) is revised.
    g. Paragraphs (d)(6) and (d)(8) are removed.
    h. Paragraph (d)(5) is redesignated as paragraph (d)(6) and 
paragraph (d)(7) is redesignated as paragraph (d)(5).
    i. Newly redesignated paragraph (d)(6) is revised in its entirety.
    The additions and revisions read as follows:


Sec. 273.9  Income and deductions.

* * * * *
    (b) * * *
    (1) * * *
    (v) Earnings to individuals who are participating in on-the-job 
training programs under section 204(b)(1)(C) or section 264(c)(1)(A) of 
the Workforce Investment Act. This provision does not apply to 
household members under 19 years of age who are under the parental 
control of another adult member, regardless of school attendance and/or 
enrollment as discussed in paragraph (c)(7) of this section. For the 
purpose of this provision, earnings include monies paid under the 
Workforce Investment Act and monies paid by the employer.
* * * * *
    (4) For a household containing a sponsored alien, the income of the 
sponsor and the sponsor's spouse must be deemed in accordance with 
Sec. 273.4(c)(2).
* * * * *
    (c) * * *
    (8) * * * TANF payments made to divert a family from becoming 
dependent on welfare may be excluded as a nonrecurring lump-sum payment 
if the payment is not defined as assistance because of the exception 
for non-recurrent, short-term benefits in 45 CFR 261.31(b)(1).* * *
* * * * *
    (11) Energy assistance as follows:
    (i) Any payments or allowances made for the purpose of providing 
energy assistance under any Federal law other than part A of Title IV 
of the Social Security Act (42 U.S.C. 601 et seq.), including utility 
reimbursements made by the Department of Housing and Urban Development 
and the Rural Housing Service, or
    (ii) A one-time payment or allowance applied for on an as-needed 
basis and made under a Federal or State law for the costs of 
weatherization or emergency repair or replacement of an unsafe or 
inoperative furnace or other heating or cooling device. A down-payment 
followed by a final payment upon completion of the work will be 
considered a one-time payment for purposes of this provision.
* * * * *
    (d) * * *
    (6) Standard utility allowance.
    (i) Homeless shelter deduction. A State agency may develop a 
standard homeless shelter deduction up to a maximum of $143 a month for 
shelter expenses specified in paragraphs (d)(6)(ii)(A), (d)(6)(ii)(B) 
and (d)(6)(ii)(C) of this section that may reasonably be expected to be 
incurred by households in which all members are homeless individuals 
but are not receiving free shelter throughout the month. The deduction 
must be subtracted from net income in determining eligibility and 
allotments for the households. The State agency may make a household 
with extremely low shelter costs ineligible for the deduction. A 
household receiving the homeless shelter deduction cannot have its 
shelter expenses considered under paragraphs (d)(6)(ii) or (d)(6)(iii) 
of this section. However, a homeless household may choose to claim 
actual costs under paragraph (d)(6)(ii) of this section instead of the 
homeless shelter deduction if actual costs are higher and verified.
    (ii) Excess shelter deduction. Monthly shelter expenses in excess 
of 50 percent of the household's income after all other deductions in 
paragraphs (d)(1) through (d)(5) of this section have been allowed. If 
the household does not contain an elderly or disabled member, as 
defined in Sec. 271.2 of this chapter, the shelter deduction cannot 
exceed the maximum shelter deduction limit established for the area. 
FNS will notify State agencies of the amount of the limit. Only the 
following expenses are allowable shelter expenses:
    (A) Continuing charges for the shelter occupied by the household, 
including rent, mortgage, condo and association fees, or other 
continuing charges leading to the ownership of the shelter such as loan 
repayments for the purchase of a mobile home, including interest on 
such payments.
    (B) Property taxes, State and local assessments, and insurance on 
the structure itself, but not separate costs for insuring furniture or 
personal belongings.
    (C) The cost of fuel for heating; cooling (i.e., the operation of 
air conditioning systems or room air conditioners); electricity or fuel 
used for purposes other than heating or cooling;

[[Page 70204]]

water; sewerage; well installation and maintenance; septic tank system 
installation and maintenance; garbage and trash collection; all service 
fees required to provide service for one telephone, including, but not 
limited to, basic service fees, wire maintenance fees, subscriber line 
charges, relay center surcharges, 911 fees, and taxes; and fees charged 
by the utility provider for initial installation of the utility. One-
time deposits cannot be included.
    (D) The shelter costs for the home if temporarily not occupied by 
the household because of employment or training away from home, 
illness, or abandonment caused by a natural disaster or casualty loss. 
For costs of a home vacated by the household to be included in the 
household's shelter costs, the household must intend to return to the 
home; the current occupants of the home, if any, must not be claiming 
the shelter costs for food stamp purposes; and the home must not be 
leased or rented during the absence of the household.
    (E) Charges for the repair of the home which was substantially 
damaged or destroyed due to a natural disaster such as a fire or flood. 
Shelter costs shall not include charges for repair of the home that 
have been or will be reimbursed by private or public relief agencies, 
insurance companies, or from any other source.
    (iii) Standard utility allowances.
    (A) With FNS approval, a State agency may develop the following 
standard utility allowances (standards) to be used in place of actual 
costs in determining a household's excess shelter deduction: an 
individual standard for each type of utility expense; a standard 
utility allowance for all utilities that includes heating or cooling 
costs (HCSUA); and, a limited utility allowance (LUA) that includes 
electricity and fuel for purposes other than heating or cooling, water, 
sewerage, well and septic tank installation and maintenance, telephone, 
and garbage or trash collection. The LUA must include expenses for at 
least two utilities. However, at its option, the State agency may 
include the excess heating and cooling costs of public housing 
residents in the LUA if it wishes to offer the lower standard to such 
households. The State agency may use different types of standards but 
cannot allow households the use of two standards that include the same 
expense. In States in which the cooling expense is minimal, the State 
agency may include the cooling expense in the electricity component. 
The State agency may vary the allowance by factors such as household 
size, geographical area, or season. Only utility costs identified in 
paragraph (d)(6)(ii)(C) of this section must be used in developing 
standards.
    (B) The State agency must review the standards annually and make 
adjustments to reflect changes in costs, rounded to the nearest whole 
dollar. State agencies must provide the amounts of standards to FNS 
when they are changed and submit methodologies used in developing and 
updating standards to FNS for approval when the methodologies are 
developed or changed.
    (C) A standard with a heating or cooling component must be made 
available to households that incur heating or cooling expenses 
separately from their rent or mortgage and to households that receive 
direct or indirect assistance under the Low Income Home Energy 
Assistance Act of 1981 (LIHEAA). A heating or cooling standard is 
available to households in private rental housing who are billed by 
their landlords on the basis of individual usage or who are charged a 
flat rate separately from their rent. However, households in public 
housing units which have central utility meters and which charge 
households only for excess heating or cooling costs are not entitled to 
a standard that includes heating or cooling costs based only on the 
charge for excess usage. Households that receive direct or indirect 
energy assistance that is excluded from income consideration (other 
than that provided under the LIHEAA) are entitled to a standard that 
includes heating or cooling only if the amount of the expense exceeds 
the amount of the assistance. Households that receive direct or 
indirect energy assistance that is counted as income and incur a 
heating or cooling expense are entitled to use a standard that includes 
heating or cooling costs. A household that has both an occupied home 
and an unoccupied home is only entitled to one standard.
    (D) At initial certification, recertification, and when a household 
moves, the household may choose between a standard or verified actual 
utility costs for any allowable expense identified in paragraph 
(d)(6)(ii)(C) of this section (except the telephone standard), unless 
the State agency has opted, with FNS approval, to mandate use of a 
standard. The State agency may require use of the telephone standard 
for the cost of basic telephone service even if actual costs are 
higher. Households certified for 24 months may also choose to switch 
between a standard and actual costs at the time of the mandatory 
interim contact required by Sec. 273.10(f)(1)(i), if the State agency 
has not mandated use of the standard.
    (E) A State agency may mandate use of standard utility allowances 
for all households with qualifying expenses if the State has developed 
one or more standards that include the costs of heating and cooling and 
one or more standards that do not include the costs of heating and 
cooling, the standards will not result in increased program costs, and 
FNS approves the standard. The prohibition on increasing Program costs 
does not apply to necessary increases to standards resulting from 
utility cost increases. Under this option households entitled to the 
standard may not claim actual expenses, even if the expenses are higher 
than the standard. Households not entitled to the standard may claim 
actual allowable expenses. Households in public housing units that have 
central utility meters and charge households only for excess heating or 
cooling costs are not entitled to the HCSUA but, at State agency 
option, may claim the LUA. Requests for approval to use a standard for 
a single utility must include the cost figures upon which the standard 
is based. Requests to use an LUA should include the approximate number 
of food stamp households that would be entitled to the nonheating and 
noncooling standard, the average utility costs prior to use of the 
mandatory standard, the proposed standards, and an explanation of how 
the standards were computed.
    (F) If a household lives with and shares heating or cooling 
expenses with another individual, another household, or both, the State 
agency must prorate a standard that includes heating or cooling 
expenses among the household and the other individual, household, or 
both. However, the State agency may not prorate the SUA if all the 
individuals who share utility expenses but are not in the food stamp 
household are excluded from the household only because they are 
ineligible.

