[Federal Register Volume 59, Number 8 (Wednesday, January 12, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-657]
[[Page Unknown]]
[Federal Register: January 12, 1994]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Social Security Administration
Social Security Ruling SSR 94-1c; Supplemental Security Income--
Disability--Illegal Activity as Substantial Gainful Activity
AGENCY: Social Security Administration, HHS.
ACTION: Notice of Social Security ruling.
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SUMMARY: In accordance with 20 CFR 422.406(b)(1), the Commissioner of
Social Security gives notice of Social Security Ruling 94-1c. This
Ruling is based on the decision of the U.S. Court of Appeals for the
Seventh Circuit in Dotson v. Shalala, which affirmed the U.S. district
court decision upholding the decision of the Secretary of Health and
Human Services denying the claimant's application for disability
benefits under the supplemental security income program. Among other
things, the court of appeals determined that the decision of the
Secretary that the illegal activity in which the claimant engaged to
support a drug addiction constituted substantial gainful activity (SGA)
was consistent with the Social Security Act and the Secretary's
regulations and supported by substantial evidence, and that in
determining whether such activity was SGA, the cost of the claimant's
narcotics could not be deducted from the claimant's income as an
impairment-related work expense.
EFFECTIVE DATE: January 12, 1994.
FOR FURTHER INFORMATION CONTACT: Joanne K. Castello, Office of
Regulations, Social Security Administration, 6401 Security Boulevard,
Baltimore, MD 21235, (410) 965-1711.
SUPPLEMENTARY INFORMATION: Although we are not required to do so
pursuant to 5 U.S.C. 552(a)(1) and (a)(2), we are publishing this
Social Security Ruling in accordance with 20 CFR 422.406(b)(1).
Social Security Rulings make available to the public precedential
decisions relating to the Federal old-age, survivors, disability,
supplemental security income, and black lung benefits programs. Social
Security Rulings may be based on case decisions made at all
administrative levels of adjudication, Federal court decisions,
Commissioner's decisions, opinions of the Office of the General
Counsel, and other policy interpretations of the law and regulations.
Although Social Security Rulings do not have the force and effect
of the law or regulations, they are binding on all components of the
Social Security Administration, in accordance with 20 CFR
422.406(b)(1), and are to be relied upon as precedents in adjudicating
other cases.
If this Social Security Ruling is later superseded, modified, or
rescinded, we will publish a notice in the Federal Register to that
effect.
(Catalog of Federal Domestic Assistance Program No. 93.807
Supplemental Security Income)
Dated: December 21, 1993.
Shirley S. Chater,
Commissioner of Social Security.
Sections 1611 and 1614(a) of the Social Security Act (42 U.S.C. 1382
and 1382c(a)) Supplemental Security Income--Disability--Illegal
Activity as Substantial Gainful Activity
20 CFR 416.910, 416.920(a)-(b), 416.971, 416.972(a)-(c), 416.973(a)-
(b), 416.974 (a)(1), (b)(2)(vii) and (b)(3)(vii), and 416.976
Dotson v. Shalala, 1 F.3d 571 (7th Cir. 1993)
The claimant applied for disability benefits under the supplemental
security income program, alleging that he was disabled due to asthma,
multiple allergies, and past drug abuse. His application was denied
initially and upon reconsideration and he requested a hearing before an
administrative law judge (ALJ). At the hearing, the claimant testified
that he currently used $200-$300 worth of narcotics each day and that
he supported his drug habit through stealing and panhandling. Based on
the claimant's testimony, the ALJ concluded that the claimant's
stealing and panhandling constituted substantial gainful activity (SGA)
worth an average of approximately $5,600 per month. Specifically, the
ALJ found that due to the poor area in which the claimant panhandled,
the bulk of his income must be derived from stealing, which the ALJ
determined involved significant physical and mental activities. The ALJ
concluded that because the claimant was engaging in SGA, he was not
disabled and, therefore, not eligible for disability benefits. The
Appeals Council declined to review the ALJ's decision which became the
final decision of the Secretary. The claimant sought judicial review in
Federal district court. The district court upheld the Secretary's
decision and the claimant appealed to the Court of Appeals for the
Seventh Circuit.
On appeal, the claimant argued that illegal activity undertaken to
support a drug addiction cannot constitute SGA; that assuming such
activity can constitute SGA, the Secretary's finding of SGA in his case
was unsupported by substantial evidence; and that if illegal activity
to support a drug habit can be considered SGA, then the Secretary, in
determining SGA, was required to deduct the cost of the narcotics from
the claimant's income as an impairment-related work expense.
Additionally, the claimant contended that using illegal activity as a
basis for finding SGA denied him due process and equal protection of
the law.
