[Federal Register Volume 59, Number 202 (Thursday, October 20, 1994)] [Unknown Section] [Page 0] From the Federal Register Online via the Government Publishing Office [www.gpo.gov] [FR Doc No: 94-25977] [[Page Unknown]] [Federal Register: October 20, 1994] ======================================================================= ----------------------------------------------------------------------- DEPARTMENT OF AGRICULTURE Food and Nutrition Service 7 CFR Part 273 [Amendment No. 360] Food Stamp Program: Resource Provision From the Mickey Leland Memorial Domestic Hunger Relief Act of 1990 AGENCY: Food and Nutrition Service, USDA. ACTION: Proposed rule. ----------------------------------------------------------------------- SUMMARY: This rule proposes to amend Food Stamp Program regulations to implement a provision contained in the Mickey Leland Memorial Domestic Hunger Relief Act of 1990 (the Leland Act) to expand the criteria by which a resource can be considered inaccessible. The Department originally published a proposed rule concerning this provision on August 13, 1991 at 56 FR 40164. After reviewing the comments received, the Department elected to withdraw the provision as originally proposed and amend its proposal. Subsequently, on December 13, 1991, the Food Stamp Act of 1977 was amended by the Food, Agriculture, Conservation, and Trade Act Amendments of 1991 which refined the Leland Act provision concerning inaccessible resources. In this proposed rulemaking, the Department is addressing both statutory provisions dealing with inaccessible resources. DATES: Comments must be received on or before January 18, 1995, to be assured of consideration. ADDRESSES: Comments should be submitted to Judith M. Seymour, Supervisor, Eligibility and Certification Regulations Section, Certification Policy Branch, Program Development Division, Food Stamp Program, Food and Nutrition Service, USDA, 3101 Park Center Drive, Alexandria, Virginia, 22302. Comments can also be sent via datafax to Ms. Seymour at (703) 305-2454. All written comments will be open to public inspection at the offices of the Food and Nutrition Service during regular business hours (8:30 a.m. to 5:00 p.m., Monday through Friday) in Room 718 at 3101 Park Center Drive, Alexandria, Virginia. FOR FURTHER INFORMATION CONTACT: Judith M. Seymour, Supervisor, Eligibility and Certification Regulations Section, at the above address or at (703) 305-2496. SUPPLEMENTARY INFORMATION: Executive Order 12372 The Food Stamp Program is listed in the Catalog of Federal Domestic Assistance under No. 10.551. For the reasons set forth in the final rule and related Notice(s) to 7 CFR 3105, subpart V (48 FR 29115, June 24, 1983; or 48 FR 54317, December 1, 1983, as appropriate), this Program is excluded from the scope of Executive Order 12372 which requires intergovernmental consultation with State and local officials. Executive Order 12778 This proposed rule has been reviewed under Executive Order 12778, Civil Justice Reform. This rule is intended to have preemptive effect with respect to any state or local laws, regulations, or policies which conflict with its provisions or which would otherwise impede its full implementation. This rule is not intended to have retroactive effect unless so specified in the ``Effective Date'' paragraph of this preamble. Prior to any judicial challenge to the provisions of this rule or the application of its provisions all applicable administrative procedures must be exhausted. In the Food Stamp Program the administrative procedures are as follows: (1) For program benefit recipients--state administrative procedures issued pursuant to 7 U.S.C. 2020(e)(10) and 7 CFR 273.15; (2) For State agencies--administrative procedures issued pursuant to 7 U.S.C. 2023 set out at 7 CFR 276.7 (for rules related to non- quality control (QC) liabilities) or Part 284 (for rules related to QC liabilities); (3) For retailers and wholesalers--administrative procedures issued pursuant to 7 U.S.C. 2023 set out at 7 CFR 278.8. Executive Order 12866 This proposed rule is issued in conformance with Executive Order 12866. Regulatory Flexibility Act This proposed rule has also been reviewed with respect to the requirements of the Regulatory Flexibility Act of 1980 (Pub. L. 96-354, 94 Stat. 1164, September 19, 1980). The Administrator of the Food and Nutrition Service (FNS) has certified that this proposal would not have a significant economic impact on a substantial number of small entities. State and local agencies that administer the Program will be the most affected. Food stamp applicants and recipients will be affected due to changes in excludable resources for purposes of the Food Stamp Program. Paperwork Reduction Act This action does not contain reporting or record keeping requirements subject to approval by the Office of Management and Budget (OMB) under the Paperwork Reduction Act of 1980 (44 U.S.C. 3507). Background The Mickey Leland Memorial Domestic Hunger Relief Act (Food, Agriculture, Conservation, and Trade Act of 1990, Title XVII, Pub. L. 101-624, 104 Stat. 3783); (hereinafter referred to as the Leland Act) made several