5100 Summary

This section describes income which must be considered when determining food stamp eligibility and benefit level. It explains which income must be included in the eligibility determination and provides verification guidelines for this countable income. It also explains which income is to be excluded during eligibility determination.

5110 Bankruptcy

Filing for bankruptcy has only a limited effect on the amount of income counted in a household's food stamp budget. However, the household's bankruptcy papers should be examined carefully to determine if the terms of the settlement will have any impact on the household's resource and/or deductible expenses.

After a household files for bankruptcy, the gross amount of any income (earned and unearned) received by the household will continue to be counted in the budget. Sometimes, the household's income goes to a trustee and the trustee pays the household's bills and gives the household a living allowance. The living allowance has already been counted as part of the household's gross income and so would not be counted as income again.

When a self-employed household (including any farmer) declares bankruptcy and continues to do the same type of business, the self-employment income continues to be counted in the food stamp budget. Often when a business or farm declares bankruptcy but continues to operate, some of the assets of the business are sold to pay the debts of the business. If the business owner (or farmer) sells property or equipment used in their business and uses the proceeds to pay off a loan, the money is counted as income in the self-employment enterprise. (See Capital Gains, [FSC 5632].) Even if the proceeds of the sale are diverted to a bank to repay a loan, the money is still counted as income in the self-employment enterprise.

If the household is no longer allowed to continue the self-employment enterprise, the self-employment income is dropped from the food stamp budget. When the business no longer continues to operate and business collateral is turned over to a bank -- either voluntarily or through repossession, it becomes the legal property of the bank. Even if the bank sells the collateral (land, equipment, etc.) and uses the proceeds to pay off a business loan, the proceeds of the sale are not counted as income in the self-employment enterprise.

When bankruptcy is declared, a creditor (or lender) may write off all or part of a loan or "forgive" the outstanding balance or the household's current payment may be recalculated. If the amount due on a deductible expense (i.e., house payment) changes as a result of a bankruptcy, the worker will verify the amount currently incurred for the expense. The current amount will be used in the food stamp budget. Past due amounts will not be allowed even if included with current payments or even if paid through the court directly to the creditor. See [FSC 6710].

Income eligibility standards will be applied to households as provided in this section. The applicable standard is based upon the household's classification as regular or aged/disabled or categorically eligible. See FSC 1910 for an explanation of an aged/disabled household. See FSC 1920 for an explanation of a categorically eligible household. All other households are considered regular households. Income standards are applied as described below.

An aged/disabled household must meet only the net income eligibility standards. Net monthly income is computed by adding all non-excluded income for all household members and subtracting all allowable deductions.

A regular household must meet both the net income eligibility standards and the gross income eligibility standards. Gross monthly income is all non-excluded gross earned and unearned income for all households members. Net income is the household's income after subtracting all allowable deductions.

Only the following types of income are excluded when determining food stamp eligibility:

• Child support payments obligated to OCSE to maintain eligibility
• Costs of producing self-employment income
• Earnings of a child who attends school
• Educational expenses
• By Federal statute
• In-kind benefits
• Irregular income
• Loans
• Non-recurring loan payments
• Recoupments
• Reimbursements
• Payments for third party beneficiaries
• Vender payments
• Earned income tax credits

Child Support payments received by TEA recipients which are obligated to the Office of Child Support Enforcement (OCSE) to maintain TEA eligibility will not be counted as income. This exclusion applies even when such payments are not actually turned in to OCSE. This also applies to payments received by former AFDC and/or TEA recipients when held by OCSE and applied to previous AFDC and/or TEA arrearages.

Any child support payment received through an interception of a State or Federal income tax refund is excluded as non-recurring lump sum payments. Any child support payment received through interception of a lump sum Worker's Compensation payment is also excluded as a non-recurring lump sum payment. See [FSC 4950] for instructions on handling lump sum payments.

The earnings of elementary or secondary school students age 17 or younger who continue to live with a parent and attend school classes at least half-time will be excluded. This includes students who attend classes to obtain a general equivalency diploma (GED) so long as the GED program is recognized, supervised or operated by the student's state or local school district. Half-time status will be defined by the school.

The earned income of a high school student must be counted beginning the month after the student turns 18. This applies regardless of marital status so long as the student continues to live with a parent.

This exclusion does not apply to students who have established a residence separate from their natural, adoptive or step parent or from the adult household member who exercises parental control over the student.

Educational income will be excluded in its entirety when paid under Title IV of the Higher Education Act or Bureau of Indian Affairs Student Assistance Programs. Other types of educational income will be excluded to the extent they are earmarked for or used by a student for allowable educational costs. See FSC 1622 for instructions.

Any income specifically excluded for food stamp purposes by any Federal statute is not counted as income. These income exclusions are listed below.