The court of appeals found nothing in the Social Security Act (the
Act) or the Secretary's implementing regulations which requires SGA to
be lawful. The court noted that under the regulations, work activity is
substantial if it ``involves doing significant physical or mental
activity'' and is gainful if it is ``the kind of work usually done for
pay or profit, whether or not a profit is realized.'' The court stated
that these considerations ``apply with almost equal ease irrespective
of the legality of the activities involved,'' and that, therefore,
``[w]hether legally or illegally employed, the regulations direct an
ALJ to focus on whether the claimant is performing significant physical
or mental activities, and doing so with the intent of earning money or
making a profit.'' Finding that neither the Act nor the regulations
recognizes a distinction between lawful and unlawful activity for
purposes of determining SGA, the court of appeals concluded that
illegal activity can constitute SGA.
The court also determined that the claimant's uncontradicted
testimony regarding the thievery in which he engaged to support his
$200-$300 per day drug habit provided substantial evidence to support
the ALJ's finding that the claimant was engaged in SGA. The court
rejected the claimant's contention that the cost of narcotics must be
deducted from his income as an impairment-related work expense. The
court noted that to be considered an impairment-related work expense
under the Secretary's regulations, a drug must ``reduce or eliminate''
the symptoms of a claimant's impairment, or ``slow down its
progression.'' Contrary to these criteria, the court found that in this
case the claimant's use of drugs was the basis of his alleged
disability, and that his continued usage of drugs only exacerbated his
medical condition. The court also found the claimant's due process and
equal protection arguments to be without merit. Accordingly, the court
of appeals affirmed the decision of the district court upholding the
Secretary's decision denying the claimant's application for disability
benefits.
Engel, Senior Circuit Judge*
\*\Sitting by designation.
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Harold Wayne Dotson, a Supplemental Security Income claimant,
appeals the district court's grant of summary judgment in favor of
Donna E. Shalala, Secretary of the Department of Health and Human
Services. In granting summary judgment, the district court upheld an
administrative law judge's finding that Dotson was engaging in
substantial gainful activity by supporting a $200- to $300-per-day
heroin and cocaine habit through illegal means. See Dotson v. Sullivan,
813 F. Supp. 651 (C.D. Ill. 1992). Because we agree that illegal
activity can constitute substantial gainful activity, we affirm.
I. Background
Dotson applied for Supplemental Security Income benefits on
September 25, 1989, alleging disability since 1968 due to asthma,
multiple allergies, and past drug abuse. The Social Security
Administration denied his application on January 10, 1990, and again
upon reconsideration on May 21, 1990. Dotson then requested and
received a hearing before an administrative law judge (``ALJ''). At the
administrative hearing, Dotson testified that he uses $200 to $300
worth of heroin and cocaine each day. Additionally, he testified that
he supports his drug habit by hustling. When asked to define hustling,
Dotson replied: ``steal, beg, whatever, you know.''
With regard to his begging, Dotson stated that he usually
panhandles at the Warner Homes, which are located in a poor
neighborhood in Peoria, Illinois. As to Dotson's thievery, the
following colloquy occurred during the administrative hearing:
Q. [By ALJ] Where do you steal at?
A. [By Dotson] You can do that anywhere. Wherever we can find a
place to.
Q. Give me an idea. Give me some examples.
A. The mall, downtown, wherever. You just ride and look and, you
know.
Q. How long do you spend riding and looking until you find a place
to steal?
A. As long as you have to.
Q. Like how long?
A. Sometime--
Q. All day long?
A. Sometimes it takes all day.
Q. What kinds of things have you stolen this month?
A. This month?
Q. Uh huh.
A. I, well, I like to, I try to concentrate on saws.
Q. On what?
A. Saws.
Q. Saws?
A. You know, the chainsaws, the little bitty chainsaws?
Q. Where do you find those at?
A. Everywhere, everywhere.
Q. And once you get them, what do you do with them?
A. You sell them.
Q. To who?
A. A lot of people buy.
Q. Well, where do you find--I wouldn't imagine there would be a lot
of demand for them in Warner homes.
A. No.
Q. Where do you go to sell the chainsaws?
A. Different businesses.
Q. Like what?
A. Small businesses.
Q. Give me some examples.
A. Like small stores or cleaners, different places like that.
Q. Do you have to travel around to these places? How long does it
take you to find somebody to buy a saw?
A. Usually, they already, you have been--you kind of already know
they probably want one.
Q. So you have already canvassed these places earlier? You have
gone out and--
A. No, you have probably sold them stuff and they can give you kind
of an idea about what else they might like, you know.
