[Federal Register Volume 61, Number 200 (Tuesday, October 15, 1996)]
[Rules and Regulations]
[Pages 53595-53601]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-26067]
========================================================================
Rules and Regulations
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains regulatory documents
having general applicability and legal effect, most of which are keyed
to and codified in the Code of Federal Regulations, which is published
under 50 titles pursuant to 44 U.S.C. 1510.
The Code of Federal Regulations is sold by the Superintendent of Documents.
Prices of new books are listed in the first FEDERAL REGISTER issue of each
week.
========================================================================
Federal Register / Vol. 61, No. 200 / Tuesday, October 15, 1996 /
Rules and Regulations
[[Page 53595]]
DEPARTMENT OF AGRICULTURE
Food and Consumer Service
7 CFR Parts 271, 272, 274, and 278
[Amendment No. 343]
RIN 0584-AB02
Food Stamp Program: Miscellaneous Farm Bill Provisions Relating
to the Authorization of Retail Firms and Wholesale Food Concerns
AGENCY: Food and Consumer Service, USDA.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: This Food Stamp Program rulemaking implements the three
following provisions of the Food, Agriculture, Conservation and Trade
Act of 1990 (FACT Act): homeless food stamp households may purchase
meals with food stamps in restaurants approved by State agencies for
this purpose, and the Department may periodically require authorized
retailers and wholesalers to be reauthorized to participate in the Food
Stamp Program, and no co-located wholesale/retail food concern may be
authorized as a retail food store unless the firm does a substantial
level of retail food business, or unless failure to authorize such a
firm as a retail food store would cause hardship to food stamp
households. This rulemaking is necessary to implement sections 1713,
1733 and 1734 of the FACT Act. The intended effects are: to expand the
sources of low-cost food to homeless recipients; to provide the
Department with complete and current information on retailers and
wholesalers participating in the Food Stamp Program and ensure that
only those firms qualified to participate in the program are
authorized; and to preclude the authorization of the firms not needed
to effectuate the purposes of the program.
EFFECTIVE DATE: These provisions were effective February 1, 1992,
except the provisions of 7 CFR 278.1(i) which have been submitted to
the Office of Management and Budget for approval under the Paperwork
Reduction Act of 1995. The provisions of this section will become
effective upon approval. FCS will publish a document in the Federal
Register announcing the effective date.
FOR FURTHER INFORMATION CONTACT: Questions regarding this rulemaking
should be addressed to Suzanne Fecteau, Chief, Coupon and Retailer
Branch, Food Stamp Program, 3101 Park Center Drive, Alexandria,
Virginia 22302, or by telephone at (703) 305-2418.
SUPPLEMENTARY INFORMATION:
Executive Order 12866
This final rule has been determined to be significant and was
reviewed by the Office of Management and Budget under Executive Order
12866.
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 part 3015, subpart V (48 FR 29115,
June 24, 1983), this program is excluded from the scope of Executive
Order 12372 which requires intergovernmental consultation with State
and local officials.
Regulatory Flexibility Act
The final rule has been reviewed with regard to the requirements of
the Regulatory Flexibility Act of 1980 (5 U.S.C. 601 et seq.). William
E. Ludwig, the Administrator of the Food and Consumer Service (FCS),
has certified that this final rule will not have a significant economic
impact on a substantial number of small entities. State and local
agencies that administer the Program will be affected. Some restaurants
will be affected because they will be allowed to accept food stamp
benefits in payment for meals served to homeless food stamp recipients.
The rule will also affect retail food stores and wholesale food
concerns which accept and redeem food stamp benefits. Thus, while the
rule may affect a substantial number of small entities, the effect on
any one entity will not be significant.
Paperwork Reduction Act
In accordance with the Paperwork Reduction Act of 1995, this notice
announces the Food and Consumer Service's intention to request Office
of Management and Budget's approval of a revision to a currently
approved information collection pertaining to food stamp applications
to accept and redeem food stamps.
Comments on this information collection must be received by
December 16, 1996.
Send requests for copies of this information collection to: Suzanne
M. Fecteau, Chief, Redemption Management Branch, Benefit Redemption
Division, Food and Consumer Service, U.S. Department of Agriculture,
3101 Park Center Drive, Alexandria, VA 22302 or call (703) 305-2418.
Comments are invited on: (a) Whether the proposed collection of
information is necessary for the 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 proposed
collection of information including the validity of the methodology and
assumptions used; (c) ways to enhance the quality, utility and clarity
of the information to be collected; and (d) ways to minimize the burden
of 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.
All responses to this notice will be summarized and included in the
request for OMB approval, and will become a matter of public record.
For further information contact Suzanne M. Fecteau, (703) 305-2418.
Supplementary information: Title: Food Stamp Application for
Stores, Form FNS-252 (9-93); Food Stamp Program for Stores-
Reauthorization, Form FCS-252R (2-95);Food Stamp Program Application
for Stores--Supplement, Form FNS-252A (8-94);Food and Nutrition Service
Meal Services, Form FNS-252-2 (10-79).
