A farmer may receive any of the following payments or credits if he or she applies for the payment and is eligible to receive the credit or payment:

Federal Gasoline Tax Credit - This is a credit against tax liability. It is excluded as income.

State Gasoline Tax Refund - This is a non-recurring lump sum payment. It is excluded as income.

NOTE: The Federal gasoline tax credit and the State gasoline tax refund may be combined on the same line of the tax form.

Recaptured Depreciation and Recaptured Investment Credit - IRS allows self-employed individuals to deduct depreciation on property as a cost of doing business. When the property is sold before the end of its useful life, the seller must declare a portion of the depreciation as income for IRS purposes. This is commonly referred to as recaptured depreciation.

IRS allows a percentage of certain investments to be deducted as an expense. If the asset is disposed of or ceases to be eligible before the end of the recapture period for recovery property or before the end of the estimated life used to figure the credit, a percentage of the credit may have to be recaptured for IRS purposes. This is commonly referred to as recaptured investment credit.

Recaptured depreciation and recaptured investment credit are considered to be capital gains.

Patronage Dividends - These are dividends paid by cooperatives in cash or in shares of stock. These dividends are similar to rebates paid based on the amount of goods bought or services used for the self-employment enterprise. Cash dividends are counted as income. Stock dividends are counted as a resource.

Royalties - Payments received as royalties are counted as unearned income, not as part of the self-employment income.

Rental Property - Rent payments are counted as self-employment income. Payments from rental property that is not part of the business will be handled as a separate source of self-employment income.

Agricultural Stabilization and Conservation Service (ASCS) Payments - Except for loans and payments made as a result of a Presidentially declared disaster, ASCS payments are counted as earned self-employment income. Payments made as a result of a Presidentially declared disaster are excluded as income and resources in accordance with the Disaster Relief Act of 1974 as amended.

There are numerous and constantly changing programs under the ASCS including several programs that make payments to farmers for crop losses.

Under the Payment-in-Kind (PIK) program, farmers receive commodities from the U.S. Department of Agriculture, Commodity Credit Corporation (CCC). The household receives no income until the grain is sold. If the commodities are expected to be sold during the year, the anticipated income must be included as self-employment income. The CCC may also pay farmers in the form of commodity certificates for land diversion or acreage reduction. The certificates may later be surrendered to the CCC for cash or for commodities, or the farmer may sell the certificates to someone else, usually for a profit.

The certificates are valued in dollars. When the certificates are used, the farmer receives cash or commodities based on the price of the commodity at the time the certificate is used. Cash received under this program is counted as income in the year it is expected to be received. PIK payments counted as income are annualized. The value of commodities the farmer intends to use as feed or seed is excluded as income. If the farmer intends to hold the certificate or commodities for longer than one year, the value of the commodities is counted as a resource.

A farmer may sell commodities they own to the CCC and receive them back from CCC as PIK commodities. The CCC pays farmers for the commodities with the payment being used to repay price support loans previously extended to the farmer by CCC. These sale and loan payments should be treated as separate transactions from the receipt of CCC certificates or PIK commodities and should be handled as any other sale of commodities and repayment of a price support loan.

Federal Crop Insurance Corporation (FCIC) Payments – The farmer must pay a premium to be covered by the FCIC. Payments from the FCIC are excluded as a non-recurring lump sum payment.

Crop Insurance Payments / Private Company Payment – Crop insurance payoffs from private companies are excluded as income if received in a lump sum payment. Payoffs received in installments are counted as income.

(This section of policy applies to businesses in existence for longer than one year. The policy at [FSC 5662.1] applies to business in existence for less than one year.)

Example 1:  A household member is self-employed as a carpenter. He receives income from various jobs throughout the year. His income from carpentry will be annualized.

Example 2:  A household member has a farm. He raises cotton and soybeans. He receives income from the sale of the cotton and soybeans in the fall of the year, but it represents his annual income. His farm income will be annualized.

Self-employment is annualized even if the household receives income from other sources.

If self-employment income is intended to support the household for only part of the year, income from the past year will not be annualized. Instead, the self-employment income from the past year will be averaged over the period of intended use and counted as anticipated income in those months.