    13. In Sec. 273.10,
    a. The third and fourth sentences of paragraph (a)(1)(ii) are 
revised.
    b. Paragraph (a)(1)(iv) is removed.
    c. The third sentence of paragraph (a)(2) is amended by removing 
the words ``an application for recertification is submitted more than 
one month'' and adding in their place, ``a household, other than a 
migrant or seasonal farmworker household, submits an application'' and 
by adding a new sentence after the third sentence.
    d. Three sentences are added to the end of paragraph (d)(3).
    e. The second sentence of paragraph (e)(1)(i)(E) is removed.

[[Page 70205]]

    f. Paragraphs (e)(1)(i)(G) and (e)(1)(i)(H) are redesignated as 
paragraphs (e)(1)(i)(H) and (e)(1)(i)(I), respectively, and a new 
paragraph (e)(1)(i)(G) is added.
    g. Newly redesignated paragraph (e)(1)(i)(H) is revised.
    h. Paragraph (e)(2)(i)(E) is amended by removing the number ``22'' 
wherever it appears and adding in its place the number ``18''.
    i. Paragraph (f) is revised.
    The additions and revisions read as follows:


Sec. 273.10  Determining household eligibility and benefit levels.

    (a) * * *
    (1) * * *
    (ii) * * * As used in this section, the term ``initial month'' 
means the first month for which the household is certified for 
participation in the Food Stamp Program following any period during 
which the household was not certified for participation, except for 
migrant and seasonal farmworker households. In the case of migrant and 
seasonal farmworker households, the term ``initial month'' means the 
first month for which the household is certified for participation in 
the Food Stamp Program following any period of more than 1 month during 
which the household was not certified for participation. * * *
* * * * *
    (2) * * * If a household's failure to timely apply for 
recertification was due to an error of the State agency and therefore 
there was a break in participation, the State agency shall follow the 
procedures in Sec. 273.14(e). * * *
* * * * *
    (d) * * *
    (3) * * * For households certified for 24 months that have one-time 
medical expenses, the State agency must use the following procedure. In 
averaging any one-time medical expense incurred by a household during 
the first 12 months, the State agency must give the household the 
option of deducting the expense for one month, averaging the expense 
over the remainder of the first 12 months of the certification period, 
or averaging the expense over the remaining months in the certification 
period. One-time expenses reported after the 12th month of the 
certification period will be deducted in one month or averaged over the 
remaining months in the certification period, at the household's 
option.
* * * * *
    (e) * * *
    (1) * * *
    (i) * * *
    (G) Subtract the homeless shelter deduction, if any, up to the 
maximum of $143.
    (H) Total the allowable shelter expenses to determine shelter 
costs, unless a deduction has been subtracted in accordance with 
paragraph (e)(1)(i)(G) of this section. Subtract from total shelter 
costs 50 percent of the household's monthly income after all the above 
deductions have been subtracted. The remaining amount, if any, is the 
excess shelter cost. If there is no excess shelter cost, the net 
monthly income has been determined. If there is excess shelter cost, 
compute the shelter deduction according to paragraph (e)(1)(i)(I) of 
this section.
* * * * *
    (f) Certification periods. The State agency must certify each 
eligible household for a definite period of time. State agencies must 
assign the longest certification period possible based on the 
predictability of the household's circumstances. The first month of the 
certification period will be the first month for which the household is 
eligible to participate. The certification period cannot exceed 12 
months, except as specified in paragraphs (f)(1) and (f)(2) of this 
section:
    (1) Households in which all adult members are elderly or disabled. 
The State agency may certify for up to 24 months households in which 
all adult members are elderly or disabled. The State agency must have 
at least one contact with each household every 12 months. The State 
agency may use any method it chooses for this contact.
    (2) Households residing on a reservation. The State agency must 
certify for 24 months those households residing on a reservation which 
it requires to submit monthly reports in accordance with Sec. 273.21, 
unless the State agency obtains a waiver from FNS. In the waiver 
request the State agency must include justification for a shorter 
period and input from the affected Indian tribal organization(s). When 
households move off the reservation, the State agency must either 
continue their certification periods until they would normally expire 
or shorten the certification periods in accordance with paragraph 
(f)(4) of this section.
    (3) Certification period length. The State agency should assign 
each household the longest certification period possible, consistent 
with its circumstances.
    (i) Households should be assigned certification periods of at least 
6 months, unless the household's circumstances are unstable or the 
household contains an ABAWD.
    (ii) Households with unstable circumstances, such as households 
with zero net income, and households with an ABAWD member should be 
assigned certification periods consistent with their circumstances, but 
generally no less than 3 months.
    (iii) Households may be assigned 1- or 2-month certification 
periods when it appears likely that the household will become 
ineligible for food stamps in the near future.
    (4) Shortening certification periods. The State agency may not end 
a household's certification period earlier than its assigned 
termination date, unless the State agency receives information that the 
household has become ineligible, or the household has not complied with 
the requirements of Sec. 273.12(c)(3). Loss of public assistance or a 
change in employment status is not sufficient in and of itself to meet 
the criteria necessary for shortening the certification period. The 
State agency must close the household's case or adjust the household's 
benefit amount in accordance with Sec. 273.12(c)(1) or (c)(2) in 
response to reported changes. The State agency may not use the Notice 
of Expiration to shorten a certification period.
    (5) Lengthening certification periods. State agencies may lengthen 
a household's current certification period once it is established, as 
long as the total months of the certification period do not exceed 24 
months for households in which all adult members are elderly or 
disabled, or 12 months for other households. If the State agency 
extends a household's certification period, it must advise the 
household of the new certification ending date with a notice containing 
the same information as the notice of eligibility set forth in 
paragraph (g)(1)(i)(A) of this section.
* * * * *

