[Federal Register Volume 61, Number 170 (Friday, August 30, 1996)]
[Rules and Regulations]
[Pages 46344-46347]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-22214]
[[Page 46343]]
_______________________________________________________________________
Part VIII
Department of Housing and Urban Development
_______________________________________________________________________
24 CFR Parts 913 and 950
Office of the Assistant Secretary for Public and Indian Housing:
Optional Earned Income Exclusions; Interim Final Rule
Federal Register / Vol. 61, No. 170 / Friday, August 30, 1996 / Rules
and Regulations
[[Page 46344]]
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
24 CFR Parts 913 and 950
[Docket No. FR-4080-I-01]
RIN 2577-AB66
Office of the Assistant Secretary for Public and Indian Housing;
Optional Earned Income Exclusions
AGENCY: Office of the Assistant Secretary for Public and Indian
Housing, HUD.
ACTION: Interim rule.
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SUMMARY: This rule amends HUD's regulations for the definition of
``annual income'' applicable to Public Housing Agencies and Indian
Housing Authorities (collectively called Housing Agencies or HAs) in
the operation of public housing and Indian housing programs. The change
is not applicable to the Section 8 Housing Assistance Payments program.
The rule is necessary to encourage HAs to take action to further the
efforts of applicants and tenants to seek employment and to increase
their earned income. The intended effect is to permit HAs to adopt an
exclusion for earned income, tailored to their own circumstances, to
support the efforts of working families.
DATES: Effective date: September 30, 1996.
Comment due date: October 29, 1996.
ADDRESSES: Interested persons are invited to submit comments regarding
this rule to the Office of the General Counsel, Rules Docket Clerk,
Room 10276, Department of Housing and Urban Development, 451 Seventh
Street, SW., Washington, DC 20410-0500. Comments should refer to the
above docket number and title. A copy of each communication submitted
will be available for public inspection and copying during regular
business hours (weekdays 7:30 a.m. to 5:30 p.m. Eastern time) at the
above address. Facsimile (FAX) comments are not acceptable.
FOR FURTHER INFORMATION CONTACT: For the public housing program,
contact Linda Campbell, Director, Marketing and Leasing Management
Division, Office of Public and Assisted Housing Operations, Department
of Housing and Urban Development, 451 Seventh Street, SW., Washington,
DC 20410, telephone (voice): (202) 708-0744, extension 4020. (This is
not a toll-free number.) For hearing- and speech-impaired persons, this
number may be accessed via text telephone by dialing the Federal
Information Relay Service at 1-800-877-8339.
For the Indian housing programs, contact Deborah Lalancette,
Director, Housing Management Division, Office of Native American
Programs, Department of Housing and Urban Development, Room B-133, 451
Seventh Street, SW., Washington, DC 20410, telephone (voice): (202)
755-0088, extension 122. (This is not a toll-free number.) For hearing-
and speech-impaired persons, this number may be accessed via text
telephone by dialing the Federal Information Relay Service at 1-800-
877-8339.
SUPPLEMENTARY INFORMATION:
I. General
This rule amends HUD's regulations for the public housing and
Indian housing programs that govern the definition of annual income,
which the Secretary is authorized to define. Since income eligibility
for the public and Indian housing programs is determined based on this
term, and rents are based on annual income, as modified by statutorily
prescribed adjustments, changes in this definition influence who lives
in these types of housing and how much they are required to pay. (The
change is not applicable to the Section 8 Housing Assistance Payments
program.)
The rule is necessary to encourage public housing agencies and
Indian Housing Authorities (collectively called housing authorities or
HAs) to take action to further the efforts of applicants and tenants to
seek employment and to increase their earned income. The intended
effect is to permit HAs to adopt an exclusion for earned income,
tailored to their own circumstances, to support the efforts of working
families.
The Department believes that, in light of the shortfall in funding
full HA eligibility for the Performance Funding System (PFS) expected
over the next two years and the possibility that an HA can develop a
higher income base by use of this type of exclusion, it is in the best
interests of the program to encourage occupancy in these programs by
working families.
II. The Nature of Special Treatment for Earned Income
The Balanced Budget Downpayment Act I, enacted on January 26, 1996
(Pub. L. No. 104-99), also known as the Continuing Resolution or
``CR'', specifically authorized housing agencies to allow earned income
adjustments, as long as HUD's operating subsidy obligation was not
affected. That provision and others were implemented by HUD by issuance
of a Notice to HAs (PIH 96-6) on February 13, 1996, which expires on
September 30, 1996, based on the expiration of the CR on that date.