Example:  Mr. G works as a bus driver for the local school. During the months of June, July and August, he raises produce and sells it at the farmer’s market. The income from the sale of produce is intended to support Mr. G’s family during the months of June, July and August. The income from this operation will be averaged over the months of June, July and August and shown in the food stamp budget only for those months.

If the period of intended use will end before the month in which the household's semi-annual report is due to be submitted, the county office must insure that the income is dropped from the budget after the period of intended use ends. Similarly, if the period of intended use ends after the semi-annual report is issued but before the household's recertification is due, the county office must insure that income is dropped from the budget after the period of intended use ends.

Example:  A household submits an initial application for food stamps. For the last eight months the case head and his wife have operated a detail shop. The couple provides their income tax return to verify their self-employment income. The self-employment income on the tax return covers the period from July 1 through December 31. The operation’s income and expenses must be divided by six to anticipate the couple’s income from the detail shop.

When self-employment income cannot be projected, the household will be assigned a four-month certification period. At each recertification, the household must provide verification of the business' income and expenses for the four-month period just prior to the month of recertification.

• Some households have a farm operation that shows income only at the end of the year. For example, a farmer raises cotton and soybeans. This household will not have any income to show from the self-employment operation until all crops are in and sold and all expenses paid. In that case, no income will be shown until the end of the year, and the household will be assigned four month certification periods until there is enough information to project self-employment income.

If the household anticipates changes in the self-employment enterprise, these changes must be considered when the self-employment income is anticipated.

Example:  A household member raises chickens for a poultry processor. At recertification, he reports that one of his three chicken houses was destroyed in a storm. Since his oldest son has joined the service and left the home, he does not plan to rebuild the chicken house. His anticipated income must be adjusted to reflect this anticipated change in income and expenses.

The county office worker will not change the self-employment income if the reported increase or decrease is due to a seasonal fluctuation in income.

Example:  Mr. F has self-employment income from a roofing company. He applies for food stamp benefits in January. He reports no income from the roofing company due to bad weather. This is considered a seasonal fluctuation in income. The income from the roofing company will be anticipated based on last year’s income.

If the increase or decrease is not due to a seasonal fluctuation, the county office worker must anticipate the effect of the change on the household’s self-employment income. Examples of such changes include, but are not limited to, a change in the type of business, a change in the size of the business, or a substantial change in the amount received for the product.

Example:  Mr. K is self-employed as a bricklayer. He applies for food stamp benefits in March. He reports that he hasn’t been able to work since January when he had a heart attack. He has gone back to work, but he will not be able to work as many hours or to accept as many jobs. The worker must anticipate his self-employment income based on his current situation.

When self-employment income is anticipated, any capital gains that the household anticipates receiving during the 12-month period must be divided by 12 and the average monthly amount added to the monthly self-employment income. The average capital gain amount must be counted in each of the 12 months during which the income is anticipated to be received. However, if the anticipated amount of capital gains changes, a new average must be calculated.

Costs of producing self-employment income are excluded from the gross income. Allowable costs include, but are not limited to, the identifiable costs of:

• Labor such as wages and salaries paid to employees. (Wages paid to the business owner or other household members are NOT allowable costs.)
• Stock.
• Raw material and supplies.
• Seed and plants.
• Fertilizer and lime.
• The interest (but not the principal) portion of payments on business or operating loans or payments on income producing real estate and capital assets like equipment, machinery or other durable goods.
• Insurance premiums paid on buildings, equipment or other income producing property.
• Taxes paid on income producing property.
• Privilege taxes such as excise taxes that must be paid in order to earn self-employment income.
• Licensing fees.
• Business transportation costs.
• Rental payments on income producing property. If a business owner is renting equipment with an option to buy, the rent payments are allowable until the purchase is made.
• Utilities paid on business property.
• Costs for the repair and maintenance of equipment.
• Storage and warehousing costs.
• Special equipment or clothing specifically needed to perform the job. (Blue jeans and work boots would not be considered special equipment since they are not specific to a particular job. Hip boots used by a fisherman would be considered special equipment. Welder’s shields or special gloves used by welders would be considered special equipment. Uniforms purchased to wear in a house cleaning operation would be considered special clothing.)
• The cost of rooms and meals for any self-employed individual whose job takes him or her away from home and requires them to remain at the job site overnight.