1. Reimbursements from the Uniform Relocation Assistance and Real Property Acquisition Policy Act of 1970. (P. L. 91-646, Section 216.)
2. Payments to volunteers under Title II (RSVP, foster grandparents, senior companions program, and others) of the Domestic Volunteer Services Act of 1973 (P.L. 93-113), as amended. Payments under Title I of that Act (including payments from such Title I programs as VISTA, University Year for Action, and Urban Crime Prevention Program to volunteers) will be excluded for individuals receiving food stamp benefits or public assistance at the time they joined the Title I program. Temporary interruptions in Food Stamp Program participation do not affect this exclusion once an initial determination is made. New applicants who were not receiving public assistance or food stamp benefits at the time they joined VISTA will have these volunteer payments included as earned income.
3. Payments received by individuals from Community Services Employment as authorized by the Older Americans Act (P.L. 100-175). In Arkansas, this program is operated by the U.S. Forest Service, the American Association of Retired Persons (AARP), the National Center on Black Aging, the Green Thumb Program and the Area Agency on Aging.
4. Payments or allowances made under Federal Law (other than provided under Title IV-A of the Social Security Act, e.g.- welfare block grant payments) for purpose of energy assistance including utility reimbursements made by the Department of Housing and Urban Development (HUD) and the Farmers Home Administration (FHA). Examples of Federal payments that are excluded are energy assistance payments provided through the Department of Health and Human Services; payments from the Low-Income Energy Assistance Program; the Community Services Administration's Energy Crisis Assistance and Crisis Intervention Programs and utility assistance payments. This also excludes one time Federal or State payments for weatherization or emergency repair/ replacement of heating or cooling devices.
5. Under the provisions of the Job Training Partnership Act (JTPA), allowances and payments to individuals participating in programs under that Act are excluded as income with the following exception.

Exception: On the job training (OJT) payments provided under Section 204(5) of Title II of the JTPA are counted as income unless the payee is a dependent less than 19 years of age. If the payee is a dependent less than 19 years of age, OJT payments are excluded.

The JTPA exclusion does apply to on-the-job training payments received under the Summer Youth Employment and Training Program.

P.L. 101-610, Section 117(d), 11-28-90, provides that the JPTA income exclusion applies to projects conducted under Title I of the National and Community Services Act of 1990 as if such projects were conducted under the JTPA described in item 5 above. This includes:

1. The Community Service, Schools and Service-Learning Act of 1990 (Serve-America);
2. The American Conservation and Youth Service Corps Act of 1990; and
3. The National Community Service Act (NCSA). There are about 47 different NCSA programs and they vary by State. Most of the payments are made as a weekly stipend or for educational assistance. The Higher Education Service Learning Program and the AmeriCorps Umbrella Programs come under this Title. The National Civilian Community Corps (NCCC) is a federally managed AmeriCorps program. The Summer for Safety Program is an AmeriCorps program. The School-to-Work Opportunities Program is funded under this Act. In Arkansas, the Delta Service Corps is administered under this Act. Payments, allowances, earnings and payments to individuals participating in programs under this Act are excluded as income.

6. P.L. 102-550, Housing and Community Act of 1992, Section 456(e) provides that payments made under the Youth Build Program are to be treated like JTPA payments. See item 5 above for an explanation of how to handle JTPA payments.
7. Federal payments to Indians and Eskimos are excluded as stipulated below:

- Payments received under the Alaska Native Claims Settlement Act (P.L. 92-203, Section 21(A).

- Payments received from the disposition of funds to the Grand River Band of Ottawa Indians (P.L. 94-540).

- Income from certain submarginal land held in trust for certain Indian tribes (P.L. 94-114, Section 6).

- Payments by the Indian Claims Commission to the Confederated Tribes and Bands of the Yakima Indian Nation or the Apache Tribe of the Mescalero Reservation (P.L. 95-443).

- Payments to the Passamaquoddy Tribe and the Penobscot Nation or any of their members received pursuant to the Maine Indian Claims Settlement Act of 1980 (P.L. 96-420, Section 5).

- Per capita payments of $2,000 and less made under Public Law 98-64 to Native Americans from judgement awards and trust funds. This exclusion applies on a per-person and not a per-household basis. It applies individually to each payment regardless of the frequency of the payments or the number of months for which the payment was made. These payments are also excluded as a resource. [See FSC 4450], Item 7.

- Payments of relocation assistance to members of the Navajo and Hopi Tribes (Pub. L. 93-531).

- Payments to the Turtle Mountain Band of Chippewas, Arizona (P.L. 97-403).

- Payments to the Blackfeet, Grosventre, and Assiniboine tribes (Montana) and the Papago (Arizona) P.L. 97-408).

- Per capita and interest payments made to the Assiniboine Tribe of the Fort Belknap Indian Community and the Assiniboine Tribe of the Fort Beck Indian Reservation (Montana) (P.L. 98-124, Section 5).

- Per capita and interest payments made to the Red Lake Band of Chippewas (P.L. 98-123, Section 3, 10/13/83).

- Payments to the Saginaw Chippewa Indian Tribe of Michigan (P.L. 99-346, Section 6 (b)(2)).

- Per capita payments to the Chippewas of Mississippi (P.L. 99-377, Section 4 (b), 8/8/86).

- Old Age Assistance Claims Settlement Act, provides that funds made to heirs of deceased Indians under this Act except for per capita shares in excess of $2,000 (P.L. 98-500, Section 8, 10/17/84).

- Payments to the Puyallup Tribe of the State of Washington (P.L. 101-41, 6-21-89).

- Payments under the White Earth Reservation Land Settlement Act of 1985 to the White Earth Band of Chippewa Indians in Minnesota (P.L. 99-264).

- Payments under the Seneca Nation Settlement Act of 1990 to members of the Seneca Nation (P.L. 101-503).

- Funds appropriated in satisfaction of judgements awarded to the Seminole Indians in dockets 73, 151, and 73-A of the Indians Claims Commission.

- Funds distributed or held in trust for members of the Chippewas of Lake Superior (P.L. 99-146).