The CR enacted by Congress, effective for Federal Fiscal Year 1996,
permitted housing agencies to take actions to attract and retain
working families in occupancy such as the adoption of ceiling rents and
the adoption of earned income adjustments that would ease the impact on
working tenants. The Act also repealed Federal admissions preferences,
permitting HAs to use working preferences to greater advantage. This
rule codifies for Federal Fiscal Years 1997 and 1998 a provision
permitting housing agencies to provide for special treatment of earned
income.
The rationale for making this provision effective via a rule is to
ensure some degree of consistency in Departmental policy, on which HAs
can rely. The Department believes that this measure can contribute to
improving the stability of HAs by permitting them to improve the income
mix in their developments, thus increasing dwelling rental income.
There is a difference between the special treatment of earned
income specifically authorized by the CR and that authorized by this
rule. There are two defined terms related to income under the United
States Housing Act of 1937: ``annual income'' and ``adjusted income.''
The former is a gross income amount, which is used to determine the
eligibility of a family for participation in the program based on
whether that amount is less that 50% or 80% of median income for the
area (adjusted by family size). The latter is a net amount after
adjustments are made to the gross income, which is used to determine
the amount of rent a family pays under the affected programs because
rent is generally based on a percentage of ``adjusted income.'' The CR
authorized an ``adjustment'' to income affecting the amount of
``adjusted income'', while this rule authorizes an ``exclusion'' from
income, which affects income at an earlier stage--the definition of
``annual income.''
The reason that this rule authorizes an exclusion rather than an
adjustment is that the scope of the Department's authority does not
clearly include authorizing ``adjustments'' without specific
Congressional action. The statute prescribes the definition of
``adjusted income'' but leaves to the Secretary of HUD the authority
(under section 3 of the United States Housing Act of 1937, 42 U.S.C.
1437a) to define the term ``income,'' as it is used for purposes of
determining eligibility and rental payment in the public and Indian
housing programs. The term HUD uses
[[Page 46345]]
that corresponds to this statutory term is ``annual income.''
Although the CR provision expires at the end of the current fiscal
year (September 30, 1996), a change made by the Secretary in the
definition of income permitting an exclusion for earned income can have
longer lasting effect. The Secretary is exercising this authority in
this rule.
Under this rule, HAs have the authority to establish their own
earned income exclusion, as a means of attracting and retaining more
tenants with earned income. The ``exclusion'' an HA adopts may be
similar or identical to the ``adjustment'' it had adopted under the CR.
The adoption of an earned income exclusion under this rule will
have the same effect on an HA's operating subsidy as the adoption of an
earned income adjustment under the previously issued HUD Notice. (See
discussion below.) In general, HAs that opt to adopt earned income
exclusions will increase their total income if they are successful in
obtaining more and/or higher income working tenants but will lose
income if their policies do not produce a net increase in rent
revenues.
III. Specific Changes in Existing Rules
For the public housing program, this change to permit a new
exclusion is accomplished by adding a new paragraph (d) to
Sec. 913.106, which states the definition of ``annual income.'' The
change to the Indian housing program occurs in Sec. 950.102, in the
definition of ``annual income,'' where a new paragraph (3) is added.
The new paragraphs authorize an HA to adopt a written earned income
exclusion, after considering certain enumerated possibilities. No HUD
approval is required for adoption of such an exclusion. However, if the
HA experiences a decrease in dwelling rental income as a result, it
will have to absorb the cost.
IV. Effect on Operating Subsidy
In addition to the HUD Notice to housing agencies described above,
HUD issued a second Notice (PIH 96-24) in the spring of 1996,
implementing the CR with respect to its impact on the Performance
Funding System of determining operating subsidy eligibility.
Specifically, that Notice permitted HAs to offset PFS funding
shortfalls by retaining increases in dwelling rental income that result
from increases in residents' earned incomes and non-dwelling rental
income earned by the HAs through entrepreneurial activities. That
Notice made the changes effective for the shorter period through
Federal Fiscal Year 1998 or the time by which HUD no longer has a
shortfall in the availability of funds to pay full operating subsidy
eligibility to all HAs.
Under this rule, as under that Notice, the special treatment given
earned income by an HA will not affect its PFS subsidy eligibility.
That eligibility will be calculated without respect to either decreases
in rental income resulting from the exclusion, or increases resulting
from higher rents received from households with earned income. Another
pending rulemaking (FR-4072) codifies those changes.
V. Scope of rule
The CR authorized the earned income adjustment only for the public
and Indian housing programs and only based on the premise that
operating subsidy obligations of the Department would not be affected.