OMB Number: 0584-0008.
Expiration Date of Approval: Three years from date of approval.
Type of Request: Revision of a currently approved collection.
Request
[[Page 53596]]
for approval of application forms has been previously submitted. This
submission is for an additional requirement under section 278.1(i) of
the Food Stamp Program regulations as described below. The burden
associated with this requirement applies to one class of respondents
which complete the form FNS-252-2.
Abstract: FCS of the Department of Agriculture is the Federal
Agency responsible for the Food Stamp Program. The Food Stamp Act of
1977, as amended (7 U.S.C. 2011 et seq.) requires that the Agency
determine the eligibility of firms and certain food service
organizations to accept and redeem food stamp benefits and to monitor
them for compliance and continued eligibility.
Part of FCS' responsibility is to accept applications from retail
food stores, restaurants and programs that wish to participate in the
Food Stamp Program, review the applications in order to determine
whether or not applicants meet eligibility requirements, and make
determinations whether to grant or deny authorization to accept and
redeem food stamp benefits. FCS is also responsible for requiring
updates to application information and reviewing the information to
determine whether or not the firms or services continue to meet
eligibility requirements.
Section 278.1(i) of this rule contains an information collection
requirement. It requires that restaurants interested in serving
homeless food stamp recipients are responsible for obtaining contracts
with the appropriate State agency and providing to the State agency the
approximate prices that will be charged for meals served to homeless
food stamp recipients.
Estimate of Burden: The public reporting burden for the collection
of information for all applicant firms wishing to participate, or
continue to participate, in the FSP is estimated to average .280 hours
per response.
Respondents: Retail food stores, restaurants and State or local
governments.
Estimated Number of Respondents: 80,613.
Estimated Number of Responses per Respondent: 1.
Estimated Total Annual Burden: 18,396.
The individual components of the burden are as follows:
------------------------------------------------------------------------
Hours
Form No. and/or title Use Annual per Annual
responses response burden
------------------------------------------------------------------------
Form FNS 252, FSP Application New....... 26,431 .45 11,894
for Stores.
Form FNS 252-2 FSP........... New....... \1\ 817 \1\ .226 \1\ 185
Application for Meal Services Update.... 1,775 .1667 296
(including private
restaurants).
Form FCS-252R FSP Update.... 51,590 .1167 6021
Reauthorization Application.
------------------------------------------
80,613 18,396
------------------------------------------------------------------------
\1\ Of the 817 new meal service applications, we estimate that 98 will
be private restaurants which will be required to obtain a contract
with an appropriate State agency. We estimate that the contract
requirement will take .50 hours per response, for a total of 49 hours
annually.
Send comments regarding the burden estimate or any other aspect of
the information collection, including suggestions for reducing the
burden, to the following address. Please refer to the OMB Control No.
0584-0008. Office of Information and Regulatory Affairs, Office of
Management and Budget, Attention: Desk Officer for FCS, 725 17th
Street, N.W., Washington, D.C. 20503.
Executive Order 12778
This final 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.
s 2020 (e)(10) and 7 CFR s 273.15; (2) for State agencies--
administrative procedures issued pursuant to 7 U.S.C. s 2023 set out at
7 CFR s 276.7 (for rules related to non-quality control (QC)
liabilities) or Part 283 (for rules related to QC liabilities); (3) for
program retailers and wholesalers--administrative procedures issued
pursuant to 7 U.S.C. s 2023 set out at 7 CFR s 278.8.
Background
On October 23, 1991, the Food and Nutrition Service, which has
since been redesignated the Food and Consumer Service (FCS), published
a proposed rule at 56 FR 54799 to implement the three following
provisions of the Food, Agriculture, Conservation and Trade Act of 1990
(Pub. L. No. 101-624, 104 Stat. 3359): (1) restaurants may accept food
stamp benefits in exchange for meals from homeless recipients, and (2)
the Department may require a periodic reauthorization of authorized
firms, and (3) no co-located wholesale/retail food concern may be
authorized as a retail food store unless the concern does a substantial
level of retail food business, or failure to authorize such firm would
cause hardship to food stamp households. These amendments to the Food
Stamp Act of 1977, as amended, (the Act) (7 U.S.C. 2011 et seq.) are
found in Pub. L. No. 101-624 at sections 1713, 1733, and 1734,
respectively. The public was provided a 30-day period to submit
comments on the proposed provisions. Thirteen comments were received in
response to the proposed rule. The major concerns raised by the
commentors are discussed below.