Based on Dotson's testimony, the ALJ found that Dotson's stealing
and panhandling constituted substantial gainful activity (``SGA'')
worth an average of approximately $5,600 per month and, accordingly,
denied his claim for SSI benefits. Specifically, the ALJ found that,
due to the poor area in which Dotson panhandles, the bulk of his income
must come from illegal means. As to the nature of Dotson's criminal
endeavors, the ALJ concluded:
In order to steal he must ``case'' the area in which he has
determined to steal the property. He must then plan on how he is
going to steal the property and then actually steal it. During the
month in which the hearing was held the claimant was stealing
chainsaws. Lifting and carrying the chainsaws would also be
significant physical activity. The planning and execution of the
larceny entails significant mental activity. From these activities
the claimant earns enough money to support his cocaine habit and
provide him with other money in substantial amounts exceeding $200
to $300 a day. [Emphasis in original.]
On July 9, 1991, the Appeals Council declined to review the ALJ's
decision. Dotson then filed the instant action against the Secretary of
the Department of Health and Human Services (``Secretary'') in federal
court. On July 1, 1992, with cross-motions for summary judgment before
it, the district court granted the Secretary's motion for summary
affirmance and entered a separate judgment against Dotson and in favor
of the Secretary. See Dotson v. Sullivan, 813 F. Supp. 651 (C.D. Ill.
1992). This appeal followed.
II. Discussion
Dotson essentially raises four arguments. First, he believes that
illegal activities undertaken solely to satisfy a drug addiction cannot
constitute SGA. Second, assuming that illegal activity can constitute
SGA, Dotson claims that the ALJ's finding of SGA in his case is
unsupported by substantial evidence. Third, Dotson contends that if
illegal activity undertaken to support a drug habit can constitute SGA,
then the Secretary is required to deduct the cost of the narcotics from
the claimant's income as an impairment-related work expense. Fourth and
finally, Dotson believes that using illegal activities to furnish the
basis for finding SGA denies him due process and equal protection of
the laws under the United States Constitution.
A. Overview
The Social Security Act (``Act''), as amended, 42 U.S.C. 301 et
seq., provides for the payment of benefits to disabled persons. Title
II of the Act governs the payment of Old-Age, Survivors, and Disability
Insurance (``OASDI'') benefits to disabled persons who have contributed
to the Social Security program. 42 U.S.C. 401 et seq. Title XVI of the
Act, the title under which Dotson filed his application for benefits,
provides for the payment of Supplemental Security Income (``SSI'')
benefits to disabled persons who are indigent. 42 U.S.C. 1382 et seq.;
see generally Bowen v. Yuckert, 482 U.S. 137, 140 (1987). Both Titles
II and XVI define disability as an ``inability to engage in any
substantial gainful activity by reason of any medically determinable
physical or mental impairment which can be expected to result in death
or which has lasted or can be expected to last for a continuous period
of not less than twelve months ***.'' 42 U.S.C. 423(d)(1)(A),
1382c(a)(3)(A).
Pursuant to statutory authority, the Secretary has promulgated
regulations establishing a five-step sequential analysis for
determining whether an SSI claimant is disabled. See 20 CFR 416.920;
Sullivan v. Zebley, 493 U.S. 521, 525 (1990).\1\ The first step of the
process, and the only one relevant for purposes of this appeal,
requires the Secretary to determine whether the claimant is engaging in
SGA. See 20 CFR 416.920(a). A finding of SGA means that the claimant is
ineligible for SSI benefits. Id. at Sec. 416.920(b); Yuckert, 482 U.S.
at 140. In this case, because the ALJ found that Dotson's stealing and
panhandling constituted SGA, he denied Dotson's claim for benefits
without moving to the next step in the sequential analysis.\2\
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\1\For other, more generalized, SSI eligibility requirements,
see 20 CFR 416.202.
\2\The parties have devoted some attention to the issue of
whether panhandling, or the income therefrom, can cause a person to
become ineligible for SSI benefits. We decline to reach this issue.
As noted above, the ALJ determined that, due to the poor area in
which Dotson panhandles, the bulk of his income comes from illegal
activities. We believe the ALJ's finding to be supported by
substantial evidence and, therefore, leave the panhandling issue to
a court with the question properly before it.
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B. Illegal Activity as SGA
Our research reveals that we are the first appellate court to
address the issue of whether illegal activity can support a finding of
SGA. The handful of federal trial courts faced with this question,
including the district court below, have answered unanimously in the
affirmative.\3\ Because the ALJ and district court's determination that
illegal activity can constitute SGA is a construction of the
Secretary's regulations, we review this decision of law de novo. See
Johnson v. Sullivan, 922 F.2d 346, 356 (7th Cir. 1990).
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\3\See Bell v. Sullivan, 817 F. Supp. 719 (N.D. Ill. 1993)
(Marovich, J.); Jones v. Sullivan, 804 F. Supp. 1045 (N.D. Ill.