changes to the Food Stamp Act of 1977, as amended (7 U.S.C. 2011, et seq.) (the Act). This proposed rulemaking pertains to Section 1719 of the Leland Act which amended Section 5(g) of the Act, 7 U.S.C. 2014(g)(5), to expand the criteria by which property can be considered inaccessible to households in the calculation of their resources for purposes of food stamp eligibility. The Department originally published a proposed rule on August 13, 1991 at 56 FR 40164 regarding, in part, this Leland Act provision. The Department received twenty comments on the proposal to amend 7 CFR 273.8(e) to incorporate this provision. On December 13, 1991, Section 904 of the Food, Agriculture, Conservation, and Trade Act Amendments of 1991 (Pub. L. 102-237, 105 Stat. 1818); (hereinafter referred to as the 1991 Technical Amendments) further amended Section 5(g)(5) of the Act. In light of the additional legislation, and after full consideration of the comments received in response to the earlier proposed rule, the Department has elected to re-propose the rule on the inaccessible resources provision. Following are explanations of current rules, the Department's earlier proposal and the comments received, the 1991 Technical Amendments, and the new proposal. We believe understanding these items will lead to a better understanding of the re-proposal. Current Rule Currently, regulations at 7 CFR 273.8(c) describe both liquid and non-liquid resources that are counted when determining a household's eligibility for food stamps. Non-liquid resources such as land, buildings, and licensed and unlicensed vehicles, with some exceptions, are included as resources because they can be converted to cash. However, not all property can be easily sold, and this has posed significant problems for both State agencies administering the Food Stamp Program and households applying for benefits. Except for the provisions regarding vehicles, current regulations focus on the accessibility/inaccessibility of resources. In establishing inaccessibility, State agencies are compelled to require a household to verify that the property it owns, which is not otherwise an exempt resource, has little or no fair market value; cannot be sold because it is jointly owned with non-household members who are unwilling to sell; or is otherwise inaccessible. In many instances, households have found it difficult to provide this verification. Further, in establishing accessibility/inaccessibility, State agencies may be faced with questions of state property law and probate law. The situation was particularly difficult with heir property, i.e., an undivided fractional interest in a decedent's property. It is apparent that the treatment of heir property was the primary problem Congress was addressing when it passed Section 1719 of the Leland Act, as the legislative history contained in House Report No. 101-569, 101st Congress, 2nd Session, Part 1, at 429-30, specifically refers to the problems of heir property encountered by food stamp applicants and State agencies. Section 1719 of the Leland Act required the Department to promulgate regulations requiring State agencies to develop standards for identifying kinds of resources that, as a practical matter, a household is unlikely to be able to sell for any significant return because the household's interest is relatively slight or because the cost of selling the household's interest would be relatively great. Resources so identified were to be excluded as inaccessible resources for food stamp purposes. Our Earlier Proposal and Comments In order to implement Section 1719, the Department proposed an amendment to 7 CFR 273.8(e) that would have excluded as a resource property that a household could not sell for any significant return because the household's interest was relatively slight or because the cost of selling the household's interest would have been greater than the value of the property. The proposed rule provided that a property would be excluded as a resource if it could not be sold for more than $2,000 and the cost of selling the property exceeded 75 percent of the expected sale price. State agencies would have been required to establish standards for identifying the costs likely to be associated with the sale of various types of property and the likely gross value of such property as a guide for recipients and eligibility workers to follow in determining if the property was accessible as a resource. The August 13, 1991 proposed rulemaking generated twenty comments. The general consensus of the comments was that the proposed rule violated the intent of Congress by imposing criteria that a property is considered an inaccessible resource if it could not be sold for more than $2,000 and the cost of selling the property exceeded 75 percent of the expected sale price. However, the Department found there was no consensus among the commenters on how to amend the proposed rule to determine what types of property should be excluded. For example, one commenter suggested amending the proposed rule to say that the property be considered inaccessible if it cannot be sold for $2000 or more or the cost of