    14. In Sec. 273.11,
    a. Paragraphs (a) and (b) are revised.
    b. The heading and introductory text of paragraph (c)(2) are 
revised, paragraph (c)(3) is redesignated as paragraph (c)(4) and a new 
paragraph (c)(3) is added.
    c. The heading of paragraph (e) and paragraphs (e)(1) through 
(e)(5) are revised.
    d. Paragraphs (f)(1) and (f)(7) are revised.
    e. Paragraph (g)(5) is revised.
    f. Paragraph (j) is removed and paragraph (k) is redesignated as 
paragraph (j).
    The revisions and additions read as follows:

[[Page 70206]]

Sec. 273.11  Action on households with special circumstances.

    (a) Self-employment income. The State agency must calculate a 
household's self-employment income as follows:
    (1) Averaging self-employment income. (i) Self-employment income 
must be averaged over the period the income is intended to cover, even 
if the household receives income from other sources. If the averaged 
amount does not accurately reflect the household's actual circumstances 
because the household has experienced a substantial increase or 
decrease in business, the State agency must calculate the self-
employment income on the basis of anticipated, not prior, earnings.
    (ii) If a household's self-employment enterprise has been in 
existence for less than a year, the income from that self-employment 
enterprise must be averaged over the period of time the business has 
been in operation and the monthly amount projected for the coming year.
    (iii) Notwithstanding the provisions of paragraphs (a)(1)(i) and 
(a)(1)(ii) of this section, households subject to monthly reporting and 
retrospective budgeting who derive their self-employment income from a 
farming operation and who incur irregular expenses to produce such 
income have the option to annualize the allowable costs of producing 
self-employment income from farming when the self-employment farm 
income is annualized.
    (2) Determining monthly income from self-employment. (i) For the 
period of time over which self-employment income is determined, the 
State agency must add all gross self-employment income (either actual 
or anticipated, as provided in paragraph (a)(1)(i) of this section) and 
capital gains (according to paragraph (a)(3) of this section), exclude 
the costs of producing the self-employment income (as determined in 
paragraph (a)(4) of this section), and divide the remaining amount of 
self-employment income by the number of months over which the income 
will be averaged. This amount is the monthly net self-employment 
income. The monthly net self-employment income must be added to any 
other earned income received by the household to determine total 
monthly earned income.
    (ii) If the cost of producing self-employment income exceeds the 
income derived from self-employment as a farmer (defined for the 
purposes of this paragraph (a)(2)(ii) as a self-employed farmer who 
receives or anticipates receiving annual gross proceeds of $1,000 or 
more from the farming enterprise), such losses must be prorated in 
accordance with paragraph (a)(1) of this section, and then offset 
against countable income to the household as follows:
    (A) Offset farm self-employment losses first against other self-
employment income.
    (B) Offset any remaining farm self-employment losses against the 
total amount of earned and unearned income after the earned income 
deduction has been applied.
    (iii) If a State agency determines that a household is eligible 
based on its monthly net income, the State may elect to offer the 
household an option to determine the benefit level by using either the 
same net income which was used to determine eligibility, or by unevenly 
prorating the household's total net income over the period for which 
the household's self-employment income was averaged to more closely 
approximate the time when the income is actually received. If income is 
prorated, the net income assigned in any month cannot exceed the 
maximum monthly income eligibility standards for the household's size.
    (3) Capital gains. The proceeds from the sale of capital goods or 
equipment must be calculated in the same manner as a capital gain for 
Federal income tax purposes. Even if only 50 percent of the proceeds 
from the sale of capital goods or equipment is taxed for Federal income 
tax purposes, the State agency must count the full amount of the 
capital gain as income for food stamp purposes. For households whose 
self-employment income is calculated on an anticipated (rather than 
averaged) basis in accordance with paragraph (a)(1) of this section, 
the State agency must count the amount of capital gains the household 
anticipates receiving during the months over which the income is being 
averaged.
    (b) Allowable costs of producing self-employment income. (1) 
Allowable costs of producing self-employment income include, but are 
not limited to, the identifiable costs of labor; stock; raw material; 
seed and fertilizer; payments on the principal of the purchase price of 
income-producing real estate and capital assets, equipment, machinery, 
and other durable goods; interest paid to purchase income-producing 
property; insurance premiums; and taxes paid on income-producing 
property.
    (2) In determining net self-employment income, the following items 
are not allowable costs of doing business:
    (i) Net losses from previous periods;
    (ii) Federal, State, and local income taxes, money set aside for 
retirement purposes, and other work-related personal expenses (such as 
transportation to and from work), as these expenses are accounted for 
by the 20 percent earned income deduction specified in 
Sec. 273.9(d)(2);
    (iii) Depreciation; and
    (iv) Any amount that exceeds the payment a household receives from 
a boarder for lodging and meals.
    (3) When calculating the costs of producing self-employment income, 
State agencies may elect to use actual costs for allowable expenses in 
accordance with paragraphs (b)(1) and (b)(2) of this section or 
determine self-employment expenses as follows:
    (i) For income from day care, use the current reimbursement amounts 
used in the Child and Adult Care Food Program or a standard amount 
based on estimated per-meal costs.
    (ii) For income from boarders, other than those in commercial 
boarding houses or from foster care boarders, use:
    (A) The maximum food stamp allotment for a household size that is 
equal to the number of boarders; or
    (B) A flat amount or fixed percentage of the gross income, provided 
that the method used to determine the flat amount or fixed percentage 
is objective and justifiable and is stated in the State's food stamp 
manual.
    (iii) For income from foster care boarders, refer to 
Sec. 273.1(c)(6).
    (iv) Use the standard amount the State uses for its TANF program.
    (v) Use an amount approved by FNS. State agencies may submit a 
proposal to FNS for approval to use a simplified self-employment 
expense calculation method that does not result in increased Program 
costs. Different methods may be proposed for different types of self-
employment. The proposal must include a description of the proposed 
method, the number and type of households and percent of the caseload 
affected, and documentation indicating that the proposed procedure will 
not increase Program costs.
    (c) * * *
    (2) SSN disqualification. The eligibility and benefit level of any 
remaining household members of a household containing individuals who 
are disqualified for refusal to obtain or provide an SSN must be 
determined as follows:
* * * * *
    (3) Ineligible alien. The State agency must determine the 
eligibility and benefit level of any remaining household members of a 
household containing an ineligible alien as follows:
    (i) The State agency must count all or, at the discretion of the 
State agency, all but a pro rata share, of the ineligible