- Assistance paid under P.L. 95-608, the Indian Child Welfare Act of 1978.

- Payments to the Confederated Tribes of the Colville Reservation under the Grand Coulee Dam Settlement Act (P.L. 103-436).

- Financial assistance available to any Navajo or Hopi Indian pursuant to USCS 460d - 460d - 31.

8. Under P.L. 99-576, Veterans Benefits and Health Care Authorization Act of 1986, any amount by which the basic pay of military service personnel is reduced to fund the G.I. Bill. Under U.S.C., Title 38 Sections 1411 (b) and 1412 (c), the amount by which the basic pay of an individual is reduced to fund the G.I. Bill will not be considered to have been received by or to be within the control of this individual.

9. Cash donations, based on need, received from one or more private, nonprofit charitable organizations to the extent that such donations do not exceed $300 in a Federal fiscal year quarter as mandated by the Charitable Assistance and Food Bank Act of 1987 (P.L. 100‑232).

    

   10.  Payments made to Vietnam veterans under the Agent Orange Veteran Payment Program as authorized by P.L. 101‑201.  P.L. 101-239, the Omnibus Reconciliation Act of 1989,    Section 10405, excludes payments made from the Agent Orange Settlement fund or any   other fund established pursuant to the settlement in the Agent Orange product liability litigation, M.D.L. No. 381 (E.D.N.Y.)

    

   Exception        Payments made to Vietnam Veterans under the Agent Orange Act of 1991, P.L. 102-4, are not excluded as income.  Veterans of the Vietnam War who are determined to be eligible for veterans' benefits as a result of exposure to Agent Orange will be issued payments in accordance with P.L. 102-4.  Refer to FSC 5723 for additional information.

    

   11.  Under P.L. 104-102, Section 1805(d), monthly allowances paid to a child of a Vietnam Veteran for any disability resulting from spina bifida suffered by such child.

    

   12.  Under P.L. 106-419, Section 1815 (a), monthly allowances paid to any individual with one or more covered birth defects if he or she is a child of a woman Vietnam veteran.

    

   13.  Under the Civil Liberties Act of 1988 (P.L. 100-383),payments to U.S. citizens of Japanese ancestry and permanent resident Japanese aliens or their survivors and Aleut residents of the Pribilof Islands and the Aleutian Isands West of Unimack Island. 

    

   14.  Payments received through the Radiation Exposure Compensation Act (P.L. 101-426, Section   6 (h)(2), 10/15/90).  This law establishes a program to compensate individuals for injuries or deaths resulting from exposure to radiation from nuclear testing and uranium mining in  Arizona, Nevada and Utah. 

    

   15.  Payments received from the Federal Emergency Management Assistance (FEMA) under P.L. 93-288, Sec. 312 (d) as amended by P.L. 100-707, Section 105 (i) the Disaster Relief and Emergency Assistance Amendments of 1988.  Funds distributed by FEMA due to a major disaster or emergency are excluded as income.  Not all payments from FEMA are for disaster or emergency assistance.  This exclusion applies to Federal assistance provided to persons directly affected and to comparable disaster assistance provided by states, local governments, and disaster assistance organizations. For payments to be excluded, the disaster or emergency must be declared by the President.

    

   16.  Income amounts necessary for the fulfillment of a PASS (Plan for Achieving Self-Support) plan under Title XVI of the Social Security Act.  Verification of the existence of the PASS and the amounts of resources and income set aside by the plan may be obtained from SSA.

   See FSC 5414.2 for additional information about IDAs.

    

   17.  The value of assistance to children under P.L. 89-642, Section 11(b) of the Child Nutrition Act of 1966 and P.L. 79-396, the National School Lunch Act.  The Child Nutrition Act authorizes the Special Milk Program, the School Breakfast Program, and the WIC Program.  See item 17 for additional information about the WIC Program.  The National School Lunch Act authorizes the School Lunch Program, the Summer Food Service Program for children, the Commodity Distribution Program and the Child and Adult Care Food Program.  The exclusion applies to assistance provided to children rather than that paid to providers.

    

   18.  Benefits received from the Special Supplemental Food Program for Women, Infants and Children (WIC) under P.L. 92-443, Sec. 9 and P.L. 100-435, which amended Section   17(m)(7) of the Child Nutrition Act of 1966.

    

   19.  Under P.L. 102-586, Section 8, the Child Care and Development Block Grant Act Amendments of 1992, the value of any child care provided or arranged (or any amount received as payment for such care or reimbursement for costs incurred for such care) under this subchapter.

   20.  Payments made to individuals because of their status as victims of Nazi persecution under   P.L. 103-286.  This exclusion is effective for eligibility and benefit level determinations made on or after August 1, 1994. 

    

   21.  Under P.L. 101-508, the Omnibus Reconciliation Act of 1990, earned income credit (EIC) payments s under section 3507 of the Internal Revenue Code.  EIC payments are received as part of the employee's paycheck through a reduction in taxes withheld.

    

   22.  Under P.O. 103-22, compensation made to crime victims as authorized by the Crime Act of 1984.

    

   23.  Under P.L. 107-171, the Food Stamp Reauthorization Act of 2002, all student financial assistance.  See FSC 1622.3.P

    

   24.  Under P.L. 101-625, section 22(i), Cranston-Gonzales National Affordable Housing Act, dated 11/28/90 42 USCS 1437t(i) - no service provided to a public housing resident under section 22(I) of this law may be treated as income.  This exclusion applies to services such as child care, employment training and counseling, literacy training, computer skills training, assistance in the attainment of certificates of high school equivalency and other services.  It does not apply to wages or stipends.  Wages and stipends are counted as income.