selling the property is at least 75 percent or more of the sale price. Another commenter recommended the definition of inaccessible property be changed to include the following criteria: (1) It is jointly owned by non- household and household members; (2) It cannot be converted to cash without the consent of all parties; and (3) It cannot be converted to cash because all parties do not agree to sell or all parties cannot be contacted to consult. A third commenter suggested the final rule exclude property which is either heavily mortgaged (such as over 75 percent of its value) or owned by more than two people and exclude property where for whatever reason net proceeds after paying all expenses (including co-owners and liens) in selling the property would be less than $2000. 1991 Technical Amendment In December 1991, Section 904 of the 1991 Technical Amendments amended Section 5(g)(5) of the Food Stamp Act by adding to the end of this paragraph the following new sentences: A resource shall be so identified [as inaccessible] if its sale or other disposition is unlikely to produce any significant amount of funds for the support of the household. The Secretary shall not require the State agency to require verification of the value of a resource to be excluded under this paragraph unless the State agency determines that the information provided by the household is questionable. The Current Proposal The Department has carefully considered Section 1719 of the Leland Act, the Congressional intent evidenced in House Report No. 101-529, 101st Congress, 2nd Session, part 1, the comments regarding the August 13, 1991 proposed rule, and the language in Section 904 of the 1991 Technical Amendments. As a result, this proposed rulemaking is significantly different from the Department's previous proposed rule on this subject. The regulations at 7 CFR 273.8(d) already exclude jointly-owned resources that can be shown to be inaccessible. An example is a bank account that is jointly-owned by food stamp applicant household and non-household members which, by State law, is determined to be inaccessible wholly or in part to the food stamp household. Also, certain types of property are excluded from consideration as a resource including property that the household is making a good faith effort to sell (7 CFR 273.8(e)(8)). The Department believes that the amendments to Section 5(g)(5) of the Act were not intended to supplant the existing regulations on inaccessible resources. Rather, these amendments were intended to provide an additional exclusion for resources such as heir property or other property which is unlikely to produce a significant return or significant funds for the support of the household. In Section 1719 of the Leland Act, Congress required that household resources unlikely to be sold for any significant return because the household's interest is relatively slight or because the cost of selling the household's interest would be relatively great be excluded from income for Food Stamp eligibility purposes. The legislative history of this provision did not provide any further guidance as to how this was to be implemented. The floor debate indicated that it would not be necessary for State agencies to determine the exact fair market value for a resource for such resource to be considered inaccessible. Cong. Rec. H11862, October 23, 1990, remarks of Congressman Hatcher. The 1991 Technical Amendments added to the Leland Act provision the requirement that a resource be excluded as inaccessible if its sale or other disposition is unlikely to produce any significant amount of funds for the support of the household. The legislative history of this provision also did not provide any definitive guidance as to what Congress intended by ``any significant return''. The floor debates indicated that the term was to include ``any significant amount of money to buy food for the household'' and that ``[N]o arbitrary sale price of percent-of-value test may be imposed.'' Cong. Rec. S18326, November 26, 1991, remarks of Senator Leahy. The Department is proposing to define ``any significant return'' as being one half the resource limit for the household. The Department believes that some value above which the resource must be sold must be established for uniform administration of the program. The Act requires that the standards of eligibility be uniform for all participants, 7 USC 2014(b), and provides that the Secretary shall issue such regulations, consistent with the terms of the Act, that the Secretary deems necessary or appropriate for the effective and efficient administration of the Food Stamp Program. 