1992) (Holderman, J.); Curtis v. Sullivan, 764 F. Supp. 119 (N.D.
Ill. 1991) (Bua, J.); Moore v. Sullivan, No. 91 C 20369, 1992 WL
199257 (N.D. Ill. Aug. 4, 1992) (Reinhard, J.; unpublished); Love v.
Sullivan, No. 91 C 7863, 1992 WL 86193 (N.D. Ill. Apr. 22, 1992)
(Conlon, J.; unpublished); Dugan v. Bowen, No. 87-3713, 1989 WL
281911 (S.D. Ill. Nov. 8, 1989) (unpublished), rev'd on other
grounds sub nom. Dugan v. Sullivan, 957 F.2d 1384 (7th Cir. 1992);
Hart v. Sullivan, ______ F. Supp. ______, No. C-92-1172 SBA, 1992 WL
496646 (N.D. Cal. Dec. 30, 1992). Cf. Hammonds v. Celebrezze, 260 F.
Supp. 992 (N.D. Ala. 1965) (claimant's illegal manufacture of
whiskey not conclusive evidence of SGA absent evidence of earnings).
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As the definition of disability quoted above indicates, the
inability to engage in SGA is a statutory prerequisite to obtaining
either SSI or OASDI benefits. Nonetheless, Congress delegated to the
Secretary the responsibility for defining SGA. 42 U.S.C. 1382c(a)(3)(D)
(Title XVI). In response to the Act's mandate, and as the components of
the term suggest, the Secretary has defined SGA as ``work activity that
is both substantial and gainful.'' See 20 CFR 416.972. Work activity is
substantial if it ``involves doing significant physical or mental
activities.'' Id. at Sec. 416.972(a). Work activity is gainful if it is
``the kind of work usually done for pay or profit, whether or not a
profit is realized.'' Id. at Sec. 416.972(b); see generally Callaghan
v. Shalala, 992 F.2d 692 (7th Cir. 1993) (discussing elements of
SGA).\4\ Activities such as taking care of one's self, performing
household tasks, engaging in hobbies or therapy, and attending school,
clubs, or social programs generally do not constitute SGA. 20 CFR
416.972(c).
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\4\For a reconstituted formulation of the above definition, see
20 CFR 416.910, which provides: ``Substantial gainful activity means
work that--(a) Involves doing significant and productive physical or
mental duties; and (b) Is done (or intended) for pay or profit.''
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The foregoing framework underscores the dual nature of an ALJ's
inquiry into whether a claimant is engaging in SGA. Under the
substantiality prong of the analysis, an ALJ considers the nature of
the undertakings comprising the claimant's work activity. Thus, the
degree to which a claimant's work requires the use of ``expertise,
skills, supervision and responsibilities'' becomes relevant in
determining whether that work constitutes SGA. See 20 CFR 416.973(a).
Additionally, an ALJ will consider how well a claimant performs his or
her work activities:
If you do your work satisfactorily, this may show that you are
working at the substantial gainful activity level. If you are
unable, because of your impairments, to do ordinary or simple tasks
satisfactorily without more supervision or assistance than is
usually given other people doing similar work, this may show that
you are not working at the substantial gainful activity level. If
you are doing work that involves minimal duties that make little or
no demands on you and that are of little or no use to your employer,
or to the operation of a business if you are self-employed, this
does not show that you are working at the substantial gainful
activity level.
Id. at Sec. 416.973(b).
In evaluating the gainfulness of a claimant's work, an ALJ's
inquiry is more circumscribed. Here, as noted above, the claimant's
undertakings need be only of the type that normally result in pay or
profit. In other words, a claimant can be found to be engaging in SGA
without earning any income. See Callaghan, 992 F.2d at 695-96
(unprofitable business owner was engaging in SGA).5 This is not to
say that a claimant's earnings are irrelevant for purposes of
determining whether he or she is engaging in SGA. See, e.g., 20 CFR
416.974(a)(1). To the contrary, a claimant who earns on average less
than $300 per month is presumed not to be engaging in SGA, while a
claimant who makes more than an average of $500 per month is
presumptively ineligible for SSI benefits. Id. at
Secs. 416.974(b)(3)(vii), (b)(2)(vii).6 As with most legal
presumptions, however, these income guidelines are rebuttable and ``do
not relieve an ALJ of the duty to develop the record fully and
fairly.'' Dugan v. Sullivan, 957 F.2d 1384, 1390 (7th Cir. 1992)
(citations and internal quotations omitted).
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\5\Accordingly, substantial but non-remunerative volunteer work
would fall short of SGA because people normally do not volunteer
their services for pay or profit. See Social Security Law and
Practice Sec. 37:4 at 8 (Timothy E. Travers et al. eds., 1987).