   25.  Funds withdrawn from a Department of Housing and Urban Development's (HUD) Family Self-Sufficiency Program escrow account are excluded as income when determining eligibility for food stamps.  See FSC 5413.2 for additional information about this exclusion.

   26.  Under P.L. 104-193, section 103 (a) which amended Section 404 (h) of Part A of Title IV of the Social Security Act, funds (including accrued interest) in an individual development account (IDA) under the TANF Block grant program will be excluded during any period during which the individual maintains or makes contributions into such an account.  See FSC 5414.2 for additional information about IDAs.

    

In-kind benefits are any gain or benefit which is not in the form of money payable directly to the household. In-kind benefits which are excluded include:

1. Meals
2. Clothing
3. Public housing
4. Produce from a garden;
5. Shelter provided to an employee;

Example: A farmer hires a household member as a laborer. The household is provided with a house on the farmer's farm and utilities are free of charge. The house and utilities are considered in-kind benefits and excluded as income.

6. Cash and Counseling Demonstration.

All loans, except deferred payment educational loans, are excluded as income. This includes loans from private individuals as well as commercial loans. A formal repayment agreement is not required. However, the intent to repay the loan must exist.

Example: A household member receives a loan from his brother in the amount of $1,600.00 for the purpose of buying a stereo system. The total amount of the loan is to be repaid. There were no documents signed since both parties verbally agreed to the terms. The amount of the loan ($1,600) is totally excluded as income to the household.

See [FSC 5415] for instructions on verifying loans.

See [FSC 4950], Lump Sum Payments, for instructions on handling the receipt of loans.

One-time lump sum payments are excluded as income. Examples of lump sum payments include, but are not limited to, the following payments:

Non-recurring lump-sum payments excluded as income must be counted as a resource in the month received, unless specifically excluded as a resource by Federal statute or regulation. See [FSC 4450] for a list of resources excluded by law.

A recoupment is the voluntary or involuntary return of money from either an earned or unearned income source to repay a previous overpayment. Monies currently being recouped are excluded as income if both of the following conditions are met.

Condition 1 -The income in which the overpayment occurred must not have been considered excluded income when food stamp eligibility was determined. For example, the Child Support Enforcement Unit (CSEU) determines that an overpayment occurred because an individual kept child support payments for a child who was included on an AFDC grant instead of turning the payment over to CSEU. The payments were excluded as income when received as specified in [FSC 5401]. The individual no longer receives AFDC but does receive child support through CSEU. CSEU is recouping part of the current child support payment and as repayment of the overpayment. The full child support payment (including the amount recouped) will be counted in the current food stamp budget.

Condition 2 -The overpayment may not be classified as an Intentional Program Violation if it occurred in:

1. An AFDC payment;
2. A Pell Grant;
3. An SSI payment; or
4. HUD Assistance.

The determination that an overpayment will be classified as an IPV is made by the agency administering the program.

Payments which cover past or future expenses are excluded as income if the payment does not exceed the actual expense and does not represent a gain or benefit. This does not apply to reimbursements for normal living expenses such as rent, utilities, personal clothing, etc.

NOTE: No portion of a regular AFDC payment will be excluded as a reimbursement for past or future expenses.

To be excluded, the payment must be for a specifically identified expense and used for the purpose intended. Any portion of the payment that exceeds the actual incurred expense or covers normal living expenses is considered income. A payment is not considered excessive unless the provider or the household indicates the amount is excessive. When a payment covers several expenses, each expense does not have to be separately identified provided the payment covers only normal living expenses.

Examples of excludable reimbursements which are not considered a gain or a benefit to the household are listed below.

1. Reimbursements or flat allowances for job related expenses such as travel, per diem, uniforms, or transportation to and from a job or a training site. Unless paid through a reimbursement which is over and above the basic wage, these job related expenses are neither deductible nor excludable.
2. Reimbursements for out-of-pocket expenses incurred by volunteers during the course of volunteer work.
3. Medical or dependent care reimbursements.
4. Reimbursements received by households to pay for services provided by Title XX of the Social Security Act.
5. Utility reimbursements made by the Department of Housing and Urban Development (HUD) and the Farmers Home Administration (FMHA). These payments are also called utility assistance payments.

Also, no portion of benefits provided under title IV-A of the Social Security Act which is provided specifically for work-related or child care expenses will be excluded as a reimbursement.

EXCEPTION - Payments or reimbursements for work related or child care expenses made under an employment, education or training program (i.e. - Project SUCCESS Programs) will be excluded.

A beneficiary is an individual for whom a gain or benefit is intended. An individual who receives an entitlement check such as VA or SSA is usually the intended beneficiary. However, in some cases, the intended beneficiary does not actually receive the income. Another individual is designated to receive the income as a payee and to use the income for the care and maintenance of the intended beneficiary. In these cases the intended beneficiary is called a third-party beneficiary. The adult relative in an AFDC case is the payee for the eligible children who are considered third-party beneficiaries.

Money received for the care and maintenance of a third party beneficiary who is not a household member is excluded to the extent that the money is actually used for the care and maintenance of the beneficiary.