[[Page 70207]]

alien's income and deductible expenses and all of the ineligible 
alien's resources in accordance with paragraphs (c)(1) or (c)(2) of 
this section. In exercising its discretion under this paragraph 
(c)(3)(i), the State agency may count all of the alien's income for 
purposes of applying the gross income test for eligibility purposes 
while only counting all but a pro rata share to apply the net income 
test and determine level of benefits. This paragraph (c)(3)(i) does not 
apply to an alien:
    (A) Who is lawfully admitted for permanent residence under the INA;
    (B) Who is granted asylum under section 208 of the INA;
    (C) Who is admitted as a refugee under section 207 of the INA;
    (D) Who is paroled in accordance with section 212(d)(5) of the INA;
    (E) Whose deportation or removal has been withheld in accordance 
with section 243 of the INA;
    (F) Who is aged, blind, or disabled in accordance with section 
1614(a)(1) of the Social Security Act and is admitted for temporary or 
permanent residence under section 245A(b)(1) of the INA; or
    (G) Who is a special agricultural worker admitted for temporary 
residence under section 210(a) of the INA.
    (ii) For an ineligible alien within a category described in 
paragraphs (c)(3)(i)(A) through (c)(3)(i)(G) of this section, State 
agencies may either:
    (A) Count all of the ineligible alien's resources and all but a pro 
rata share of the ineligible alien's income and deductible expenses; or
    (B) Count all of the ineligible alien's resources, count none of 
the ineligible alien's income and deductible expenses, count any money 
payment (including payments in currency, by check, or electronic 
transfer) made by the ineligible alien to at least one eligible 
household member, not deduct as a household expense any otherwise 
deductible expenses paid by the ineligible alien, but cap the resulting 
benefit amount for the eligible members at the allotment amount the 
household would receive if the household member within the one of the 
categories described in paragraphs (c)(3)(i)(A) through (c)(3)(i)(G) of 
this section were still an eligible alien. The State agency must elect 
one State-wide option for determining the eligibility and benefit level 
of households with members who are aliens within the categories 
described paragraphs (c)(3)(i)(A) through (c)(3)(i)(G) of this section.
    (iii) For an alien who is ineligible under Sec. 273.4(a) because 
the alien's household indicates inability or unwillingness to provide 
documentation of the alien's immigration status, the State agency must 
count all or, at the discretion of the State agency, all but a pro rata 
share of the ineligible alien's income and deductible expenses and all 
of the ineligible alien's resources in accordance with paragraphs 
(c)(1) or (c)(2) of this section. In exercising its discretion under 
this paragraph (c)(3)(iii), the State agency may count all of the 
alien's income for purposes of applying the gross income test for 
eligibility purposes while only counting all but a pro rata to apply 
the net income test and determine level of benefits.
    (iv) The State agency must compute the income of the ineligible 
aliens using the income definition in Sec. 273.9(b) and the income 
exclusions in Sec. 273.9(c).
    (v) For purposes of this paragraph (c)(3), the State agency must 
not include the resources and income of the sponsor and the sponsor's 
spouse in determining the resources and income of an ineligible 
sponsored alien.
* * * * *
    (e) Residents of drug and alcohol treatment and rehabilitation 
programs. (1) Narcotic addicts or alcoholics who regularly participate 
in publicly operated or private non-profit drug addict or alcoholic 
(DAA) treatment and rehabilitation programs on a resident basis may 
voluntarily apply for the Food Stamp Program. Applications must be made 
through an authorized representative who is employed by the DAA center 
and designated by the center for that purpose. The State agency may 
require the household to designate the DAA center as its authorized 
representative for the purpose of receiving and using an allotment on 
behalf of the household. Residents must be certified as one-person 
households unless their children are living with them, in which case 
their children must be included in the household with the parent.
    (2)(i) Prior to certifying any residents for food stamps, the State 
agency must verify that the DAA center is authorized by FNS as a 
retailer in accordance with Sec. 278.1(e) of this chapter or that it 
comes under part B of title XIX of the Public Health Service Act, 42 
U.S.C. 300x et seq., (as defined in ``Drug addiction or alcoholic 
treatment and rehabilitation program'' in Sec. 271.2 of this chapter).
    (ii) Except as otherwise provided in this paragraph (e)(2), the 
State agency must certify residents of DAA centers by using the same 
provisions that apply to all other households, including, but not 
limited to, the same rights to notices of adverse action and fair 
hearings.
    (iii) DAA centers in areas without EBT systems may redeem the 
households' paper coupons through authorized food stores. DAA centers 
in areas with EBT systems may redeem benefits in various ways depending 
on the State's EBT system design. The designs may include DAA use of 
individual household EBT cards at authorized stores, authorization of 
DAA centers as retailers with EBT access via POS at the center, DAA use 
of a center EBT card that is an aggregate of individual household 
benefits, and other designs. Guidelines for approval of EBT systems are 
contained in Sec. 274.12 of this chapter.
    (iv) The treatment center must notify the State agency of changes 
in the household's circumstances as provided in Sec. 273.12(a).
    (3) The DAA center must provide the State agency a list of 
currently participating residents that includes a statement signed by a 
responsible center official attesting to the validity of the list. The 
State agency must require submission of the list on either a monthly or 
semimonthly basis. In addition, the State agency must conduct periodic 
random on-site visits to the center to assure the accuracy of the list 
and that the State agency's records are consistent and up to date.
    (4) The State agency may issue allotments on a semimonthly basis to 
households in DAA centers.
    (5) When a household leaves the center, the center must notify the 
State agency and the center must provide the household with its ID 
card. If possible, the center must provide the household with a change 
report form to report to the State agency the household's new address 
and other circumstances after leaving the center and must advise the 
household to return the form to the appropriate office of the State 
agency within 10 days. After the household leaves the center, the 
center can no longer act as the household's authorized representative 
for certification purposes or for obtaining or using benefits.
    (i) The center must provide the household with its EBT card if it 
was in the possession of the center, any untransacted ATP, or the 
household's full allotment if already issued and if no coupons have 
been spent on behalf of that individual household. If the household has 
already left the center, the center must return them to the State 
agency. These procedures are applicable at any time during the month.
    (ii) If the coupons have already been issued and any portion spent 
on behalf of the household, the following procedures must be followed.