This rule follows those limits on the scope of the optional special
treatment of earned income. Therefore, the change is not applied to
other programs usually governed by the same definition of ``annual
income,'' such as the Section 8, Section 236, and Rent Supplement
programs.
Findings and Certifications
Justification for Interim Rule
The Department generally publishes a rule for public comment before
issuing a rule for effect, in accordance with its regulations on
rulemaking in 24 CFR part 10. However, part 10 provides that prior
public procedure will be omitted if HUD determines that it is
``impracticable, unnecessary, or contrary to the public interest'' (24
CFR 10.1).
The change made by this interim rule merely adds an optional
exclusion to the definition of income used by Housing Agencies, which
supports the policy of obtaining a broad range of income levels in
public housing and Indian housing developments and the Secretary's
policy of encouraging HAs to increase the number of working families
residing in these developments. As noted earlier, the Department has
already authorized the use of such income exclusions for a limited
period of time, based on the Balanced Budget Downpayment Act I, in a
Notice. Authorization of such an optional exclusion in this rule is
expected to increase the number of HAs using it, helping to encourage
the participation of working families in these programs.
Implementation of the rule's provisions is needed as soon as
possible to facilitate the adoption of this type of exclusion to
realize the benefits of increasing the incentives for working families
to participate and to prevent HAs that are now deducting earned income
from having to change their policy starting on October 1, 1996, only to
institute earned income exclusions later. Therefore, the Department has
determined that good cause exists to omit prior public procedure for
this interim rule because such delay would be contrary to the public
interest and unnecessary.
In the interest of obtaining the fullest participation possible in
determining the factors that should be considered in an HA's
determination to adopt an earned income exclusion, the Department does
invite public comment on the rule. The comments received within the 60-
day comment period will be considered during development of a final
rule that will supersede this interim rule.
Impact on the Environment
A Finding of No Significant Impact with respect to the environment
has been made in accordance with HUD regulations at 24 CFR part 50 that
implement section 102(2)(C) of the National Environmental Policy Act of
1969, 42 U.S.C. 4332. The Finding of No Significant Impact is available
for public inspection and copying during regular business hours (7:30
a.m. to 5:30 p.m.) in the Office of the Rules Docket Clerk, Room 10276,
451 Seventh Street, SW., Washington, DC 20410-0500.
Federalism Impact
The General Counsel, as the Designated Official under section 6(a)
of Executive Order 12612, Federalism, has determined that the policies
contained in this rule do not have significant impact on States or
their political subdivisions since the provisions of this interim rule
simply add an option for housing agencies to adopt. To the extent there
is an impact, it is advantageous to the HAs, which are creatures of
State or local government.
Impact on the Family
The General Counsel, as the Designated Official under Executive
Order 12606, The Family, has determined that this rule does not have
potential for significant impact on family formation, maintenance, and
general well-being. Therefore, the rule is not subject to review under
the Order. The rule merely broadens the options for housing agencies in
managing their public housing or Indian housing programs to encourage
families to obtain employment and to increase their earnings.
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Impact on Small Entities
The Secretary, in accordance with the Regulatory Flexibility Act (5
U.S.C. 605(b)), has reviewed this rule before publication and by
approving it certifies that this rule will not have a significant
impact on a substantial number of small entities, because it makes
available additional options for housing agencies but does not impose
mandatory obligations.
Catalog
The Catalog of Federal Domestic Assistance number for the
programs affected by this rule is 14.850.
List of Subjects
24 CFR Part 913
Grant programs--housing and community development, Public housing,
Reporting and recordkeeping requirements.
24 CFR Part 950
Aged, Grant programs--housing and community development, Grant
programs--Indians, Indians, Individuals with disabilities, Low and
moderate income housing, Public housing, Reporting and recordkeeping
requirements.
Accordingly, parts 913 and 950 of title 24 of the Code of Federal
Regulations are amended as follows:
PART 913--DEFINITION OF INCOME, INCOME LIMITS, RENT AND
REEXAMINATION OF FAMILY INCOME FOR THE PUBLIC HOUSING PROGRAM
1. The authority citation for part 913 continues to read as
follows:
Authority: 42 U.S.C. 1437a, 1437d, 1437n and 3535(d).
2. In Sec. 913.106, paragraphs (d) and (e) are redesignated as
paragraphs (e) and (f), and a new paragraph (d) is added, to read as
follows:
Sec. 913.106 Annual income.
* * * * *
(d) In addition to the exclusions from annual income covered in
paragraph (c) of this section, a housing agency may adopt additional
exclusions for earned income pursuant to an established written policy.