7 USC 2013(c). Given this, and the lack of clarity of the statute and legislative history, the Department believes that it is reasonable to establish ``significant return'' or ``significant funds'' to mean one half of the household resource limit. For food stamp purposes, households are permitted to have up to $2,000 in resources ($3,000 for households if at least one member is aged 60 or older). (For categorically-resource-eligible households, the issue of accessibility is irrelevant.) Current data show that the average value of countable resources for all food stamp households is less than $100. Ninety-five percent of all food stamp households have $1,000 or less in countable resources. As very few households participating in the food stamp program have resources exceeding $1,000, the Department believes that a resource that would yield a return of $1,000 (or $1,500, as appropriate) would be a significant return for a household that is otherwise eligible for food stamps. Section 5(g)(5) also provides that the return must be determined to be not significant either (1) because the household's interest is relatively slight or (2) because the cost of selling the household's interest would be relatively great. The legislative history does not provide any direction to the Department in establishing the meaning of relatively slight interest or relatively great cost of selling other than a statement by Senator Leahy in the floor debates that no ``arbitrary sale price or percent-of-value test may be imposed''. Cong. Rec. S18326, November 26, 1991. The Department recognizes that what constitutes a ``relatively slight interest'' or a ``relatively great cost of selling'' may vary, depending on the specific resource. The ultimate inquiry is whether the resource, given the ownership interest and/or the cost of sale, would produce a significant return or significant amount of funds to the household, if sold. The Department is proposing in 7 CFR 273.8(e) to prohibit applying this provision to negotiable financial instruments such as stocks and bonds. As a general matter, stocks and bonds are liquid resources which are available to the household. Section 5(g)(5) is directed in part at inaccessibility due the cost of selling being relatively great in relation to the amount of funds that would be realized if the resource were sold. In general, brokerage firms and other financial institutions charge either a minimum fee or a small percentage of the sale when a negotiable financial instrument is sold. The Department recognizes that a household may own stock or some other negotiable financial instrument that has decreased in value since the household acquired it. However, regardless of the reduced value of that resource, it could not be considered to be inaccessible because the cost of selling it would not be ``relatively great'' unless the stock were basically worthless, and thus would not be of value as a resource in any event. The proposed distinction between negotiable financial instruments, which could not be declared inaccessible under this proposal, and other types of resources which, depending on the value of the resource and the circumstances of each particular household's ownership interest in the resource, could be found inaccessible, is given further support in language found in the Congressional floor debates on the statutory provision. Senator Leahy indicated that the ``availability'' of a resource should be one of the determinants of whether that resource may be declared inaccessible. Cong. Rec. S18325, November 26, 1991. By their very nature, negotiable financial instruments, regardless of either their current value or their value when purchased, are liquid and available to the household in contrast to other nonliquid resources such as real property. This proposal retains the provision from the 1991 proposed rule that would have required State agencies to develop standards to be used to identify the kinds of resources that, as a practical matter, the household is unlikely to sell for any significant return. Several commenters said the proposed rule placed too heavy a burden on State agencies by requiring them to develop these standards. The Department understands these concerns; however, Section 5(g)(5)of the Act is clear in requiring State agencies to develop such standards. In order to emphasize this requirement, the Department is proposing to add a new paragraph (18) to 7 CFR 273.8(e) that would require State agencies to develop standards for identifying resources, that as a practical matter, the household is unable to sell for any significant return because the household's interest in the property is relatively slight or because the cost of selling the household's interest would be relatively great. State agencies are not required to submit these standards to the Department for approval. In developing their standards, the State agencies need to keep in mind that verification of the inaccessibility of a resource that meets the defined standard is necessary only if the information provided by the household appears questionable. The 1991 Technical Amendments prohibited requiring State agencies to require verification unless the information provided appears questionable. Accordingly, the Department is proposing in 7 CFR 273.8(e)(18) to require verification of inaccessibility of resources only if the information provided by the household is insufficient to clearly establish inaccessibility. The Department would like to make it clear that this standard does not invalidate any other provision regarding jointly-owned resources and inaccessible resources, as described in 7 CFR 