Evidence of such volunteer work, however, could be used to deny a
claimant benefits at a later stage in the sequential evaluation
process. See 20 CFR 416.971.
\6\In contrast to the OASDI provisions of the Act, the SSI
program is particularly concerned with a claimant's financial
situation: The basic purpose underlying the supplemental security
income program is to assure a minimum level of income for people who
are age 65 or over, or who are blind or disabled and who do not have
sufficient income and resources to maintain a standard of living at
the established Federal minimum income level.
20 CFR 416.110 (emphasis added); see also id. at Sec. 416.1100
(``the amount of income you have is a major factor in deciding
whether you are eligible for SSI benefits''). Thus, a claimant not
engaging in SGA and otherwise eligible for the SSI program will be
denied benefits if he or she has too much income or too many
resources. See 42 U.S.C. 1382(a); generally 20 CFR subpts. K,
Sec. 416.1100 se seq. (income) and L, Sec. 416.1201 et seq.
(resources).
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Against this background, Dotson concedes--as he must--that in at
least some instances illegal activity can be substantial gainful
activity. Dotson continues, however, that the context in which his
thievery occurs precludes its use in determining whether he has been
engaging in SGA. In his own words:
A drastic distinction exists between a person who is engaged in
illegal activity for effectively the equivalent of a legal career
such as being a drug dealer, illegal drug importer or other illegal
activity which has counterparts in lawful activities such as
business managers, business owners and the like, and a thief who
steals merely to feed the cravings of unquenchable drug addiction.
Aplnt's. Br. at 18. Considering Dotson's claim under the scheme set
forth above, we conclude that he forwards a distinction without a
difference.
Admittedly, even a cursory examination of the regulations reveals
that the Secretary envisioned their application within a traditional
employment context. Importantly, however, nothing in the Act or its
regulations specifically requires SGA to be lawful. This silence, we
believe, suggests that illegal activities can constitute SGA. The
inference is strengthened, moreover, when considering that the relevant
considerations noted above apply with almost equal ease irrespective of
the legality of the activities involved. Thus, one can envision a
number of illegal activities that might not rise to the level of
SGA.7 Whether legally or illegally employed, the regulations
direct an ALJ to focus on whether the claimant is performing
significant physical or mental activities, and doing so with the intent
of earning money or making a profit.
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\7\For example, acting as a lookout at a drug house might
constitute a gainful yet insubstantial activity, whereas someone who
chronically engages in acts of vandalism may be substantially, but
not gainfully, occupied.
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Moreover, it must be remembered that an ALJ performs the SGA
analysis as one of five steps used to determine whether a person is
disabled and, consequently, unable to function within our economy. A
claimant who can manage through illegal means is just as undeserving of
benefits as a claimant who can survive without violating the law. For
this reason, there is no difference between the addict who spends all
of his lawfully derived earnings on narcotics and the one who illegally
obtains, and then exhausts, her income. Both are fueled, to quote
Dotson, by the ``cravings of unquenchable drug addiction.'' The only
real distinction between the two--the lawfulness of their income--finds
no cognizance under the Act and its interpretive regulations.8
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\8\Indeed, were we to hold otherwise, the court would be
creating the perverse incentive--although admittedly only at the
margins--for both SSI claimants and recipients to engage in illegal
activity because the income therefrom would be ignored.
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Finally, our conclusion that illegal activity can constitute SGA
derives substantial support from the well-established tax principle
that unlawful earnings come within the meaning of the term ``gross
income'' and are thus taxable. See, e.g., James v. United States, 366
U.S. 213, 218 (1961) (plurality opinion of Warren, C.J.), overruling
Commissioner v. Wilcox, 327 U.S. 404 (1946); United States v. Sullivan,
274 U.S. 259, 263 (1927). Notably, the Act has adopted the tax code's
definition of gross income for purposes of determining whether a SSI
claimant's income is sufficiently high so as to render him or her
ineligible for benefits. 42 U.S.C. 1382(d); see also 20 CFR
416.1110(b).9 Indeed, one of the concerns motivating the plurality
in James, ``to remove the incongruity of having the gains of the honest
laborer taxed and the gains of the dishonest immune,'' 366 U.S. at 218,
provides the crux of our reasoning in this case.
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\9\Again, however, the resources and income analysis implicated
here and discussed at note 6, supra, is different from the ALJ's
responsibility to determine whether a claimant is engaging in SGA.
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C. Sufficiency of the Evidence
Having concluded that illegal activity can constitute SGA, we must
next determine whether the ALJ properly applied the legal standard in
Dotson's case. Our inquiry is a limited one. We will not decide facts
anew, reweigh evidence, or substitute our judgment for the Secretary's.