(1) In establishing such a policy, a housing agency must adopt one
or more of the following types of earned income exclusions, including
variations thereof:
(i) Exclude all or part of the family's earned income;
(ii) Apply the exclusion only to new sources of earned income or
only to increases in earned income;
(iii) Apply the exclusion to the earned income of the head, the
spouse, or any other family member age 18 or older;
(iv) Apply the exclusion only to the earned income of persons other
than the primary earner;
(v) Apply the exclusion to applicants, newly admitted families,
existing tenants, or persons joining the family;
(vi) Make the exclusion temporary or permanent, for the HA, the
family, or the affected family member;
(vii) Make the exclusion graduated, so that more earned income is
excluded at first and less earned income is excluded after a period of
time;
(viii) Exclude any or all of the costs that are incurred in order
to go to work but are not compensated, such as the cost of special
tools, equipment, or clothing;
(ix) Exclude any or all of the costs that result from earning
income, such as social security taxes or other items that are withheld
in payroll deductions;
(x) Exclude any portion of the earned income that is not available
to meet the family's own needs, such as amounts that are paid to
someone outside the family for alimony or child support; and
(xi) Exclude any portion of the earned income that is necessary to
replace benefits lost because a family member becomes employed, such as
amounts that the family pays for medical costs or to obtain medical
insurance.
(2) Any amounts that are excluded from annual income under this
paragraph (d) may not also be deducted in determining adjusted income,
as defined in Sec. 913.102.
(3) Housing agencies do not need HUD approval to adopt optional
earned income exclusions.
(4) In the calculation of Performance Funding System operating
subsidy eligibility, housing agencies will have to absorb any loss in
rental income that results from the adoption of any of the optional
earned income exclusions discussed in paragraph (d)(1) of this section,
including any variations of the listed options.
PART 950--INDIAN HOUSING PROGRAMS
3. The authority citation for part 950 continues to read as
follows:
Authority: 25 U.S.C. 450e(b); 42 U.S.C. 1437aa-1437ee and
3535(d).
4. In the definition of ``Annual income'' in Sec. 950.102,
paragraphs (3) and (4) are redesignated as paragraphs (4) and (5), and
a new paragraph (3) is added, to read as follows:
Sec. 950.102 Definitions.
* * * * *
Annual income. * * *
(3) In addition to the exclusions from annual income covered in
paragraph (2) of this definition, an IHA may adopt additional
exclusions for earned income pursuant to an established written policy.
(i) In establishing such a policy, an IHA must adopt one or more of
the following types of earned income exclusions, including variations
thereof:
(A) Exclude all or part of the family's earned income;
(B) Apply the exclusion only to new sources of earned income or
only to increases in earned income;
(C) Apply the exclusion to the earned income of the head, the
spouse, or any other family member age 18 or older;
(D) Apply the exclusion only to the earned income of persons other
than the primary earner;
(E) Apply the exclusion to applicants, newly admitted families,
existing residents, or persons joining the family;
(F) Make the exclusion temporary or permanent, for the IHA, the
family, or the affected family member;
(G) Make the exclusion graduated, so that more earned income is
excluded at first and less earned income is excluded after a period of
time;
(H) Exclude any or all of the costs that are incurred in order to
go to work but are not compensated, such as the cost of special tools,
equipment, or clothing;
(I) Exclude any or all of the costs that result from earning
income, such as social security taxes or other items that are withheld
in payroll deductions;
(J) Exclude any portion of the earned income that is not available
to meet the family's own needs, such as amounts that are paid to
someone outside the family for alimony or child support; and
(K) Exclude any portion of the earned income that is necessary to
replace benefits lost because a family member becomes employed, such as
amounts that the family pays for medical costs or to obtain medical
insurance.
(ii) Any amounts that are excluded from annual income under
paragraph (3) of this definition may not also be deducted in
determining adjusted income, as defined in this section.
(iii) IHAs do not need HUD approval to adopt optional earned income
exclusions.
(iv) In the calculation of Performance Funding System operating
subsidy eligibility, IHAs will have to absorb any loss in rental income
that results from the adoption of any of the optional earned income
exclusions discussed in paragraph (3)(i) of this definition, including
any variations of the listed options.
* * * * *
[[Page 46347]]
Dated: August 6, 1996.
Kevin Emanuel Marchman,
Acting Assistant Secretary for Public and Indian Housing.
[FR Doc. 96-22214 Filed 8-29-96; 8:45 am]
BILLING CODE 4210-33-P