Authorization of Restaurants to Serve Prepared Meals to Homeless
Persons
One State agency commented that use of the terms ``private
establishment'' and ``restaurant'' interchangeably in the proposed rule
is confusing and that the term ``private homeless meal providers''
should be used instead. The Department concurs that use of the two
aforementioned terms is confusing. However, the term ``private homeless
meal providers'' would also be confusing since the regulations contain
other references to ``private nonprofit homeless meal providers.'' In
order to avoid confusion and to clarify which types of establishments
are being referred to, the Department has used the word ``restaurant''
in this preamble and also in the regulatory text. In addition, to
further assist with clarification, the Department has in this
rulemaking specified that those entities other than restaurants feeding
the homeless are referred to as ``public or private
[[Page 53597]]
nonprofit'' homeless meal providers. To further elucidate the types of
establishments to be considered ``restaurants'' for the purposes of
serving meals to eligible categories of recipients, the Department is
clarifying that such facilities must be primarily in the business of
selling food. Thus, section 7 CFR 278.1(d)(3) is being revised to state
that a restaurant must have more than 50 percent of its total sales in
food.
The Food Stamp Act and the proposed rule permit restaurants to
accept food stamp benefits from homeless recipients but require that
restaurants sell the meals at concessional (reduced) prices. Several
public interest groups and certain state agencies expressed concern
that restaurants would not wish to participate in the program if they
were required to provide meals at reduced prices to homeless
participants. Another commentor asked whether a restaurant could argue
that its prices are so low that a further reduction is not reasonable.
The Department has further considered the requirement for a
``concessional'' price and has concluded that an already low price can
be considered to meet this requirement. This interpretation is
consistent with a reference in the relevant legislative history to a
concessional price as a ``cheap or reduced'' price in the discussion of
restaurants serving elderly and disabled persons offering concessional
prices. H.R. Rep. No. 464, 95th Cong., 1st Sess. 333. Due to the
similarities in the two provisions, this final rule also refers to a
concessional price as a ``low or reduced price.''
Another commentor asked whether concessional prices would be
determined for each restaurant or for each food item. The same
commentor also asked if there is a predetermined methodology to
determine concessional prices. Provisions for concessional prices will
be determined by the contract between the restaurant and the State.
There is no predetermined methodology for determining concessional
prices. It could include, but would not be limited to, a simple
percentage reduction, a set dollar amount reduction, or an offer of a
free food item or beverage (excluding alcoholic beverages). Price
reductions for homeless individuals must be negotiated between the
restaurant and the State.
One commentor asked what is considered a reasonable rate of price
reduction. In addition, it has come to the Department's attention that
there is a perception that if a restaurant's means of arriving at
reduced prices consists of a percentage reduction, that percentage
reduction must be 10 percent. This is not correct. If a restaurant
chooses a percentage reduction as a means of arriving at reduced
prices, the amount of the reduction may be a subject for negotiation
between the restaurant and the State agency. Thus, the final rule does
not prescribe a specific rate of reduction in prices of meals sold to
homeless participants.
One commentor asked whether restaurants would be required to post
two meal prices--one for the homeless and one for the other customers.
As long as the restaurant charges the homeless concessional prices, it
will not be necessary for the restaurant to post separate prices in
order to comply with this rule.
One State agency asked if a restaurant which is approved to serve
meals to the elderly and disabled recipients and their spouses would be
required to serve the homeless. It is the Department's position that
restaurants approved for providing meals to elderly and disabled
recipients would not be required to sell meals to the homeless.
Restaurant participation in either of these programs is strictly
voluntary.
One public interest group stated that change in restaurant
transactions should not be limited to 99 cents. Section 7(b) of the Act
(7 U.S.C. 2016(b)) provides that eligible households using coupons may
receive cash in change so long as the cash received does not equal or
exceed the value of the lowest coupon denomination issued. Thus, cash
change must be limited to 99 cents as mandated by the Act. The
Department has no discretion to change this provision and has adopted
it as final in this rulemaking. However, in addition to giving up to 99
cents in change, a restaurant may use the lowest denomination coupon,
which is $1. These coupons must be unmarked and uncancelled for making
change. For example, if change in the amount of $2.50 is due, the
restaurant would give the recipient two one-dollar coupons and 50 cents
in cash change.
One State agency commented that it presumed that State sales tax is
applicable to restaurant meals purchased with coupons by homeless
persons. Section 4(a) of the Act (7 U.S.C. 2013(a)) provides that a
State agency may not participate in the Food Stamp Program if State or
local taxes are collected within that State on purchases made with food
stamp benefits. The Department cannot waive this provision. Sales tax
cannot be collected on any purchase with food stamp benefits, whether
it be restaurant meals or food purchased in retail food stores.
Several commentors stated that the requirement that State agencies
contract with restaurants would create a new function for State
agencies which are suffering from a lack of resources. These commentors
recommended that USDA should handle the negotiations and contracts with
restaurants as well as monitor restaurants. Another commentor
recommended that the State agency delegate this function to a private
nonprofit organization. Congress stated in Pub. L. 101-624 which
amended section 3(g)(9) of the Act (7 U.S.C. 2012 (g)(9)), that
restaurants eligible for authorization to accept food stamp benefits
are those that shall contract with the appropriate agency of the State
to offer meals to homeless individuals. However, there is no
restriction in the statute which would preclude State agencies from
contracting with private nonprofit organizations to administer the
restaurant program contracts. The State agency would, however, remain
responsible and the Department would hold the State agency liable for
any action related to the contract.