Schroeter v. Sullivan, 977 F.2d 391, 394 (7th Cir. 1992). Rather, we
look to see whether ``substantial evidence'' supports the ALJ's
findings. See 42 U.S.C. 1383(c)(3) (citing 42 U.S.C. 405(g)).
Substantial evidence is ``such relevant evidence as a reasonable mind
might accept as adequate to support a conclusion.'' Richardson v.
Perales, 402 U.S. 389, 402 (1977).
Dotson first contends that the ALJ had before him no evidence of
specific illegal acts which could support a finding of SGA. Secondly,
he believes the ALJ erroneously assumed that he paid full street-value
for the narcotics he used and, thus, overestimated the amount of income
needed to support his drug habit. We address each claim in
order.10
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\1\0Dotson also argues that the ALJ erred by underestimating the
amount of money he earned through panhandling. As we discussed at
note 2, supra, the ALJ's decision to discount Dotson's panhandling
income--because of the poor area in which he begs--is supported by
substantial evidence.
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Dotson's first claim, that the record lacks any evidence of illegal
activities, is belied by his own testimony and by the reasonable
inferences drawn therefrom by the ALJ. For example, when the ALJ asked
Dotson to describe what types of items he had stolen in the month
during which the administrative hearing was held, Dotson replied: ``I
try to concentrate on saws. * * * You know, the chainsaws, the little
bitty chainsaws.'' Dotson then went on to explain, in some detail, how
he would sell the stolen items. Additionally, the ALJ made at least one
specific inquiry into the substantiality of Dotson's activities, asking
him how long it takes him to find a place to steal.
We grant to Dotson his point that the record contains no evidence
concerning any specific act of thievery. Also, we agree with him that
the ALJ could have more fully developed the record as to the nature of
his criminal undertakings. Nevertheless, we cannot say that the record
before us contains less than substantial evidence that Dotson's
thievery required the significant use of his physical and mental
skills, and that those skills were applied within a context designed to
produce pay or profit. See 20 CFR 416.972 (a), (b). In short, Dotson's
testimony allowed the ALJ to reasonably conclude that the effort
required to steal the chainsaws with regularity constituted SGA, and we
therefore uphold this aspect of the ALJ's decision. A more exacting
inquiry, while desirable, was not required.
Dotson's second argument, that the ALJ overestimated the cost of
the narcotics, is also unpersuasive. As an initial matter, this claim
suffers from the same weakness that proved fatal to his first argument,
that is, Dotson testified without contradiction to using $200 to $300
worth of heroin and cocaine daily.11 If Dotson actually paid less
for his narcotics, one would have expected him to testify accordingly.
Furthermore, this case is unlike Curtis v. Sullivan, 764 F. Supp. 119
(N.D. Ill. 1991), where the ALJ simply imputed to the claimant an
income sufficient to satisfy his addiction. In that case, the ALJ
concluded, in the absence of evidence as to legal or illegal
employment, that the claimant had to be engaging in SGA in order to
support his expensive drug habit. Here, on the other hand, Dotson's
testimony as to his thievery filled the gap. From this, the ALJ was
justified in finding that Dotson's earnings surpassed $500 per month,
thereby rendering him presumptively ineligible for SSI benefits. See 20
CFR 416.974(b)(2)(vii).
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\1\1Moreover, this is not an instance where the claimant's
testimony was of such dubious veracity that the ALJ should have
discredited it. Dotson's claim to spending $200 to $300 per day on
heroin and cocaine, while on the high side, is certainly within the
realm of possibility. See, e.g., Hart v. Sullivan, ______ F. Supp.
______, No. C-92-1172 SBA, 1992 WL 496646 (N.D. Cal. Dec. 30, 1992)
(claimant ``presently consumes seven or eight twenty-dollar bags of
heroin daily * * *, uses crack every night * * *, and drinks
approximately eight half-pints of hard liquor daily'').
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We agree with the court in Curtis that simply because a claimant
has a severe and expensive drug habit does not mean that the person is
engaging in SGA to support it. 764 F. Supp. at 120-21. The record must
contain substantial evidence, of the type outlined in Section II(B),
supra, that the claimant is engaging in legal or illegal activities
that are substantial and gainful. Because we have held that the ALJ's
decision in this case comports with those requirements, we reject
Dotson's challenge to the evidence supporting the Secretary's decision.
D. Narcotics as an Impairment-Related Work Expense
Dotson next raises the interesting yet ultimately unavailing
argument that, if illegal activities undertaken to maintain a drug
habit can constitute SGA, then the cost of the narcotics must be
deducted from income as an impairment-related work expense (``IRWE'')
under 42 U.S.C. 1382a(b)(4)(B)(ii) and its interpretive regulations, 20
CFR 416.976. As we discuss below, Dotson misapprehends the nature of
IRWEs.