[[Page 70208]]

    (A) If the household leaves prior to the 16th of the month and 
benefits are not issued under an EBT system, the center must provide 
the household with one-half of its monthly coupon allotment unless the 
State agency issues semi-monthly allotments and the second half has not 
been turned over to the center. If benefits are issued under an EBT 
system, the State must ensure that the EBT design or procedures for 
DAAs prohibit the DAA from obtaining more than one-half of the 
household's allotment prior to the 16th of the month or permit the 
return of one-half of the allotment to the household's EBT account 
through a refund, transfer, or other means if the household leaves 
prior to the 16th of the month.
    (B) If the household leaves on or after the 16th day of the month, 
the State agency, at its option, may require the center to give the 
household a portion of its allotment. Under an EBT system where the 
center has an aggregate EBT card, the State agency may, but is not 
required to transfer a portion of the household's monthly allotment 
from a center's EBT account back to the household's EBT account. 
However, the household, not the center, must be allowed to receive any 
remaining benefits authorized by the household's HIR or ATP or posted 
to the EBT account at the time the household leaves the center.
    (iii) The center must return to the State agency any EBT card or 
coupons not provided to departing residents by the end of each month. 
These coupons include those not provided to departing residents because 
they left either prior to the 16th and the center was unable to provide 
the household with the coupons or the household left on or after the 
16th of the month and the coupons were not returned to the household.
* * * * *
    (f) * * *
    (1) Disabled or blind residents of a group living arrangement (GLA) 
(as defined in Sec. 271.2 of this chapter) may apply either through use 
of an authorized representative employed and designated by the group 
living arrangement or on their own behalf or through an authorized 
representative of their choice. The GLA must determine if a resident 
may apply on his or her own behalf based on the resident's physical and 
mental ability to handle his or her own affairs. Some residents of the 
GLA may apply on their own behalf while other residents of the same GLA 
may apply through the GLA's representative. Prior to certifying any 
residents, the State agency must verify that the GLA is authorized by 
FNS or is certified by the appropriate agency of the State (as defined 
in Sec. 271.2 of this chapter) including the agency's determination 
that the center is a nonprofit organization.
    (i) If the residents apply on their own behalf, the household size 
must be in accordance with the definition in Sec. 273.1. The State 
agency must certify these residents using the same provisions that 
apply to all other households. If FNS disqualifies the GLA as an 
authorized retail food store, the State agency must suspend its 
authorized representative status for the same time; but residents 
applying on their own behalf will still be able to participate if 
otherwise eligible.
    (ii) If the residents apply through the use of the GLA's authorized 
representative, their eligibility must be determined as a one-person 
household.
* * * * *
    (7) If the residents are certified on their own behalf, the food 
stamp benefits may either be returned to the GLA to be used to purchase 
meals served either communally or individually to eligible residents or 
retained and used to purchase and prepare food for their own 
consumption. The GLA may purchase and prepare food to be consumed by 
eligible residents on a group basis if residents normally obtain their 
meals at a central location as part of the GLA's service or if meals 
are prepared at a central location for delivery to the individual 
residents. If personalized meals are prepared and paid for with food 
stamps, the GLA must ensure that the resident's food stamp benefits are 
used for meals intended for that resident.
    (g) * * *
    (5) State agencies must take prompt action to ensure that the 
former household's eligibility or allotment reflects the change in the 
household's composition. Such action must include acting on the 
reported change in accordance with Sec. 273.12 or Sec. 273.21, as 
appropriate, by issuing a notice of adverse action in accordance with 
Sec. 273.13.
* * * * *

    15. In Sec. 273.12:
    a. New paragraphs (a)(1)(vii) and (c)(3) are added.
    b. Paragraphs (f)(3) and (f)(4) are revised, and paragraph (f)(5) 
is removed.
    The additions and revisions read as follows:


Sec. 273.12  Reporting changes.

    (a) * * *
    (1) * * *
    (vii) State agencies may opt to require households with earned 
income that are assigned 6-month or longer certification periods to 
report only changes in the amount of gross monthly income that result 
in their gross monthly income exceeding 130 percent of the monthly 
poverty income guideline for their household size.
    (A) Households with earned income certified for 6 months in 
accordance with paragraph (a)(1)(vii) of this section must not be 
required to report changes in accordance with paragraphs (a)(1)(ii) 
through (a)(1)(vi) of this section. The State agency must act on any 
change reported by such households that would increase their benefits 
in accordance with paragraph (c)(1) of this section. The State agency 
must not act on changes that would result in a decrease in benefits 
unless:
    (1) The household has voluntarily requested that its case be closed 
in accordance with Sec. 273.13(b)(12);
    (2) The State agency has information about the household's 
circumstances considered verified upon receipt; or
    (3) There has been a change in the household's PA grant, or GA 
grant in project areas where GA and food stamp cases are jointly 
processed in accord with Sec. 273.2(j)(2).
    (B) Households with earned income certified for longer than 6 
months under this option shall be required to submit an interim report 
at 6 months in accordance with paragraphs (a)(1)(i) through (a)(1)(vi) 
of this section. The State agency must act on any change reported by 
such households on the interim report in accordance with paragraph (c) 
of this section. If the household files a complete report resulting in 
reduction or termination of benefits, the State agency shall send an 
adequate notice, as defined in Sec. 271.2 of this chapter. The notice 
must be issued so that it will be received by the household no later 
than the time that its benefits are normally received. If the household 
fails to provide sufficient information or verification regarding a 
deductible expense, the State agency will not terminate the household, 
but will instead determine the household's benefits without regard to 
the deduction.
* * * * *
    (c) * * *
    (3) Unclear information. During the certification period, the State 
agency may obtain information about changes in a household's 
circumstances from which the State agency cannot readily determine the 
effect of the change on the household's benefit amount. The State 
agency might receive such unclear