The following items WILL NOT be considered costs of producing self-employment income:

• Payments on the principal (but not the interest) portion of payments on business or operating loans or payments on income producing real estate and capital assets like equipment, machinery or other durable goods.
• Expenses and net losses from previous years.
• Federal, state and local income taxes.
• Money set-aside for retirement.
• Work related personal expenses such as transportation to and from work.
• Depreciation.
• Penalties and fines.
• Charitable contributions.

If the household’s home is on property connected to the property used for the self-employment enterprise, the county office worker must determine if the household’s shelter costs can be separated from the costs of doing business. If necessary, proration may be used to determine the amount of the payment on the property attributed to shelter costs. This calculation may be based on information from a mortgage lender, real estate tax records, Farmers Home Administration (FHA) documents, insurance premiums, etc.

Example:  A household submits a loan agreement for the purchase of a dairy farm and house. The monthly payment is $1,500. The portion of the payment attributed to the dairy farm is $1,000. The portion of the payment attributed to the house is $500 or 33% of the total payment. The remainder of the payment will be excluded as a cost of producing the self-employment income.

If a household uses part of the residence such as a room or a separate apartment solely for the self-employment operation, the county office worker will, at the household’s discretion either:

Include all of rent or mortgage, taxes and insurance as shelter costs;

OR

Exclude part of the rent or mortgage interest, taxes and insurance as a cost of producing the self-employment income. (Payments on the principal balance of a loan are not deductible as a cost of producing self-employment income.) The portion of the shelter to be excluded as costs of producing self-employment income may be based on the percentage of the total living space used solely for the self-employment enterprise. Any portion of a rent payment or mortgage, taxes or insurance payment used as a cost of producing self-employment income may be used as a shelter cost.

Example:  A member of a household is self-employed as a beautician. The household is renting a home for $600 each month. The den has been converted into a beauty shop. The home has 1200 square feet. The square footage of the den (200 square feet) is about 16.6% of the square footage of the entire house. The portion of the rent payment that may be used as a cost of producing self-employment income is $99.60. The remainder of the rent payment, $501.40 may be allowed as a shelter cost.

If a self-employed individual’s house is on property connected to the property used for the business, the county office worker must determine if the self-employment costs can be separately identified from the household’s shelter costs.

• If the utilities for the business are measured and billed separately, the utility costs for the business will be allowed as a cost of producing the self-employment income. The utilities for the residence will be allowed as a shelter cost. If the household is otherwise entitled to use the utility standard, the household may elect to do so.

• If the utility costs for the business cannot be separately identified from the utility costs for the residence, the utility costs may not be allowed as a cost of producing the self-employment income. The household will not be allowed to use actual utility costs in the food stamp budget. However, if the household is otherwise entitled to use the utility standard, the utility standard will be used in the food stamp budget.

If part of a self-employed individual’s residence is used for the business, the county office worker must determine if the self-employment costs can be separately identified from the household’s shelter costs.

• If the utilities for the business are measured and billed separately, the utility costs for the business will be allowed as a cost of producing the self-employment income. The utilities for the remainder of the residence will be allowed as a shelter cost. If the household is otherwise entitled to use the utility standard, the household may elect to do so.

• If the utilities are not measured and billed separately, the household may: 1) allow all utility costs as a cost of producing the self-employment income; or 2) allow all utility costs as a shelter cost; or 3) allow the household to prorate the utility costs between the cost of producing the self-employment income and the shelter cost.

To calculate net self-employment income using a form DCO-226 or DCO-227:

• Total the gross receipts from the business during the selected period.
• Exclude the cost of producing the income.
• If the selected period is one year, annualize the net income by dividing the net income by 12. If the selected period is less than one year, average the net income by dividing the net income by the number of months in the selected period.

If there is a profit, the net self-employment income will be used to determine the household’s gross food stamp income. Losses will not be deductible unless the self-employment enterprise is a farming operation. See [FSC 5670] for a definition of a farming enterprise and an explanation of deducting losses.