42 U.S.C. 1382a(b)(4)(B)(ii), enacted as part of the Social
Security Disability Amendments of 1980, Public Law No. 96-265, 94 Stat.
441 (1980), provides:
In determining the income of an individual (and his eligible
spouse) there shall be excluded * * * if such individual (or such
spouse) is disabled but not blind (and has not attained age 65, or
received benefits under this subchapter (or aid under a State plan
approved under section 1352 or 1382 of this title) for the month
before the month in which he attained age 65) * * * such additional
amounts of earned income of such individual, if such individual's
disability is sufficiently severe to result in a functional
limitation requiring assistance in order for him to work, as may be
necessary to pay the costs (to such individual) of attendant care
services, medical devices, equipment, prostheses, and similar items
and services (not including routine drugs or routine medical
services unless such drugs or services are necessary for the control
of the disabling condition) which are necessary (as determined by
the Secretary in regulations) for that purpose, whether or not such
assistance is also needed to enable him to carry out his normal
daily functions, except that the amounts to be excluded shall be
subject to such reasonable limits as the Secretary may prescribe.
See also 42 U.S.C. 1382c(a)(3)(D) (restating same). In 1983, the
Department of Health and Human Services promulgated 20 CFR 416.976. See
48 FR 21940 (1983). These regulations established a five-part test for
determining the deductibility of an IRWE:
We will deduct impairment-related work expenses if--
(1) You are otherwise disabled * * *;
(2) The severity of your impairment(s) requires you to purchase
(or rent) certain items and services in order to work;
(3) You pay the cost of the item or service * * *;
(4) You pay for the item or service in accordance with paragraph
(d) of this section; and
(5) Your payment is in cash (including checks and other forms of
money). Payment in kind is not deductible.
20 CFR 416.976(b). With respect to the deductibility of drugs as an
IRWE, the regulations provide:
If you must use drugs * * * to control your impairment(s), the
payments you make for them may be deducted. The drugs or services
must be prescribed (or utilized) to reduce or eliminate the symptoms
of your impairment(s) or to slow down its progression.
* * * * *
Examples of deductible drugs * * * are anticonvulsant drugs to
control epilepsy * * *; antidepressant medication for mental
disorders; medication used to allay the side effects of certain
treatments;* * * and immunosuppressive medications that kidney
transplant patients regularly take to protect against graft
rejection.
20 CFR 416.976(c)(5)(i), (ii). Consistent with the Act's objective, use
of the drugs must be necessary to allow the person to perform work. See
Soc. Sec. R. 84-26 at 18 (1984) (``Routine drugs * * * are `needed'
when they are required to control the disabling condition, thereby
enabling the individual to function at work.'').
Dotson argues that, due to the severity of his drug addiction, he
needs the cocaine and heroin in order for him to steal and panhandle.
(Of course, he steals and panhandles so that he can purchase more
cocaine and heroin, so that he can continue to steal and panhandle--and
thus the cycle of addiction continues.) Because he needs the narcotics
in order to engage in SGA, Dotson continues, he believes that the cost
of the cocaine and heroin should be deducted from his earnings as an
IRWE.
Sadly, we have no reason to disbelieve Dotson's self-
characterization. Unfortunately for him, however, the regulations
comprehend more than mere addiction to a substance before the cost of
that substance will be considered an IRWE. As the statute and
regulations reveal, a number of obstacles lie in the path of Dotson's
argument. We content ourselves, however, to focus upon the requirement
that in order to be an IRWE a drug must ``reduce or eliminate'' the
symptoms of a claimant's impairment, or ``slow down its progression.''
20 CFR 416.976(c)(5)(i). In the face of Dotson's claim that his
disability stems from drug abuse, he cannot hope to maintain the
argument that his continued use of heroin and cocaine reduces or
eliminates the symptoms of his impairment. Rather, Dotson's use of
drugs serves as the basis of his alleged disability. And far from
slowing Dotson's dependency upon narcotics, his continued use of heroin
and cocaine only exacerbates his disability. With these considerations
in mind, we must reject Dotson's claim for an IRWE.
E. The Constitutional Claims
Dotson lastly argues that using illegal activity to constitute SGA
violates his rights to due process and equal protection of the laws
under the United States Constitution, although he has encountered some
difficulty in articulating the precise nature of his constitutional
complaints. It would seem that his due process argument--one which
might be more properly construed as an administrative challenge to the
regulations--reduces to the theory that the ALJ's decision in this case
attempts to override Congress' intent to provide SSI benefits to
substance abusers and, therefore, is void for want of a rational basis.
His equal protection claim, on the other hand, appears based on the
assertion that, under the Secretary's position, rich drug addicts will
be treated preferentially to the disadvantage of poor ones. We briefly
address each of his arguments.