[[Page 70209]]

information from a third party or from the household itself. The State 
agency must pursue clarification and verification of household 
circumstances using the following procedure:
    (i) The State agency must issue a written request for contact (RFC) 
which clearly advises the household of the verification it must provide 
or the actions it must take to clarify its circumstances, which affords 
the household at least 10 days to respond and to clarify its 
circumstances, either by telephone or by correspondence, as the State 
agency directs, and which states the consequences if the household 
fails to respond to the RFC.
    (ii) If the household does not respond to the RFC, or does respond 
but refuses to provide sufficient information to clarify its 
circumstances, the State agency must issue a notice of adverse action 
as described in Sec. 273.13 which terminates the case, explains the 
reasons for the action, and advises the household of the need to submit 
a new application if it wishes to continue participating in the 
program. When the household responds to the RFC and provides sufficient 
information, the State agency must act on the new circumstances in 
accordance with paragraphs (c)(1) or (c)(2 ) of this section.
    (iii) If the household does not respond to the RFC, or does respond 
but refuses to provide sufficient information to clarify its 
circumstances, the State agency may elect to issue a notice of adverse 
action as described in Sec. 273.13 which suspends the household for 1 
month before the termination becomes effective, explains the reasons 
for the action, and advises the household of the need to submit a new 
application if it wishes to continue participating in the program. If a 
household responds satisfactorily to the RFC during the period of 
suspension, the State agency must reinstate the household without 
requiring a new application, issue the allotment for the month of 
suspension, and if necessary, adjust the household's participation with 
a new notice of adverse action.
* * * * *
    (f) * * *
    (3) The State agency may not terminate a household's food stamp 
benefits solely because it has terminated the household's PA benefits 
without a separate determination that the household fails to satisfy 
the eligibility requirements for participation in the Program. Whenever 
a change results in the reduction or termination of a household's PA 
benefits within its food stamp certification period, the State agency 
must follow the procedures set forth below:
    (i) If a change in household circumstances requires a reduction or 
termination in the PA payment and the State agency has sufficient 
information to determine how the change affects the household's food 
stamp eligibility and benefit level, the State agency must take the 
following actions:
    (A) If the change requires a reduction or termination of food stamp 
benefits, the State agency must issue a single notice of adverse action 
for both the PA and food stamp actions. If the household requests a 
fair hearing within the period provided by the notice of adverse 
action, the State agency must continue the household's food stamp 
benefits on the basis authorized immediately prior to sending the 
notice. If the fair hearing is requested for both programs' benefits, 
the State agency must conduct the hearing according to PA procedures 
and timeliness standards. However, the household must reapply for food 
stamp benefits if the food stamp certification period expires before 
the fair hearing process is completed. If the household does not 
appeal, the State agency must make the change effective in accordance 
with the procedures specified in paragraph (c) of this section.
    (B) If the household's food stamp benefits will increase as a 
result of the reduction or termination of PA benefits, the State agency 
must issue the PA notice of adverse action, but must not take any 
action to increase the household's food stamp benefits until the 
household decides whether it will appeal the PA adverse action. If the 
household decides to appeal and its PA benefits are continued, the 
household's food stamp benefits must continue at the previous level. If 
the household does not appeal, the State agency must make the change 
effective in accordance with the procedures specified in paragraph (c) 
of this section, except that the time limits for the State agency to 
act on changes which increase a household's benefits must be calculated 
from the date the PA notice of adverse action period expires.
    (ii) Whenever a change results in the termination of a household's 
PA benefits within its food stamp certification period, and the State 
agency does not have sufficient information to determine how the change 
affects the household's food stamp eligibility and benefit level (such 
as when an absent parent returns to a household, and the household asks 
to have its TANF case closed without providing any information on the 
income of the new household member), the State agency must take the 
following action:
    (A) If the situation requires a reduction or termination of PA 
benefits, the State agency must issue a request for contact (RFC) in 
accordance with paragraph (c)(3)(i) of this section at the same time it 
sends a PA notice of adverse action. Before taking further action, the 
State agency must wait until the household's PA notice of adverse 
action period expires or until the household requests a fair hearing, 
whichever occurs first. If the household requests a fair hearing and 
elects to have its PA benefits continued pending the appeal, the State 
agency must continue the household's food stamp benefits at the same 
level. If the household decides not to request a fair hearing and 
continuation of its PA benefits, the State agency must resume action on 
the changes as required in paragraph (c)(3) of this section.
    (B) If the situation does not require a PA notice of adverse 
action, the State agency must issue a RFC and take action in accordance 
with paragraph (c)(3) of this section.
    (iii) Depending on the household's response to the RFC, the State 
agency must take appropriate action, if necessary, to close the 
household's case or adjust the household's benefit amount.
    (4) Transitional Benefits Alternative. The State agency may elect 
to provide households leaving TANF with transitional food stamp 
benefits as provided in this paragraph (f)(4). A State agency electing 
the Transitional Benefits Alternative (TBA) must provide transitional 
benefits, at a minimum, to all families with earnings who leave TANF. 
The State agency may not provide transitional benefits to a household 
which is leaving TANF when: the State agency has determined that the 
household is noncompliant with TANF requirements and the State agency 
is imposing a comparable food stamp sanction in accordance with 
Sec. 273.11; the State agency has determined that the household has 
violated a food stamp work requirement in accordance with Sec. 273.7; 
the State agency has determined that a household member has committed 
an intentional Program violation in accordance with Sec. 273.16, or the 
State agency is closing the household's TANF case in response to 
information indicating the household failed to comply with food stamp 
reporting requirements. The State agency must use procedures at 
paragraph (f)(3) of this section to determine the continued eligibility 
and benefit level of households denied