Example 1 - Mr. Smith is the payee for his brother's SSI check. Mr. Smith and his brother do not live together. Mr. Smith states that he uses all of the SSI check to meet his brother's needs. None of the SSI check would be counted as income in Mr. Smith's food stamp case.

If the intended beneficiaries of a single payment are both household and non-household members, any identifiable portion of the payment intended and used for the care and maintenance of the non-household member is excluded.

Example 2 - Ms. Conway receives Social Security for herself and one child. Ms. Conway is enrolled in college. She lives on campus and the child lives with its grandmother. The grandmother receives food stamps. Ms. Conway states that she keeps $100 of the social security payment and gives $100 to the grandmother to take care of her child. $100 will be counted in the grandmother's food stamp case.

If the non-household member's share cannot be readily identified, the payment will be evenly prorated among the intended beneficiaries. The amount excluded will be the lesser of the household member's prorata share or the amount actually used for non-household member's care and maintenance.

Vendor payments are monetary payments made by a non-household member for household expenses.

These payments must be made by a person outside of the household (with the non-household member's funds) and paid directly to the household's creditors or to a person or organization providing a service to the household.

The household must not have the option of receiving these funds directly.

Examples of excluded vendor payments appear below:

1. A friend, employer, agency, church, relative, or former spouse makes payments for household expenses such as rent or utilities directly to the landlord or utility company. If the payment is made from funds not owed to the household, it is a vendor payment and excluded as income.
2. If an employer pays a household rent or house payment directly to the landlord or financial institution in addition to paying regular wages, it is a vendor payment and excluded as income. If the employer provides a house to an employer, the value of the housing will not be considered as income.
3. Separate and identifiable alimony or support payments made by a person outside of the household under a court order or other legally binding agreement which requires direct payment to a third party are vendor payments and excluded as income by the household receiving the benefit. See [FSC 6550] for instruction on child support as a deductible expense. (When the court awards part of a pension to an ex-spouse and that payment is diverted by the payor directly to the ex-spouse, only the portion actually received by the household will be considered income. See [FSC 5712].)
4. Payments by a government agency to a child care facility for the purpose of providing day care for a household member are considered vendor payments and excluded as income.
5. Payments or allowances made by Department of Housing and Urban Development (HUD) or by the Farmers Home Administration (FMHA) directly to mortgage holders, landlords or utility providers are vendor payments and excluded as income. (See [FSC 5411] for instructions on handling utility reimbursements or utility assistance payments from HUD or FMHA.) Mortgage payments made by state or local housing authorities directly to the mortgage holder are also considered vendor payments and excluded as income.
6. Emergency assistance for a migrant or seasonal farmworker household during the period the household is in the job stream is considered a vendor payment and excluded as income. Such assistance may include, but is not limited to, emergency vendor payments for housing or transportation. See [FSC 5405], item 11.  

Public assistance (PA) vendor payments are treated as follows:

1)      PA vendor payments made for medical assistance are excluded as income.

2)      Assistance payments provided to a third party on behalf of a household under a State or Local General Assistance (GA) program or a comparable program are excluded as a vendor payment so long as no cash assistance is provided directly to the household.  (NOTE:  No such programs are known to exist in this State; however, payments received under these conditions in other states will be excluded as income.)

3)      Emergency and special public assistance (PA) funds provided to a third party on behalf of a household are excluded as a vendor payment if the assistance is provided over and above the normal PA grant or payment.

Vendor payments included as income are called Diverted Payments or Diverted Wages.  See FSC 5706, Diverted Payments, or FSC 5506, Diverted Wages.

5413.1       Demonstration Cash-Out Projects                                                         

Demonstration project cash-out funds are excluded as income.  Cash-out funds are in-kind or vendor payments that have been converted to direct cash payments under the approval of a Federally authorized demonstration project.  If the in-kind or vendor payment would have been excluded as income, the cash-out funds will also be excluded as income. 

Under these provisions, money received from the Cash and Counseling Demonstration Project for Medicaid recipients is excluded as income.  This program, which is operational in Arkansas, provides cash to certain Medicaid recipients so they can purchase personal care services.  The Independent Choices Program is a Cash and Counseling Demonstration Project.

5413.2       Individual Development Accounts Matching Payments                       

See FSC 5405, item 16 for information about SSI PASS plans.

When a Family Self-sufficiency program participant has an increase in earnings, the public housing authority increases his or her rent, but deposits the increase in an interest bearing account.  When the participant successfully completes the program and can verify that no household member is receiving welfare assistance, he or she receives the funds in the account.  Funds may be withdrawn from the escrow account before completing the program, with permission from the housing authority, but only for purposes related to the goal of the FSS contract, e.g. - completion of higher education, job training or start up costs of a small business. 

Matching funds deposited into any of the following Individual Development Accounts (IDAs) will not be counted as income. 

Under the Family Savings Initiative Act of 1999 (Act 1217) households with low income and few assets may accumulate assets by opening an individual development account (IDA).  An IDA Program participant must be a resident of the State of Arkansas and a TEA recipient families or a member of a family with income below 185% of the federal poverty level.  The family must have a net worth of $10,000 or less disregarding their primary dwelling and one motor vehicle.  Account contributions are matched at a rate of $3.00 for each $1.00 contributed by the account holder.  Matching dollars may not exceed $2,000 per account holder or $4,000 per household. 