One State agency questioned whether the Food and Consumer Service
(FCS) has review and approval authority over contracts with
restaurants. State agencies have the initial responsibility for
ensuring that contracts comply with the provisions of the Act and these
regulations. While FCS is responsible for implementing and enforcing
the law and accompanying regulations regarding the purchase of meals by
homeless participants, FCS is not assuming any direct responsibility
for prior review and approval of contracts between State agencies and
restaurants. However, at the time a restaurant applies to FCS for
authorization to accept food stamp benefits from homeless persons, the
restaurant must present a copy of the contract with the State agency.
At that time, FCS will review the contract to ensure it meets minimum
regulatory requirements. Should a restaurant have a complaint during
negotiation of the contract about any of the provisions being required
by the State agency, the restaurant may request that FCS review the
issue.
One State agency commented that the State has no outreach funds to
solicit participation of restaurants. The proposed rule did not mandate
that States employ outreach efforts to solicit participation of
restaurants. However, if the State wishes to do so, the Department
suggests that the State could contact the State restaurant association
to determine the level of interest of restaurants in participating in
this program.
[[Page 53598]]
One commentor stated that in order to encourage restaurants to
participate in the program, a simple application process, minimal State
regulation and the same prices for homeless and non-homeless alike are
needed. This rule does not establish new application procedures for
restaurants; the same procedures used for other retailers are used for
restaurants. Further, the Department does not expect States to impose a
complex set of regulations in administering this program. In addition,
as stated above, the Department has no discretion regarding the
charging of concessional prices since the requirement that restaurants
provide meals at concessional prices is included in the law. Of course,
restaurants with already low prices would not be required to further
reduce prices to homeless food stamp recipients.
The proposed rule provided that homeless recipients' identification
(ID) cards would be marked ``CD,'' the same mark on the card issued to
elderly and disabled persons eligible for communal dining or restaurant
meals. Several public interest groups and a few State agencies believed
that the use of a specially-marked ID card for the homeless would
stigmatize them and publicize their situation. In addition, one
commentor stated that a declaration system should be used to identify
homeless persons. In implementing section 1713, the Department has
looked to its experience with section 3(g)(3) of the Act (7 U.S.C.
2012(g)(3)), which allows elderly persons and disabled recipients and
their spouses to purchase meals from restaurants. There is a long-
standing procedure which designates specially-marked ID cards for
elderly and disabled recipients and their spouses and requires
restaurants to check ID cards unless restaurant personnel know the
individual is eligible to purchase meals with food stamp benefits. The
Department is not aware of any problems which have resulted from this
procedure. In addition, having the specially-marked ID card will avoid
the recipient having to verbally declare homelessness in a public
setting as would the system suggested by the commentor. The legislation
restricts the use of food stamp benefits in restaurants to only certain
groups of recipients, and the only effective method for enforcing this
restriction is to issue the recipients specially-marked ID cards. For
reasons of program integrity, the Department had decided to require
specially-marked ID cards. To assist restaurants in recognizing
recipients eligible to purchase meals, State agencies need to provide
restaurants with specially-marked sample ID cards. However, to maximize
flexibility for State agencies, the Department has decided not to
specify the mark which must be used.
Some State agencies and a public interest group commented that
requiring restaurants to check the ID cards of homeless persons is
discriminatory. One of these commentors further stated that the
requirement to check ID cards places a more restrictive level of
accountability on restaurants than is placed on grocery stores. As
stated above, the use of food stamp benefits in restaurants is
restricted to elderly and disabled recipients and their spouses, and to
homeless individuals. Based on this restriction, the Department
believes that it must ensure that only those individuals entitled to
use food stamp benefits in restaurants do so.
Additional commentors suggested that the homeless designation
should be removed from the ID card once the recipient is no longer
homeless, and thus, not eligible to purchase meals in restaurants. The
Department agrees with this suggestion and has amended the regulations
at 7 CFR 274.10(a)(3) to ensure the applicability of the designation be
re-established each time that recertification of eligibility occurs.
One State agency commented that the use of food stamp benefits in a
restaurant is not the best use of food stamp benefits for those persons
temporarily living with someone else who may have access to cooking
facilities. The reference to homeless individuals in Section 3(i)(3) of
the Act (7 U.S.C. 2012(3)) does not include access to cooking
facilities as a factor for determining eligibility of a homeless
person. Thus, the Department does not have the discretion to define
homeless individuals in terms of whether such individuals have access
to cooking facilities.