When self-employment is derived from two or more separate enterprises with no farm operation involved, the gross income and allowable costs from each business will be combined to calculate the net self-employment income.

When one of the enterprises is a farm, the county office worker must complete the following steps:

1. Determine the gross income from the farm operation.
2. Determine the allowable costs of producing the farm income.
3. Exclude the allowable costs from the gross income.

If there is no loss in the farm operation, the farm income and allowable costs will be combined with the income and allowable costs of the other business. If there is a loss, the income and allowable costs of the farm operation will not be combined with the income and costs from the other business. Instead the loss will be deducted as instructed in [FSC 5670].

When a household member is involved in a self-employment operation with one or more partners, the household’s share of the income from the business will be calculated by:

1. Determining the gross income for the business;
2. Excluding the allowable costs of doing business; and
3. Dividing the net income by the number of partners unless the profits of the partnership are prorated rather than divided equally. If the profits are prorated, the net income will be prorated in the same manner.

A farming operation is a business enterprise engaged in the production of agricultural products. Farming operations may involve cotton, soy beans, rice, other grains, stock, dairy, poultry, fish, fruit, beeswax, vegetables, ranching, tree farms, and nurseries among others.

Losses incurred in farming operations are deductible from any other household income if:

• The farmer’s cost of producing the farm income exceeded the gross income from the farming operation; and
• The farmer received or expects to receive annual gross proceeds of $1,000 or more from the farming operation.

Only allowable costs of producing self-employment income will be excluded to determine if a loss was incurred by a farm operation.

When a farm operation shows a loss, the county office worker will:

1. Determine the monthly amount of the loss by excluding the allowable costs of producing the income. If the costs of producing the income exceed the income, divide the remaining costs of producing the income by 12 or by the number of months in the selected period.  The resulting figure is the monthly farm loss.
2. Use the monthly farm loss to offset any other non-farm related self-employment income by subtracting the net self-employment income from the monthly farm loss.  If any self-employment income remains after the offset, the remaining self-employment income will be counted in the food stamp budget.  No further offset will occur.  Go to number 5.  If the farm loss deduction is greater than the non-farm related self-employment income or there is no other self-employment income in the household, go to number 3.  
3. Add together gross earned income and gross unearned income.
4. Subtract the farm loss from all other household income.
5. For households with no aged or disabled members, apply the gross income eligibility pretest. (The pretest does not apply to households with an aged or disabled member.)
6. If the household is eligible after the pretest, calculate the remainder of the food stamp budget.

Households currently participating in the Food Stamp Program may report changes in self-employment income. The worker must determine if these changes will be reflected in the anticipated income. Self-employment income will not be recalculated to reflect seasonal fluctuations in income.

Example Mrs. M. has a landscape business. On her semi-annual report submitted in April, she reports she was not able to work much in March due to bad weather. This is a seasonal fluctuation in income, and the self-employment income will not be adjusted. Other types of reported changes must be reflected in the self-employment income.

Other types of reported changes must be reflected in the self-employment income.

Example Mr. J owned 500 acres of land. He raised cattle, wheat, and fresh produce on this land. In July he reports to the worker that he filed for bankruptcy. The bank repossessed his land, and his cattle were sold to pay off his debts. He has moved to town and gone to work at a factory. The worker must remove the self-employment income from the food stamp budget and add Mr. J’s earnings to the budget.

Generally, self-employment income may be verified by viewing the household's federal income tax return for the previous year. The household's income tax return may be used as verification if the return reflects a full year's income or the income can be divided over the months the business has been in existence. The "Schedule C" attached to the return should contain a complete statement of the household's self-employment income and expenses. (Not all expenses listed will be excludable under food stamp policy.) If a tax return is not available, ledgers, bank books or other accounting records maintained by the household or prepared by a bookkeeper or accountant may be used. Receipts for the sale of goods and services and receipts for allowable costs of producing the income may also be accepted.

If the household states there are no records, the DCO-226 or DCO-227 will be completed based upon the household's declared income and expenses. This method may only be used temporarily. The household must be instructed to furnish records of income and receipts to verify costs at the next scheduled recertification. Required documentation includes:

1. Type of self-employment enterprise;
2. How the household receives this income - e.g. monthly, annually;
3. The length of time the enterprise has been in existence;
4. The figures used to arrive at the net self-employment income (DCO-226 or DCO-227) and the figures used to determine the monthly income;
5. The figures used to calculate any farm loss; and
6. The verification obtained.