A Family Savings IDA may be used for any of the following reasons:

·        Home purchase (limited to qualified first-time home buyers)*

·        Business capitalization*

·        Post secondary educational expenses*

·        Individual retirement account

·        Vehicle purchase or repair (if not the sole purpose of the IDA)

(* If Federal TANF funds are used as a match, only purposes 1, 2 and 3 are allowable.)

Any matching dollars deposited into the account are excluded as income.  (The value of the IDA is not a countable resource per FSC 4460.) 

Earned income tax credits will be excluded as income regardless of how it is received.

Earned income tax credits may be paid in a lump sum payment or as part of the employee's regular wages. When the earned income tax credit is paid as part of the employee's regular wages, the credit will be excluded before the earned income deduction is allowed.

With the exception of loans, excluded income will be verified at initial application only when questionable. Loans received by a household are always to be verified at initial application.

Excluded income will be verified at recertification or reported change if: 1) the income is newly reported and is considered questionable; or 2) the income has been reported previously but information about the income is considered incomplete, inaccurate, inconsistent, or outdated.

See the Glossary, definition of "Verification" for additional information.

Acceptable verification of loans is a statement signed by both parties indicating that the payment received was a loan and must be repaid. For student loans, see FSC 1622.3. In questionable cases (e.g. - recurring loans from the same source are declared), an affidavit will be requested from the lender. The affidavit must establish that the loan is currently being repaid or that future payments will be made in accordance with an established schedule.

Acceptable verification of other questionable income includes statements from the provider of the income which establish the source of income; or collateral contacts which establish the source of the income.

Document:

1. The name of the member who receives the income;
2. The source of the income;
3. The amount of the income;
4. The frequency of receipt; and
5. The reason the income is being excluded.

When excluded income is questionable, document:

1. The reason the income is questionable; and
2. The verification obtained.

For loans document:

1. The amount of the loan;
2. The source of the loan;
3. The verification obtained; and
4. The repayment schedule.

Earned income is wages and salaries received for services performed as an employee. Self-employment income is also considered earned income. (See [FSC 5600] for an explanation of the treatment of self-employment income.) Sources of earned income are listed below in alphabetical order.

Annual Bonuses
Assistantships
Contractual Income
Diverted Wages
Military Pay
Sick Pay/Maternity Benefits
Rental Income (Under certain conditions as described in [FSC 5715])
Training Allowances (Includes earnings under the JTPA Program)
VISTA payments
Wages and Salaries (Includes income from odd jobs)
Work Study

For food stamp purposes, bonuses are defined as monetary payments given to an employee by an employer in addition to the pay due to the employee. For example, if a farmer gives an employee a $500 cash gift at Christmas in addition to the employee's regular pay, the $500 is considered a bonus.

Unless a bonus is provided by an employer at approximately the same time and in about the same amount each year, it cannot be considered an annual bonus. For example, if a factory has a good year and gives all of its employees a one-time $100 bonus from its profits, the $100 payment will not be considered an annual bonus because no additional payments are expected. Conversely, if a factory routinely gives all of its employees a ham and a $100 bonus at Christmas, the $100 payment would be considered an annual bonus.

Annual bonuses which can be reasonably anticipated both in regard to the time of receipt and the amount which will be received will be considered earned income in the food stamp budget.

If the household is subject to monthly reporting as specified in FSC the bonus will be counted as earned income in the budget month received. For example, an MR household receives an annual bonus of $500 in December, 1987. When the household submits its report form for December, 1987, the bonus is reported. The $500 bonus is counted along with the rest of the household's December income when the retrospective budget is calculated to determine the household's January food stamp allotment.

Employees who work under a contractual arrangement will have their income prorated over a 12 month period. A contractual arrangement exists if the employee and employer have a written agreement that stipulates, at a minimum, the annual or monthly salary. Individuals who are paid on an hourly or piece work basis will not have their income prorated over a 12 month period. Examples of contract employees are school teachers and school administrators.

Diverted Wages are wages which are legally obligated and payable to the household, but diverted by the employer. The distinction is whether the employer is using wages that otherwise would have to be paid to the household.

Situations in which diverted wages should be counted as income are:

1. The employer owes wages to a household, but diverts them instead to pay for a household expense such as a house payment, doctor bills, utility expenses, etc; or
2. The employer holds money out of the paycheck as a result of a garnishment.

Example: Mr. Smith is behind in his rent. The landlord agrees to let Mr. Smith work out his rent at $3.35 per hour by washing cars at the landlord's used car lot. The rent is $150 per month. Mr. Smith actually works 50 hours. The landlord gives him a check for $17.50 which is the difference between the rent and the amount Mr. Smith has earned.

Since this is money applied to the household expense which would otherwise be payable to the household, the caseworker will count $167.50 as earned income in the food stamp budget. $150 will be allowed as rent.

Payment for duty in any branch of the Armed Services including the National Guard or Army Reserve will be considered earned income.

Earned sick pay is defined as regular wages paid during the time an employee is absent from work due to either illness or maternity leave if:

Payments to household members by vocational and rehabilitative programs for participation in a job training program are earned income when they are not considered a reimbursement. See [FSC 5411] for instructions on handling reimbursements.

See [FSC 5405] for a list of payments, including certain training allowances, excluded by law.

NOTE: The earnings of individuals participating in on-the-job training programs under JTPA are counted as income unless the participating member is under 19 years of age and under the parental control of another adult member.

Under the Family Investment Centers program, the Department of Housing and Urban Development provides families public housing and Indian housing with services such as child care, employment training and counseling, literacy training, computer skills training, and assistance in getting a GED. The value of these services will not be counted as income. However, wages and/or stipends paid under this program will be counted as income.