One commentor asked how complaints about service to the homeless at
restaurants would be handled. That commentor also asked if such
complaints would be referred to FCS field offices since restaurants
operate as authorized retailers. The State agency has primary
responsibility for enforcement of all provisions of contracts. Thus,
complaints about service to the homeless (e.g., slow service; rude
treatment; spoiled food) would be referred to the State agency.
However, if violations of the Act or regulations are involved (e.g.,
selling meals to persons not eligible to buy them, the selling of
ineligible items or cash change violations and unequal treatment of
food stamp customers), complaints should be referred to FCS field
offices which are responsible for handling such complaints.
One State agency asked whether fast food restaurants would be
eligible to participate. Neither the Act nor these regulations exclude
any specific type of restaurants from participation. Thus, if a fast
food restaurant agrees to provide meals to homeless participants at low
or reduced prices, and otherwise qualifies, it could be authorized.
One State agency was concerned about whether restaurants would be
able to participate in areas where the Electronic Benefit Transfer
(EBT) system has been implemented. In accordance with Food Stamp
Program regulations at 7 CFR 274.12, all authorized retailers
(including authorized restaurants) must be afforded the opportunity to
participate in the EBT system.
One commentor asked whether it is possible to apply for a waiver of
any of the requirements of the proposed rule. Food Stamp Program
regulations at 7 CFR 272.3 permit the Department to approve requests
for waivers to deviate from specific regulatory provisions in some
situations. However, because the Department does not have the authority
to waive any provisions of the Act except in special demonstration
projects, any request must not relate to statutory provisions.
Periodic Reauthorization of Retail Food Stores/Wholesale Food Concerns
In order to ensure that participating firms continue to be eligible
to accept food stamp benefits, Section 1733 of Pub. L. No. 101-624
permits FCS to require a full and complete periodic reauthorization of
all firms. The information obtained in the reauthorization will be used
to update any or all of the information on the firm's application form.
One commentor stated that the rule did not set forth adequate
criteria for determining whether a retail food store will be
reauthorized and that it would be appropriate to withdraw the proposed
rulemaking and issue a further rulemaking which sets forth criteria for
reauthorization. The criteria set forth in sections 3(k), 3(u) and 9 of
the Act for the authorization of firms will be used during the
reauthorization process to determine whether firms are qualified to
participate. The criteria for authorization (and, thus, periodic
reauthorization) of firms are not affected by this rule and are the
same as those specified in the current Act. Therefore, it is not
necessary to reissue those standards through this rulemaking action.
The Department would call attention to the new authorization criteria
made effective on March 25,
[[Page 53599]]
1994 with the passage of section 205 of P.L. 103-225, 108 Stat. 108-
110.
The reauthorization will utilize the same criteria for authorizing
new stores to determine whether firms continue to qualify. If FCS finds
during the reauthorization process that a firm no longer qualifies, the
firm will be withdrawn. If the firm does meet the appropriate criteria,
it will be allowed to continue program participation.
One commentor stated that the proposed rule does not provide
adequate notice to existing firms regarding the time period for the
periodic reauthorization. The Department is unable to specify an exact
date or timetable for updating data on authorized firms. The periodic
reauthorization of firms will be conducted as resources and time
permit. However, the Department will provide firms with sufficient
notice and time to respond to the request for updated information.
Authorization of Wholesale Firms Co-Located With Retail Food Stores
The October 23, 1991, proposed rulemaking included a provision
mandated by Section 1734 of Pub. L. No. 101-624, that no co-located
wholesale/retail food concern may be authorized as a retail food store
unless (A) such firm does a substantial level of retail food business
or (B) the Secretary determines that failure to authorize such a
wholesale/retail food concern as a retail food store would cause
hardship to food stamp households. The proposed rule would have
required that a wholesaler's retail food sales constitute at least 50
percent of its total sales in order to be considered as having
``substantial'' retail food business.
A commentor stated that the requirement that a firm which is
primarily a wholesaler must have 50 percent of its sales in retail food
sales would be virtually impossible since having 50 percent retail food
sales would mean the firm was primarily a retailer and not a
wholesaler. The Department concurs with the logic of this comment and
notes that the statute requires that such firms have a substantial
retail business. Webster's Dictionary defines substantial as ``being
largely, but not wholly that which is specified.'' In keeping with the
definition and Congressional concern about integrity problems with
firms with wholesale components, the Department has provided in this
final rule that a firm which has more than 50 percent of its total
sales in retail food sales shall not have to meet the criteria
contained in this final rule in order to be authorized to accept and
redeem food stamps, but will be subject to the criteria for authorizing
retail firms set forth in Sections 3(k) and 3(u) of the Food Stamp Act
of 1977, as amended.
As stated above, Section 1734 mandated that no co-located
wholesale/retail food concern may be authorized unless it does a
substantial retail food business. A wholesale firm should have what can
clearly be recognized as a retail outlet in order to participate in the
program. It is not the Department's intent to prevent the participation
of any wholesaler having a legitimate, substantial retail food
business. On the other hand, a wholesale firm which sells little food
at the retail level should not be authorized as a retailer.