The household’s annual income must be recalculated at about the same time each year. Normally, this will be soon after the first of the year when all the information needed to determine the household’s self-employment income for the year is available. To simplify the process of determining self-employment income, the household may be assigned one or two four-month certification period so that the household's certification period will end about the time the household’s annual self-employment income is due to be recalculated. Once the annual self-employment income has been recalculated, the household will be assigned a 12-month certification period and will become subject to semi-annual reporting.

TEA (Transitional Employment Assistance) Program cash assistance payments are counted as unearned income. TEA cash assistance is paid on a monthly basis and is based on a standard of need for a particular household size.

Food stamp benefits will not be increased when a household member’s TEA benefits are reduced, suspended or terminated due to non-compliance with the program requirements, or for non-cooperation with the Office of Child Support Enforcement or for an intentional program violation. See [FSC 12110] for instructions.

Diversion Assistance is a one-time payment to or on behalf of the family that will resolve a financial problem so that the adult can maintain and/or obtain employment. Diversion Assistance is available to an adult only once during his or her lifetime.

TEA Diversion Assistance payments will be excluded as a nonrecurring lump sum payment. See [FSC 4950] for instructions on handling lump sum payments.

An Employment Bonus cash payment will be made to any family who becomes ineligible for TEA cash assistance due to employment or who requests the TEA case be closed due to employment, unless the family has already received an Employment Bonus within the preceding twelve months. The amount of the bonus payment will be equal to the amount of the last regular TEA cash payment.

TEA Employment Bonuses payments will be counted as unearned income in the food stamp budget in the month received.

When a TEA case closes due to employment, the family is automatically eligible to receive two months of Extended Support Transportation payments in the amount of $200 each month. These payments are intended to help the family meet transportation costs in the first two months following termination of TEA cash assistance.

Extended Support Transportation benefit payments will be excluded as a reimbursement for a job-related expense to the extent that these payments do not exceed actual job-related expenses for transportation costs.

Example: A household member receives an Extended Support Transportation payment in the amount of $200. The member’s transportation expenses total $150. $50 will be shown as unearned income in the food stamp budget.

Transportation costs may include the expenses of purchasing, repairing or maintaining a car. Transportation costs may also include payments made for public or private transportation to the employment site. Transportation costs will be verified to the extent that it is practical to do so. For example, a household may be able to verify the costs of repairing a car or purchasing tires. However, they may not be able to furnish receipts for gas. In the case, the county office worker may use the current State reimbursement rate  per mile times the round trip mileage to the work site to determine the cost of transportation to work.

Annuities are counted as unearned income. Lottery winnings received on a one-time basis are considered a resource in the month received.  Lottery winnings paid over several years are counted as unearned income.

Annuities and lottery winnings paid annually will be averaged over a 12-month period of time. Annuities and lottery winnings received less often than annually may either be counted in the month received or averaged over the certification period.

Alimony payments made directly to the household from someone outside the household are counted as unearned income.

Child support payments made directly to a household member from someone outside the household are unearned income. This includes payments made voluntarily by the absent parent, as well as payments ordered by a court. When child support payments are directed through a court, the entire gross amount collected is as unearned income. Collection fees, postage expenses or other fees charged by the court are neither deducted nor excluded from the child support payment.

When child support is received sporadically by individuals not receiving TEA, the worker must try to establish some pattern of payment. If a pattern of payment can be established, the payment will be averaged forward over the period of intended use. For example, if a $100 child support payment is received every other month, $50 per month will be counted as income.

When the payments are so sporadic that receipt cannot be reasonably anticipated, no child support will be included in the food stamp budget. Households receiving sporadic child support payments must be carefully instructed to report the receipt of child support payments in a timely manner. If the worker can later establish a pattern of payment, the child support income will be added to the food stamp budget.

Child support received as the result of the interception of a state or federal income tax refund is a lump sum payment. Lump sum payments are excluded as income. See [FSC 4950] for instructions.