All money paid to an individual for services performed as an employee will be counted as income. This includes money paid by check or by cash. Advances of wages will be considered income in the month received if paid in anticipation of work to be performed and if the advance is to be deducted by the employer from wages paid at a later date.

When an employer provides money and this money is to be repaid directly, the money will be considered to be a loan. Loans are excluded as income. See [FSC 5408].

Odd job income is that income which a household member receives as earnings from jobs such as mowing lawns, raking leaves, unloading trucks, sweeping sidewalks, collecting and selling cans, etc. (This will not include income of less than $30 in a three-month period which is received too infrequently or too irregularly to be reasonably anticipated.)

In most instances, income from odd jobs will be treated as self- employment income. The caseworker will obtain a gross monthly income figure, will exclude any expenses (e.g. gas for a lawn mower) and will allow the earned income deduction. See [FSC 6200] for an explanation of the earned income deduction.

To obtain the gross monthly income from odd jobs, the caseworker may:

• Obtain an average figure using the actual income from odd jobs for at least the last two month period; or
• Anticipate the household's income from odd jobs based upon the household's income for any previous months along with the household's statements regarding any anticipated changes; or
• Base the anticipated income upon the statements of collateral contacts; or
• Use some other reasonable method of determining the monthly income.

The caseworker must document exactly how the household's gross monthly income from odd jobs was determined. If any expenses are excluded, these must be fully documented. This includes the type of expense, the amount excluded, and any verification obtained.

Earned income must always be verified at initial application. Earned income will be verified at recertification and at reported change if the income is from a new source. Earned income which is unchanged or changed less than $25.00 will be verified only if information regarding the income is incomplete, inaccurate, inconsistent or outdated. See the Glossary, definition of "Verification" for additional information. Acceptable verification of earned income is listed below in order of preference.

1. The most recent consecutive check stubs that accurately portray the individual's income.
2. An EMS-97 (earnings statement) properly completed by the employer or designee.
3. A statement from employer if it is signed and indicates the date of the most recent consecutive pay periods and the gross amount received at each pay period.
4. A copy of the employer's wage records for the most recent consecutive pay periods.
5. Collateral contact with the employer by telephone.
6. An EMS-70 (check verification form) indicating the gross amount of each of the most recent checks.
7. Pay envelopes if properly dated and indicating the gross pay.

If none of these items are available and the household has not changed employers, one of the following items may be used as verification of earned income.

• Employee's W-2 Form - (for monthly income divide yearly wages by twelve).
• State or Federal Income Tax Returns - (for monthly income divide yearly wages by twelve).
• The most recent information appearing on the WESD "Wage Screen - (for monthly income divide quarterly wages by three).
• State Income Tax Bureau - (use of the most recent wages reported).

1. Annual Bonuses - Verify the anticipated date of receipt and the amount of the annual bonus, if known.
2. Contractual Income - Verify the terms of the contractual agreement. Verify if the contract specifies a yearly or monthly amount.
3. Diverted Payments - Verify whether the payment was made from funds owed to the household.
4. Sick Pay/Maternity Benefits - Verify whether the individual receiving the pay is still considered an employee. Verify the source of the payment.
5. Tax Credits - Verify the frequency of the payment. Verify the amount of the payment.
6. VISTA Payments - Verify when the volunteer joined VISTA and if they were receiving AFDC or food stamps at the time they joined.

The caseworker must document at least:

• The name of the household member with earned income;

• The source of the earned income; and

• The verification obtained for the earned income. Pay period ending date, date paid, and gross income amount must be documented for each pay period verified.

In addition, any special verification obtained must be documented.

If the employer (or other source of income verification) cannot or will not cooperate in providing needed verification, the caseworker must document:

• All attempts to obtain verification; and

This section describes the procedures for processing applications which include self-employment income. These procedures also apply to households which own or operate a commercial boarding house. The procedures for handling income received from boarders by a household that does not own and operate a commercial boarding house are also described in this section.

Refer to [FSC 4960] for handling resources of self-employed persons.

Self-employment is defined as receiving income directly from one's own business, trade, or profession, rather than receiving a specified salary or wage from an employer.

Examples of some self-employment income situations are shown below.

Commercial boarding houses are establishments where the proprietor offers a room and meal to individuals for the purpose of producing a profit. See for additional information.

The income from commercial boarding houses is determined by:

1. Calculating the total payments to the proprietor from the boarders; and
2. Excluding the costs of doing business.

See FSC 1624 for a definition of a boarder.

Boarders are excluded from the household when determining the household's eligibility and benefit level. The household's income from the boarder includes all direct payments to the household. However, shelter expenses paid directly by the boarder to someone outside of the household are not counted as income. (Do not deduct these expenses as a shelter cost.)

Households with boarders may exclude as income the allowable costs of doing business. The allowable cost of doing business is equal to either of the following amounts:

Net monthly self-employment income from boarders is determined by:

1. Adding together all direct payments to the household by the boarders, then
2. Subtracting the allowable costs of doing business.

Self-employment income from all other sources (including farming) is handled by:

1. Determining the gross self-employment income for a given period of time;
2. Excluding the allowable costs of doing business;
3. Determining the monthly net self-employment income; and
4. Showing this amount as gross earned income. (The earned income deduction will be allowed from this amount.)