1. Due Process
To establish a due process violation, Dotson faces the well-settled
and formidable burden of proving that the Secretary's regulations, as
we have interpreted them, lack a rational basis. See, e.g., Weinberger
v. Salfi, 422 U.S. 749, 768 (1975) (``the Due Process Clause can be
thought to interpose a bar only if the statute [or, as here, a
regulation] manifests a patently arbitrary classification, utterly
lacking in rational justification [citation omitted]''). Moreover, that
rational basis need not be expressed explicitly by Congress or the
administrative agency; ``any state of facts reasonably may be conceived
to justify it.'' Dandridge v. Williams, 397 U.S. 471, 485 (1970)
(citation omitted).
Initially, we note that interpreting the Secretary's regulations as
allowing illegal activity to constitute SGA does not interfere with
Congress' intent, assuming there is one, to provide disability benefits
to substance abusers.12 Rather, such an interpretation prevents
only those substance abusers who are engaging in SGA, whether legally
or illegally employed, from receiving SSI benefits reserved for
disabled persons who are also poor. See Bowen v. Yuckert, 482 U.S. 137,
140 (1987) (``Title XVI of the Act provides for the payment of
disability benefits to indigent persons * * *.'' [Emphasis added.])
Thus, the Secretary's regulations coincide with the SSI program's
underlying purpose.
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\1\2We are inclined to agree with Dotson that Congress has
envisioned the application of the Act to substance abusers. See,
e.g., 42 U.S.C. 1382(e)(3)(A) (requiring SSI recipients who are
alcoholics or drug addicts to undergo treatment as a condition of
receiving disability benefits); 42 U.S.C. 1383(a)(2)(A)(ii)
(providing for payment of SSI benefits to alcoholics and drug
addicts through representative payees).
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Moving to the next level, Dotson's myopic view of Congress' intent
in the statutory context serves to highlight the flaw in his
constitutional argument. Simply put, we cannot say that regulations
which preclude the disbursement of federal disability benefits to
persons who are engaging in substantial and gainful activity,
regardless of the activity's legality, constitutes a ``patently
arbitrary classification'' warranting judicial intervention. To the
contrary, working within a system where the limited supply of federal
funds will never satisfy the deserving demand, we are hard pressed to
think of a better dividing line than the one drawn by the Secretary.
Having said this much, we must reject Dotson's due process claim.
2. Equal Protection
Dotson faces an equally difficult burden when arguing to this court
that the Secretary's regulations violate the equal protection component
of the Fifth Amendment. Because a statute's or regulation's
differential impact upon the poor versus the wealthy, by itself, does
not subject that distinction to strict judicial scrutiny, see, e.g.,
Kadrmas v. Dickinson Public Schools, 487 U.S. 450, 458 (1988), Dotson
must prove that the classification drawn by the Secretary's regulations
fails to rationally further a legitimate interest, Zobel v. Williams,
457 U.S. 55, 60 (1982). Under such a standard, Dotson's constitutional
claim again must fail.
Dotson argues that the Secretary's position, if implemented, will
hurt only poor drug abusers because rich ones, who presumably will have
paid into the Social Security system, will be eligible to receive OASDI
benefits under Title II of the Act. This argument misses the mark for
the simple reason that OASDI claimants, just like SSI claimants, must
navigate the same five-step administrative process, the first of which
requires that the claimant not be engaging in SGA. Compare 42 U.S.C.
423(d)(1)(A) and 20 CFR Sec. 404.1520(a) (Title II) with 42 U.S.C.
1382c(a)(3)(A) and 20 CFR Sec. 416.920(a) (title XVI).13 Even if
Dotson could maintain such an argument, we would be inclined to reject
it because the Secretary's classification seems rationally to further
the legitimate interest of rewarding those persons with a prior
attachment to the work force who have contributed to the Social
Security system.
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\1\3Dotson's argument would become relevant in two situations,
the first of which is beyond the court's powers generally and the
second of which is not implicated in this appeal. The first scenario
involves a wealthy addict who is able to satisfy his or her
addiction without resort to the welfare system. Such a person, of
course, is better off than Dotson, but this disparity yields him no
cause of action. In the second scenario, a wealthy addict who is not
engaging in SGA, but who has paid into the Social Security system,
applies for and receives OASDI benefits. This person, again
undoubtedly better off than Dotson, presumably would be ineligible
for SSI benefits due to an excess of resources and income. See
generally note 6, supra. Importantly, however, Dotson is not in a
position to make this argument because the ALJ below did not deny
him benefits based on his income or resources, but rather based on
the fact that Dotson was engaging in SGA.
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The judgment of the district court is affirmed.
[FR Doc. 94-657 Filed 1-11-94; 8:45 am]
BILLING CODE 4190-29-P