The first criterion against which an applicant will be evaluated is
whether the firm has what can be considered a legitimate retail outlet.
In determining this, several indicators shall be considered. For
example, is the business licensed solely as a wholesale business, or is
there a separate and distinct license for retail sales? Does the firm
have separate retail sales tax records and/or separate bookkeeping
records? In addition, the way the firm holds itself out to the public
shall be evaluated in determining whether a firm is a legitimate retail
outlet. This would include the layout of the retail sales space (e.g.,
presence of a counter for retail customers). Whether a firm actively
seeks out retail trade through advertisements, offers specials to
attract retail customers, or posts retail prices shall also be
considered in determining if a firm is a legitimate retail outlet. In
addition, the hours of operation should be considered as well as
whether the firm has parking for retail customers as opposed to just a
loading dock area.
The Department is adding a new paragraph (A) at 7 CFR
278.1(b)(1)(iv) to emphasize the fact that a co-located wholesale/
retail firm must be a legitimate retail outlet. This reflects the
longstanding Departmental policy that no firm shall be authorized as a
retail outlet unless it is a legitimate retailer.
Once it has been determined that the firm is a legitimate retail
outlet, a determination must be made as to whether the co-located firm
has a ``substantial'' level of retail food sales. One commentor
suggested that ``substantial'' be defined as a dollar amount (rather
than as a percentage), specifically at least $100,000 in retail food
sales annually. Some wholesalers may have only a small percentage of
their total sales in retail trade, but this may still be a significant
dollar amount.
The Department agrees with these comments and has determined that
the use of a specific dollar threshold is more appropriate in defining
the term ``substantial''. There will be no required percentage of total
sales which must be in retail food business.
The Department believes that the restriction on the authorization
of co-located retail/wholesale firms is intended to limit the
participation of firms not needed to effectuate the purpose of the
program. For the most part, these firms do limited retail food
business. FCS data show that firms with very limited retail food sales
have a higher propensity to violate than firms with relatively high
retail food sales. Thus, the final rule allows a firm that has at least
$250,000 in annual retail food sales to be authorized. The Department
believes that the $250,000 threshold is a reasonable definition of
``substantial'' and effectively meets the intent of Congress. The
Department is confident that this criterion is fair to all wholesale
food concerns--large and small--which provide retail services to the
community and at the same time protects the integrity of the program.
The Department would like to again emphasize that a co-located firm may
be authorized to accept food stamps, even if it does not have
substantial retail food business, if failure to authorize the firm
would cause hardship to food stamp households.
A co-located wholesale/retail firm must either have a substantial
retail food business or demonstrate that a hardship to recipients would
result if it were not authorized. The proposed rulemaking specified the
following criteria for determining whether a hardship to recipients
would result from not authorizing a co-located firm: (1) Program
recipients would have difficulty in finding authorized firms to accept
food stamp benefits for eligible foods; (2) special ethnic foods would
not otherwise be available to recipients; or (3) recipients would be
deprived of an opportunity to take advantage of unusually low prices
offered by the firm. The Department did not receive any comments on
these criteria; therefore, they are adopted in this final rule. The
Department wishes to stress that a hardship exception can only be
granted to a legitimate retail firm.
Finally, if it has been determined that a co-located firm has a
legitimate retail business and either has annual retail food sales of
at least $250,000, or can demonstrate recipient hardship, its retail
food business must then be subject to the criteria for authorizing
retail firms set forth in Sections 3(k) and 3(u) of the Food Stamp Act
of 1977, as amended.
A commentor stated that the proposed rule would impose an
unnecessary paperwork burden on retailers and
[[Page 53600]]
wholesalers. The authority to request information from applicant firms
(including those requesting reauthorization) is contained in 7 CFR
278.1(b) of the regulations and is approved under OMB Number 0584-0008.
This rule does not add any new information collection requirements.
Instead, it modifies current requirements to allow determinations to be
made on the qualifications of co-located retail/wholesale firms.
The same commentor stated that the rule would require applicant
stores to provide data concerning their sales volume for both wholesale
and retail segments of their business and that such data is classified
as trade secrets and is therefore confidential. Retail and wholesale
sales data are necessary to allow a determination on a co-located
retail/wholesale firm's qualification for authorization to accept food
stamps as a retail food store. Section 9(c) of the Act (7 U.S.C.
2018(c)) requires that such information be submitted. Section 1734 of
Pub. L. No. 101-624 specifies that retailer/wholesaler firms must have
a substantial retail food business, and the review of sales data is
necessary for the meaningful enforcement of the provision. It should be
noted, however, that section 9(c) contains safeguards which restrict
the use or disclosure of such information.
List of Subjects
7 CFR Part 271
Administrative practice and procedure, Food stamps, Grant
programs--social programs.