[[Page 70210]]

transitional benefits under this paragraph (f)(4).
    (i) When a household leaves TANF, the State agency may freeze for 
up to 3 months the household's benefit amount at the level the 
household received when it was receiving TANF. This is the household's 
transition period. If the household is losing income as a result of 
leaving TANF, the State agency must adjust the food stamp benefit 
amount before initiating the transition period. To provide the 
transition period, the State agency may extend the certification period 
for up to 3 months, not to exceed the maximum periods specified in 
Sec. 273.10(f)(1) and (f)(2).
    (ii) The State agency must issue a transition notice (TN) advising 
the household of the following: that the State agency must reevaluate 
its food stamp case no more than 3 months from the effective date of 
the TANF case closing; that its benefit amount will remain the same as 
when it was receiving cash assistance (or that the State agency has 
adjusted the food stamp benefit amount if the household's income is 
decreasing as the result of leaving cash assistance); that it is not 
required to report and provide verification for any changes in 
household circumstances until the deadline established in accordance 
with paragraph (c)(3) of this section (or its recertification 
interview, if the certification period is expiring); and that it may 
report changes if income decreases or expenses or household size 
increase.
    (iii) If the household does report changes in its circumstances 
during the transition period, the State agency must adjust the 
household's benefit amount in accordance with paragraph (c) of this 
section, except that, if the reported change would cause a reduction in 
the household's benefit amount, the State agency must make the change 
effective the month following the last month of the transition period.
    (iv) Before the end of the transition period, the State agency must 
issue the RFC specified in paragraph (c)(3) of this section and act on 
any information it has about the household's new circumstances in 
accordance with paragraph (c)(3) of this section, or recertify the 
household in accordance with Sec. 273.14. At the end of the transition 
period, the State agency may extend the household's certification 
period in accordance with Sec. 273.10(f)(5).

    16. In Sec. 273.14:
    a. Paragraph (b)(1) is amended by removing the second sentence of 
the introductory text of paragraph (b)(1)(ii)and revising paragraph 
(b)(1)(iii).
    b. Paragraph (b)(2) is revised.
    c. Paragraph (b)(3) is amended by revising paragraph (b)(3)(i), 
removing the second sentence of paragraph (b)(3)(ii), and revising 
paragraph (b)(3)(iii).
    d. Paragraph (b)(4) is amended by adding the words ``and benefits 
cannot be prorated'' at the end of the paragraph.
    e. Paragraph (e) is revised.
    The revisions read as follows:


Sec. 273.14  Recertification.

* * * * *
    (b) * * *
    (1) * * *
    (iii) To expedite the recertification process, State agencies are 
encouraged to send a recertification form, an interview appointment 
letter that allows for either in-person or telephone interviews, and a 
statement of needed verification required by Sec. 273.2(c)(5) with the 
NOE.
    (2) Application. The State agency must develop an application to be 
used by households when applying for recertification. It may be the 
same as the initial application, a simplified version, a monthly 
reporting form, or other method such as annotating changes on the 
initial application form. A new household signature and date is 
required at the time of application for recertification. The 
recertification process can only be used for those households which 
apply for recertification prior to the end of their current 
certification period, except for delayed applications as specified in 
paragraph (e)(3) of this section. The process, at a minimum, must 
elicit from the household sufficient information that, when added to 
information already contained in the casefile, will ensure an accurate 
determination of eligibility and benefits. The State agency must notify 
the applicant of information which is specified in Sec. 273.2(b)(2), 
and provide the household with a notice of required verification as 
specified in Sec. 273.2(c)(5).
    (3) * * *
    (i) As part of the recertification process, the State agency must 
conduct a face-to-face interview with a member of the household or its 
authorized representative at least once every 12 months for households 
certified for 12 months or less. The provisions of Sec. 273.2(e) also 
apply to interviews for recertification. The State agency may choose 
not to interview the household at interim recertifications within the 
12-month period. The requirement for a face-to-face interview once 
every 12 months may be waived in accordance with Sec. 273.2(e)(2).
* * * * *
    (iii) State agencies shall schedule interviews so that the 
household has at least 10 days after the interview in which to provide 
verification before the certification period expires. If a household 
misses its scheduled interview, the State agency shall send the 
household a Notice of Missed Interview that may be combined with the 
notice of denial. If a household misses its scheduled interview and 
requests another interview, the State agency shall schedule a second 
interview.
* * * * *
    (e) Delayed processing. (1) If an eligible household files an 
application before the end of the certification period but the 
recertification process cannot be completed within 30 days after the 
date of application because of State agency fault, the State agency 
must continue to process the case and provide a full month's allotment 
for the first month of the new certification period. The State agency 
shall determine cause for any delay in processing a recertification 
application in accordance with the provisions of Sec. 273.3(h)(1).
    (2) If a household files an application before the end of the 
certification period, but fails to take a required action, the State 
agency may deny the case at that time, at the end of the certification 
period, or at the end of 30 days. Notwithstanding the State's right to 
issue a denial prior to the end of the certification period, the 
household has 30 days after the end of the certification period to 
complete the process and have its application be treated as an 
application for recertification. If the household takes the required 
action before the end of the certification period, the State agency 
must reopen the case and provide a full month's benefits for the 
initial month of the new certification period. If the household takes 
the required action after the end of the certification period but 
within 30 days after the end of the certification period, the State 
agency shall reopen the case and provide benefits retroactive to the 
date the household takes the required action. The State agency shall 
determine cause for any delay in processing a recertification 
application in accordance with the provisions of Sec. 273.3(h)(1).
    (3) If a household files an application within 30 days after the 
end of the certification period, the application shall be considered an 
application for recertification; however, benefits must be prorated in 
accordance with Sec. 273.10(a). If a household's application for 
recertification is delayed beyond the first of the month of what would 
have

[[Page 70211]]

been its new certification period through the fault of the State 
agency, the household's benefits for the new certification period shall 
be prorated based on the date of the new application, and the State 
agency shall provide restored benefits to the household back to the 
date the household's certification period should have begun had the 
State agency not erred and the household been able to apply timely.
* * * * *

    17. In Sec. 273.15 paragraphs (j) and (k)(2) are revised to read as 
follows:


Sec. 273.15  Fair hearings.