Legally obligated child support payments from a household member to someone who is not a household member are deductible. See [FSC 6550] for instructions.

OCSE provides services to individuals who are not receiving TEA. Child support payments collected for children not included in a TEA case are considered unearned income. OCSE charges households not receiving benefits a collection fee; however, this fee can be neither deducted nor excluded. The entire gross amount collected and disbursed to the household will be counted in the food stamp budget. Exception: Non-recurring lump sum payments issued to make up for 1) a missed payment already counted in the food stamp budget or 2) payments held in error by OCSE will be handled as a lump sum payment in the month of receipt. See [FSC 4950].

Example: - A household normally receives $100 per month child support through OCSE. This amount has been included in the food stamp budget for the certification period June through November. On December 15, the household submits another food stamp application. Child Support of $300 is declared on the application. At the interview, the household states that the $300 child support payment was received on December 10th. However, $200 of that amount was to make up for the months of October and November when no payments were received. Since $200 of the $300 payment has already been counted in the food stamp budget, only $100 will be shown as income in the budget for December. $100 will be anticipated as child support income in the prospective budget.

At times, OCSE withholds support received by individuals no longer receiving TEA in order to reimburse previous TEA or AFDC payments. Such individuals are considered to have an "AFDC or TEA arrearage." Any child support monies, whether intended for the current month or a month prior to the current month, will be excluded as income when applied to an AFDC or TEA arrearage. See [FSC 5401].

At other times, an absent parent pays child support in excess of the court-ordered amount to make up for previously missed payments. If these payments need not be applied to an AFDC or TEA arrearage, OCSE will send the extra money to the household. Any such payments not already counted in the household's food stamp budget, will be counted as income in the month received. When it is anticipated that the absent parent will continue to make support payments in excess of the court-ordered amount due to the number of missed payments, the extra money will continue to be counted in the food stamp budget. A variable budget will be prepared as instructed in FSC 7523.3 if the household's child support payments are anticipated to decrease.

When OCSE receives more than the court-ordered amount of child support and there is no arrearage, only the court-ordered amount will be disbursed. The balance of the money will be held by OCSE in an "advance account" and used to pay the court-ordered support amount when the absent parent is unable to pay due to lack of work or other circumstances. Only the amount actually disbursed to the household by OCSE plus the collection fee will be counted in the food stamp budget.

In the 7000 Section of the Food Stamp Certification (FSC) Manual a variety of methods of anticipating income are explained. The worker may chose from FSC 7000 the most appropriate method of anticipating child support income based on the household’s current situation.

Example 1:  A household receives child support payments in the same amount each week or every other week. You may anticipate monthly income by multiplying the payment amount by 4.334 or 2.167 as appropriate. See [FSC 7513].

Example 2:  A household normally receives child support every month but the monthly amount fluctuates. You may average several months’ income. See [FSC 7521].

Example 3:  A household receives child support payments sporadically (every other month or every quarter) but a pattern of payment can be established. You may average the child support payment over the period of intended use. See [FSC 7520].

If the household is expecting changes in the amount of child support or the frequency of payment, these changes must be anticipated when the prospective budget is prepared. See [FSC 7512] for instructions. In the event that a change is anticipated, a variable budget may be required. See [FSC 7523.3] for instructions on preparing variable budgets.

The county office worker must be alert not to verify and handle child support payments from different sources as one source of income.

Example:  There are two children in the home. Each child has a different father. Each father pays child support. Each child support payment must be handled as a separate source of income.

In some instances, child support received by the household will not be included in the budget.

General guidelines for excluding child support income:

DO NOT COUNT child support received by the TEA recipients which are obligated to be turned over to OCSE to maintain TEA eligibility even when such payments are kept by the household in violation of the law. [FSC 5401]

DO NOT COUNT payments received by former AFDC and/or TEA recipients when the payments are held by OCSE and applied to AFDC and/or TEA arrearages. [FSC 5401]

NOTE: Any of these payments not to be applied by OCSE to an AFDC/TEA arrearage will be sent to the custodial parent. Unless these funds have already been counted as income in the food stamp budget, they must be counted as income in the month of receipt. [FSC 5704.3]