7 CFR Part 272
Alaska, Civil rights, Food stamps, Grant programs--social programs.
Reporting and recordkeeping requirements.
7 CFR Part 274
Administrative practice and procedures, Food stamps, Grant
programs, social programs, Reporting and recordkeeping requirements.
7 CFR Part 278
Administrative practice and procedure, Banks, Banking, Claims, Food
stamps, Groceries--retail, Groceries, General line--wholesaler,
Penalties.
Accordingly, 7 CFR parts 271, 272, 274, and 278 are amended as
follows:
1. The authority citation for parts 271, 272, 274, and 278
continues to read as follows:
Authority: 7 U.S.C. 2011-2032.
PART 271--GENERAL INFORMATION AND DEFINITIONS
2. In Sec. 271.2:
a. The definition of ``Eligible foods'' is amended by removing the
word ``and'' at the end of paragraph (7), removing the period after
paragraph (8) and adding a semi-colon and the word ``and'' in its
place, and by adding a new paragraph (9).
b. The definition of ``Homeless meal provider'' is revised.
c. The definition of ``Retail food store'' is amended by adding the
words ``or a restaurant that contracts with an appropriate State agency
to provide meals at concessional (low or reduced) prices to homeless
food stamp households;'' at the end of paragraph (2).
The addition and revision read as follows:
Sec. 271.2 Definitions.
* * * * *
Eligible foods * * * (9) In the case of homeless food stamp
households, meals prepared by a restaurant which contracts with an
appropriate State agency to serve meals to homeless persons at
concessional (low or reduced) prices.
* * * * *
Homeless meal provider means:
(1) A public or private nonprofit establishment (e.g., soup
kitchens, temporary shelters) that feeds homeless persons; or
(2) A restaurant which contracts with an appropriate State agency
to offer meals at concessional (low or reduced) prices to homeless
persons.
* * * * *
PART 272--REQUIREMENTS FOR PARTICIPATING STATE AGENCIES
3. Section 272.9 is amended by adding two new sentences after the
last sentence to read as follows:
Sec. 272.9 Approval of homeless meal providers.
* * * The State food stamp agency, or another appropriate State or
local governmental agency identified by the State food stamp agency or
private nonprofit organization under contract with the State food stamp
agency shall execute contracts with restaurants wishing to sell meals
in exchange for food stamp benefits to homeless food stamp households.
Such contracts shall specify that such meals are to be sold at
``concessional'' (low or reduced) prices and shall also specify the
approximate prices which will be charged, or the amount and type of
price reduction.
PART 274--ISSUANCE AND USE OF COUPONS
4. In section 274.10:
Sec. 274.10 [Amended]
a. Paragraph (a)(3) is amended by adding a comma and the words
``and to homeless households certified for restaurant meals'' after the
word ``period''.
b. Paragraph (a)(4)(iii) is redesignated as paragraph (a)(4)(iv)
and a new paragraph (a)(4)(iii) is added.
c. Paragraph (j) is amended by adding four new sentences at the end
of the paragraph. The additions read as follows:
Sec. 274.10 Use of identification cards and redemption of coupons by
eligible households.
(a) * * *
(4) * * *
(iii) Eligible homeless households may use food stamp benefits to
purchase meals from restaurants authorized by FCS for such purpose. Any
homeless household eligible for, and interested in, using restaurants
in those areas where restaurants are authorized to accept food stamp
benefits shall have a specially-marked ID card. The State agency shall
provide samples of specially-marked ID cards to authorized restaurants.
* * * * *
(j) * * * However, in the case of homeless food stamp households,
neither cash change nor credit slips shall be returned for food stamps
used for the purchase of prepared meals from authorized public and
private nonprofit homeless meal providers. Such meal providers may use
the lowest denomination coupons that are uncancelled and unmarked for
making change in food stamp transactions. Restaurants which are
authorized by FCS under Sec. 278.1 to provide meals to homeless food
stamp recipients shall return cash change to such recipients in food
stamp transactions when the amount of change due is less than one
dollar. If change of one dollar or more is due, uncancelled and
unmarked one dollar coupons shall also be used for change.
PART 278--PARTICIPATION OF RETAIL FOOD STORES, WHOLESALE FOOD
CONCERNS AND INSURED FINANCIAL INSTITUTIONS
5. In section 278.1:
a. Paragraph (b)(1)(iv) is revised.
b. Paragraph (c)(5) is revised.
c. Paragraph (d)(3) is revised.
d. Paragraphs (i) through (s) are redesignated as paragraphs (j)
through (t) respectively, and a new paragraph (i) is added.
[[Page 53601]]
d. Newly redesignated paragraph (n) is revised.
e. Newly redesignated paragraph (s) is amended by adding the words
``public and private nonprofit'' before the words ``homeless meal
provider'' and ``homeless meal providers'' each time they appear. (six
occurrences).
The revisions and additions read as follows:
Sec. 278.1 Approval of retail food stores and wholesale food concerns.