The exact method of determining the monthly net self-employment income will depend upon several factors:

1. How long the business has been in existence;
2. How the self-employment income is actually received; and
3. Whether the current self-employment income has recently increased or decreased substantially.

The term "capital gains" as used by the IRS describes the handling of profits from the sale or transfer of capital assets used in a self-employment enterprise. For IRS purposes, such proceeds less depreciation are considered taxable income.

The proceeds from the sale of goods or equipment used in a self-employment enterprise will be calculated for food stamp purposes in the same manner as a capital gain for Federal income tax purposes except that depreciation is not allowed.

Therefore, for food stamp purposes, the capital gain is the net proceeds of capital goods and equipment - the sale price less encumbrances, interest penalties, etc.

Net capital gains are counted as part of the household's total self-employment income before the costs of producing the income are excluded.

If a household's self-employment has been in existence for less than a year, average the income earned to date over the period of time the business has been in operation. The resulting monthly income will be used as projected monthly income for the upcoming certification.

If the business has been in operation for such a short period of time that sufficient information to arrive at a reasonable projection is not available, certify the household for short periods of time until the business has been in operation long enough to determine an accurate projection.

On an Annual Basis

Self-employment income which represents an individual's annual income, but which is received in a short period of time is averaged over a 12 month period.

For example: If self-employment income received by a farmer represents the farmer's annual support, the income will be averaged over a 12 month period. The farmer's self-employment income will be annualized even if the household receives income from other sources in addition to self-employment.

On a Monthly Basis

Self-employment income which is received on a monthly basis, but which represents a household's annual support will normally be averaged over a 12 month period. If the averaged amount does not accurately reflect the household's actual monthly circumstances due to a substantial increase or decrease in business, see below.

Intended to Meet the Household's Needs For Only Part of the Year

Self-employment income which is intended to meet the household's needs for only a portion of the year will be averaged over the period of time the income is intended to cover.

When the self-employment income has increased or decreased substantially, the household's actual circumstances are not reflected in the food stamp budget.

To correct this, anticipate the household's current self-employment income and project it over the period of certification. To anticipate the household's current income, carefully review the most current income. Review several month's income if possible. Discuss with the household whether they expect their income to continue at its current level. Consider whether the reported increase or decrease is seasonal in nature.

If the change in income is seasonal, do not attempt to anticipate income. Average the income as instructed in

If the increase or decrease is not seasonable in nature, anticipate the current income.

To determine self-employment income that must be calculated on an anticipated basis, complete the following actions:

1. Starting with the month of application, anticipate the yearly gross self-employment income based upon the household's current income. Include any capital gains anticipated to be received in the next 12 months.
2. Subtract the anticipated yearly allowable costs of producing the self-employment income based upon the household's current costs.
3. Divide the resulting amount by 12.

The following steps will be taken when calculating self-employment income:

Step 1 - Determine Net Self-Employment Income

Total all gross self-employment income for the period of time selected. Include the calculated value of capital gains.

Exclude the costs of producing the income. Form SS-226 will be used for non-farm income. Form SS-227 will be used for farm income. (If the household's income is from a farm enterprise, see FSC 5640.2.)

Annualize the net income, if possible, UNLESS:

1. Current circumstances are not accurately presented (anticipate the yearly income);
2. The income is only a portion of the annual support (average income over the period of time intended to cover); or
3. The self-employment enterprise has been in existence less than one year (project the income by averaging over the period the business has been in operation).

The following items will not be allowed as a cost of producing self-employment income:

Other bonafide costs of producing the income may be allowed.

Examples of such costs include:

1. The identifiable costs of labor (except salaries drawn by the self-employed individuals);
2. Stock;
3. Raw material;
4. Seed and Fertilizer;
5. Property rental;
6. Utilities paid on the business property;
7. Interest paid on loans used to purchase income producing land, buildings, equipment, supplies or other income producing property;
8. Insurance premiums paid on buildings, equipment or income producing property;
9. Taxes paid on income producing property; and
10. The costs of room and meals for those self-employed people whose business takes them away from their homes and requires them to remain at the job site overnight. Examples include - carpenter who has to travel to another city to complete a job or a person who sells arts and crafts at fairs in various cities.

When a self-employed household uses its residence in the self-employment enterprise, do not allow the utility costs, rent or interest on a mortgage on the residence. These items will be used as shelter costs in the food stamp budget with the following exceptions:

Exception 1 - If the household uses its residence in the self-employment enterprise, and has identifiable utility costs such as long distance charges, these may be allowed. The household must be able to identify these costs specifically - For example, separate meters for utilities used in the production of a item for sale before the costs will be allowed.

Exception 2 - If the majority of the residence is used in the self- employment enterprise, the utility costs and the rent (or the interest on the mortgage) will be allowed as a cost of producing income. No portion of the costs may then be considered a shelter cost. For example, if a household owns a motel and lives in one of the units, all of the utility costs and the interest on the mortgage would be allowed as a cost of doing business. No shelter costs would be allowed.

Step 2 - Determining Net Monthly Food Stamp Income

To determine the net monthly food stamp income for households with income from self-employment enterprises other than farming:

1. Add the monthly net self-employment income to any other earned income received by the household;
2. Add the total monthly earned income, less the earned income deduction, to the total monthly unearned income received by the household; and
3. Calculate and subtract any applicable deductions such as standard deduction, dependent care deduction, and excess shelter costs to arrive at the net monthly income for the household.