* * * * *
    (j) Denial or dismissal of request for hearing. (1) The State 
agency must not deny or dismiss a request for a hearing unless:
    (i) The State agency does not receive the request within the 
appropriate time frame specified in paragraph (g) of this section, 
provided that the State agency considers untimely requests for hearings 
as requests for restoration of lost benefits in accordance with 
Sec. 273.17;
    (ii) The household or its representative fails, without good cause, 
to appear at the scheduled hearing;
    (iii) The household or its representative withdraws the request in 
writing; or
    (iv) The household or its representative orally withdraws the 
request and the State agency has elected to allow such oral requests.
    (2) The State agency electing to accept an oral expression from the 
household or its representative to withdraw a fair hearing may discuss 
the option with the household when it appears that the State agency and 
household have resolved issues related to the fair hearing. However, 
the State agency is prohibited from coercion or actions which would 
influence the household or its representative to withdraw the 
household's fair hearing request. The State agency must provide a 
written notice to the household within 10 days of the household's 
request confirming the withdrawal request and providing the household 
with an opportunity to request a hearing. The written notice must 
advise the household it has 10 days from the date it receives the 
notice to advise the State agency of its desire to request, or 
reinstate, the hearing. If the household timely advises the State 
agency that it wishes to reinstate the fair hearing, the State agency 
must provide the household with a fair hearing, within the time frames 
specified in paragraph (c) of this section and beginning the date the 
household advises the State agency that it wishes to reinstate its 
request. The State agency must reinstate a fair hearing as requested 
from a household at least once. The State agency must not deny a 
household's request for a fair hearing if the household is aggrieved by 
a State agency action that differs from the reinstated action.
    (k) * * *
    (2) Once continued or reinstated, the State agency must not reduce 
or terminate benefits prior to the receipt of the official hearing 
decision unless:
    (i) The certification period expires. The household may reapply and 
may be determined eligible for a new certification period with a 
benefit amount as determined by the State agency;
    (ii) The hearing official makes a preliminary determination, in 
writing and at the hearing, that the sole issue is one of Federal law 
or regulation and that the household's claim that the State agency 
improperly computed the benefits or misinterpreted or misapplied such 
law or regulation is invalid;
    (iii) A change affecting the household's eligibility or basis of 
issuance occurs while the hearing decision is pending and the household 
fails to request a hearing after the subsequent notice of adverse 
action;
    (iv) A mass change affecting the household's eligibility or basis 
of issuance occurs while the hearing decision is pending; or
    (v) The household, or its representative, orally withdrew its 
request for a fair hearing and did not advise the State agency of its 
desire to reinstate the fair hearing within the time frame specified in 
paragraph (j)(2) of this section.
* * * * *


Sec. 273.21  [Amended]

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

    19. Sec. 273.25 is added to read as follows:


Sec. 273.25  Simplified Food Stamp Program.

    (a) Definitions. For purposes of this section:
    (1) Simplified Food Stamp Program (SFSP) means a program authorized 
under 7 U.S.C. 2035.
    (2) Temporary Assistance for Needy Families (TANF) means a State 
program of family assistance operated by an eligible State under its 
TANF plan as defined at 45 CFR 260.30.
    (3) Pure-TANF household means a household in which all members 
receive assistance under a State program funded under part A of title 
IV of the Social Security Act (42 U.S.C. 601 et seq.).
    (4) Mixed-TANF household means a household in which 1 or more 
members, but not all members, receive assistance under a State program 
funded under part A of title IV of the Social Security Act (42 U.S.C. 
601 et seq.).
    (5) Assistance under a State program funded under part A of title 
IV of the Social Security Act (42 U.S.C. 601 et seq.) means 
``assistance'' as defined in regulations at 45 CFR 260.31.
    (b) Limit on benefit reduction for mixed-TANF households under the 
SFSP. If a State agency chooses to operate an SFSP and includes mixed-
TANF households in its program, the following requirements apply in 
addition to the statutory requirements governing the SFSP.
    (1) If a State's SFSP reduces benefits for mixed-TANF households, 
then no more than 5 percent of these participating households can have 
benefits reduced by 10 percent of the amount they are eligible to 
receive under the regular FSP and no mixed-TANF household can have 
benefits reduced by 25 percent or more of the amount it is eligible to 
receive under the regular FSP. Reductions of $10 or less will be 
disregarded when applying this requirement.
    (2) The State must include in its State SFSP plan an analysis 
showing the impact its program has on benefit levels for mixed-TANF 
households by comparing the allotment amount such households would 
receive using the rules and procedures of the State's SFSP with the 
allotment amount these households would receive if certified under 
regular Food Stamp Program rules and showing the number of households 
whose allotment amount would be reduced by 9.99 percent or less, by 10 
to 24.99 percent, and by 25 percent or more, excluding those households 
with reductions of $10 or less. In order for FNS to accurately evaluate 
the program's impact, States must describe in detail the methodology 
used as the basis for this analysis.
    (3) To ensure compliance with the benefit reduction requirement 
once an SFSP is operational, States must describe in their plan and 
have approved by FNS a methodology for measuring benefit reductions for 
mixed-TANF households on an on-going basis

[[Page 70212]]

throughout the duration of the SFSP. In addition, States must report to 
FNS on a periodic basis the amount of benefit loss experienced by 
mixed-TANF households participating in the State's SFSP. The frequency 
of such reports will be determined by FNS taking into consideration 
such factors as the number of mixed-TANF households participating in 
the SFSP and the amount of benefit loss attributed to these households 
through initial or on-going analyses.
    (c) Application processing standards. Under statutory requirements, 
a household is not eligible to participate in an SFSP unless it is 
receiving TANF assistance. If a household is not receiving TANF 
assistance (payments have not been authorized) at the time of its 
application for the SFSP, the State agency must process the application 
using the regular Food Stamp Program requirements of Sec. 273.2, 
including processing within the 30-day regular or 7-day expedited time 
frame, and screening for and provision of expedited service if 
eligible. The State agency must determine under regular food stamp 
rules the eligibility and benefits of any household that it has found 
ineligible for TANF assistance because of time limits, more restrictive 
resource standards, or other rules that do not apply to food stamps.
    (d) Standards for shelter costs. Legislation governing the SFSP 
requires that State plans must address the needs of households with 
high shelter costs relative to their income. If a State chooses to 
standardize shelter costs under the SFSP, it must, therefore, use 
multiple standards that take into consideration households with high 
shelter costs versus those with low shelter costs. A State is 
prohibited from using a single standard based on average shelter costs 
for all households participating in an SFSP.
    (e) Opportunity for public comment. States must provide an 
opportunity for public input on proposed SFSP plans (with special 
attention to changes in benefit amounts that are necessary in order to 
ensure that the overall proposal not increase Federal costs) through a 
public comment period, public hearings, or meetings with groups 
representing participants' interests. Final approval will be given 
after the State informs the Department about the comments received from 
the public. After the public comment period, the State agency must 
inform the Department about the comments received from the public and 
submit its final SFSP plan for Departmental approval.

PART 274--ISSUANCE AND USE OF COUPONS

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


Sec. 274.2  Providing benefits to participants.

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


Sec. 274.5  [Removed and Reserved]

    20. Section 274.5 is removed and reserved.

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

    21. In Sec. 277.4, two sentences are added to the end of paragraph 
(b) introductory text to read as follows:


Sec. 277.4  Funding.

* * * * *
    (b) Federal reimbursement rate. * * * This rate includes 
reimbursement for food stamp informational activities but not for 
recruitment activities. Recruitment activities are those activities 
designed to persuade an individual who has made an informed choice not 
to apply for food stamps to change his or her decision and apply.
* * * * *

Dated: November 9, 2000.
Shirley R. Watkins,
Under Secretary, Food, Nutrition and Consumer Services.
[FR Doc. 00-29355 Filed 11-20-00; 8:45 am]
BILLING CODE 3410-30-P


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