* * * * *
(b) Determination of authorization. * * *
(1) The nature and extent of the food business conducted by the
applicant. * * *
(iv) No co-located wholesale/retail food concern with 50 percent or
less of its total sales in retail food sales may be authorized to
redeem food stamps unless it meets the criteria applicable to all
retail firms and:
(A) It is a legitimate retail food outlet. Indicators which may
establish to FCS that a firm is a legitimate retail food outlet
include, but are not limited to, the following:
(1) The firm's marketing structure; as may be determined by factors
such as, but not limited to:
(i) A retail business license;
(ii) The existence of sales tax records documenting retail food
sales; and/or separate bookkeeping records; and
(2) The way the firm holds itself out to the public as evidenced by
factors such as, but not limited to:
(i) The layout of the retail sales space;
(ii) The use of retail advertisements;
(iii) The posting of retail prices;
(iv) Offering specials to attract retail customers;
(v) Hours of operation for retail business;
(vi) Parking area for retail customers; and
(B) It has total annual retail food sales of at least $250,000; or
(C) It is a legitimate retail outlet but fails to meet the
requirements in paragraph (b)(1)(iv)(B) of this section, and not
authorizing such a firm would cause hardship to food stamp households.
Hardship would occur in any one of the following circumstances:
(1) Program recipients would have difficulty in finding authorized
firms to accept their coupons for eligible food;
(2) Special ethnic foods would not otherwise be available to
recipients; or
(3) Recipients would be deprived of an opportunity to take
advantage of unusually low prices offered by the firm if no other
authorized firm in the area offers the same types of food items at
comparable prices.
* * * * *
(c) Wholesalers. * * *
(5) For one or more specified authorized public or private
nonprofit homeless meal providers.
* * * * *
(d) Meal services. * * *
(3) It is a restaurant operating under a contract with a State or
local agency to prepare and serve (or deliver) low-cost meals to
homeless persons, elderly persons and SSI recipients (and in the case
of meal delivery services, to elderly persons or handicapped persons)
and their spouses. Such a facility must have more than 50 percent of
its total sales in food. The contracts of restaurants must specify the
approximate prices which will be charged.
* * * * *
(i) Private homeless meal providers. FCS may authorize as retail
food stores those restaurants which contract with the appropriate State
agency to serve meals to homeless persons at ``concessional'' (low or
reduced) prices. Restaurants shall be responsible for obtaining
contracts with the appropriate State agency as defined in Sec. 272.9
and for providing a copy of the contract to FCS at the time it applies
for authorization to accept food stamp benefits. Contracts must specify
the approximate prices which will be charged. Examples of reduced
prices include, but are not limited to, a percentage reduction, a set
dollar amount reduction, a daily special meal, or an offer of a free
food item or beverage (excluding alcoholic beverages).
* * * * *
(n) Periodic reauthorization. At the request of FCS a retail food
store or wholesale food concern will be required to undergo a periodic
reauthorization determination by updating any or all of the information
on the firm's application form. Failure to cooperate in the
reauthorization process will result in withdrawal of the firm's
approval to participate in the program.
* * * * *
Sec. 278.2 [Amended]
6. In Sec. 278.2:
a. Paragraph (a) is amended by adding the words ``public or private
nonprofit'' before the word ``homeless'' in the last sentence of the
paragraph.
b. The third sentence of paragraph (b) is amended by adding the
words ``public or private nonprofit'' before the words ``homeless meal
providers'', and before the words ``homeless meal provider''.
c. Paragraph (c) is amended by adding the words ``public or private
nonprofit'' before the words ``homeless meal providers'' the first time
they appear in the third sentence of the paragraph.
d. Paragraph (d) is amended by adding the words ``public or private
nonprofit'' before the words ``homeless meal providers'' in the third
sentence.
e. Paragraph (g) is amended by adding the words ``public and
private nonprofit'' before the words ``homeless meal providers''
wherever they occur (two occurrences).
f. Paragraph (h) is amended by adding the words ``public or private
nonprofit'' before the words ``homeless meal providers'' in the last
sentence of the paragraph.
g. Paragraph (1) is amended by adding the words ``public and
private nonprofit'' before the words ``Homeless meal provider'' and
before the words ``homeless meal providers''.
Sec. 278.3 [Amended]
7. In Sec. 278.3, paragraph (a) is amended by adding the words
``public or private nonprofit'' before the words ``homeless meal
providers'' wherever they occur (three occurrences).
Sec. 278.4 [Amended]
8. In Sec. 278.4, the second sentence of paragraph (c) is amended
by adding the words ``public or private nonprofit'' before the words
``homeless meal providers.''
Dated: September 27, 1996.
Ellen Haas,
Under Secretary for Food, Nutrition, and Consumer Services.
[FR Doc. 96-26067 Filed 10-11-96; 8:45 am]
BILLING CODE 3410-30-U