273.8(d). Application of This Rule to Vehicles Three commenters on the August 13, 1991 proposed rulemaking discussed whether or not vehicles could be identified as inaccessible resources under this provision. The Department believes that it is very clear from the statutory language and the legislative history of the inaccessible resource provision that it was not the intent of Congress to include vehicles. Neither Section 1719 of the Leland Act or Section 904 of the 1991 Technical Amendments nor their legislative history made any reference to vehicles when discussing the resources to be dealt with under Section 5(g)(5)of the Act. On pages 429 and 430 of House Report No. 101-569, the reasons for the legislative provision are spelled out. This legislative history specifically mentions heir property and the problems associated with attempting to assess the value of such property as the primary reason for the statutory amendments. Historically, vehicles have always been treated differently than all other resources under the Act. Section 5(g)(2) of the Act continues to require that the fair market value of vehicles be the test of whether any portion of their value is counted as a resource despite the addition of Section 5(g)(5) to the Act. Moreover, the Congressional Budget Office estimated that there would be no cost involved in implementing the inaccessible resources provision. The cost of including vehicles under the inaccessible resources provision would be substantial. The Department estimates that the cost would be over $1 billion over the next five years. Therefore, the Department does not believe that it was Congressional intent to include vehicles as an inaccessible resource under this provision. Implementation Section 1781 of the Leland Act required the Department to promulgate a final rule to implement Section 1719 of the Leland Act by October 1, 1991, with implementation required the first day of the month 120 days after publication of implementing regulations. Thus, the latest date for implementation of Section 1719 of the Leland Act was February 1, 1992. The 1991 Technical Amendments require Section 904 to be effective and implemented no later than February 1, 1992. In response to these implementation requirements, and since final regulations would not be issued before that date, the Department issued a memorandum, dated December 27, 1991, notifying State agencies of these provisions and the February implementation date. State agencies were advised to exercise their best judgment regarding procedures for applying these provisions. Clarification that the standard did not apply to vehicles was provided to all State agencies in January 1992. Whatever standards State agencies have used between February 1, 1992 and the publication of the final rule meet the requirements of the Act, provided that such standards were not applied to vehicles. Recognizing that the statutory amendments regarding inaccessible resources have already been implemented through the above described memoranda and in order to provide for the orderly implementation of the specific provision of this proposed rule, the Department is proposing to require that this rule be effective in any given State upon implementation by the State agency but in no event later than the first day of the month 120 days after publication of the final rule. List of Subjects in 7 CFR Part 273 Administrative practice and procedures, Aliens, Claims, Food stamps, Grant programs-social programs, Penalties, Reporting and recordkeeping requirements, Social security, Students. Accordingly, 7 CFR Part 273 is proposed to be amended as follows: PART 273--CERTIFICATION OF ELIGIBLE HOUSEHOLDS 1. The authority citation of Part 273 continues to read as follows: Authority: 7 U.S.C. 2011-2032. 2. In Sec. 273.8, a new paragraph (e)(18) is added to read as follows: Sec. 273.8 Resource eligibility standards. * * * * * (e) Exclusions from resources. * * * (18) State agencies shall 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 because the costs of selling the household's interest would be relatively great. A resource shall be so identified if its sale or other disposition is unlikely to produce any significant amount of funds for the support of the household. This provision does not apply to negotiable financial instruments or vehicles. The determination of whether any part of the value of a vehicle is included as a resource shall be handled using the provisions of paragraph (h) 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 following definitions shall be used in developing these standards: (i) Significant return shall be any return, after estimated costs of sale or disposition, and taking into account the ownership interest of the household, that is estimated to be one half or more of the applicable resource limit for the household; and (ii) Any significant amount of funds shall be funds amounting to one half or more of the applicable resource limit for the household. * * * * * Dated: October 13, 1994. Ellen Haas, Assistant Secretary for Food and Consumer Services. [FR Doc. 94-25977 Filed 10-19-94; 8:45 am] BILLING CODE 3410-30-U