DO NOT COUNT non-recurring lump sum child support payments received through an interception of a state or federal income tax refund or a lump sum Worker’s Compensation payment. [FSC 5401]

DO NOT COUNT non-recurring lump sum child support payments issued by OCSE to make up for a payment missed in error by OCSE and already counted in the food stamp budget. [FSC 5704.3]

DO NOT COUNT the value of voluntary in-kind payments intended as child support. For example, if the absent parent furnishes food, milk, pampers, clothes, etc. in the absence of a cash payment to the custodial parent, you would NOT count the value of the items as income. [FSC 5406]

General guidelines for counting child support income:

DO COUNT monies diverted from the court-ordered support or alimony payments to a third party for a household expense SO LONG AS there is no court order or other legally binding document requiring direct payment to a third party. If such an agreement exists, the monies will be excluded as income. Any part of a household expense covered by excluded income is not allowable in the food stamp budget. [FSC 5704] & [FSC 6700]

DO COUNT the gross amount of the child support payment. Collection fees charged by OCSE are neither deductible nor excludible. [FSC 5704.3]

DO COUNT IN THE MONTH OF RECEIPT money held by OCSE in an "advance account" and used to pay the court-ordered amount when the absent parent is unable to work. [FSC 5704.3]

Child support received through the Office of Child Support Enforcement (OCSE) will be verified through the DCO-OCSE Inquiry Interface.  The link to this interface, http://dhsgold/ocse.htm k opens Office of Child Support Enforcement's web-based inquiry interface.  Authorized DCO staff may utilize this interface to inquire OCSE child support collections and distributions where necessary to determine eligibility for DCO programs.  Instructions for accessing and using this inquiry interface may be found in the OCSE Interface Appendix.  (Appendix O.)

NOTE:  Due to IRS confidentiality rules, OCSE is no longer allowed to divulge information that could identify IRS refunds. Therefore, all information has been removed from the "Source" field. Neither will the local OCSE office verify for DHS case managers that the source of a payment is an IRS refund.  However, they will provide this information to the individual who received the payment.

To verify child support not paid through OCSE, the county office worker may accept:

• Check stubs or other documentation from a court or other agency that collects and disburses the child support payment.
• A signed, dated statement from the individual who pays the child support. If possible, the statement should contain the individual’s name, address and telephone number.
• Other documentary evidence of the amount of the payment.

If the absent parent refuses to verify the child support payments and other documentary evidence is not available, the worker may accept collateral statements. In the event that collateral statements are not available, the worker may accept the household’s statements about the amount of the payment.

Any discrepancies between information reported by the household and the information verified by the worker must be resolved. For example, a household has not reported child support income, but the worker has information indicating child support is being received. The household will be allowed to provide additional information if necessary to prove its statements.

Each source of child support income should be clearly documented to show:

• The name of the individual who makes the child support payment;
• The name of the child for which the child support is received;
• The date and amount of each child support payment used in the calculation of the monthly income;
• The frequency of receipt of child support (e.g., weekly, bi-weekly, monthly, etc.); and
• An explanation of how the gross monthly child support income was calculated.

Contributions are recurring payments received by a household member from a friend, relative or organization. Loans, gifts, lump sum payments, and irregular or infrequent income will not be considered contributions.

Cash donations, based on need, that are received from one or more private, non-profit charitable organization are excluded as income to the extent that such donations do not exceed $300 in a Federal fiscal year quarter. (See [FSC 5405, number 10].) The Federal fiscal year quarters are listed below.

First Quarter - October, November, December

Second Quarter - January, February, March

Third Quarter - April, May, June

Fourth Quarter - July, August, September

Those donations that exceed $300 in any Federal fiscal year quarter will be considered unearned income.

Example:  A household received $100 donations in July from a church. In August, the same church gave the household another $100 donation. In September the ministerial alliance gave the household $250. The donations received in July and August would be excluded as income. $100 of the September donation would also be excluded. For September, the household would have $150 in countable unearned income from charitable donations.

Contributions will be considered income in the month received when received on a monthly basis. When received less often than monthly, contributions will be averaged forward over the period of intended use.

Monies legally obligated and payable to the household will be counted as income when diverted by the payor to a third party for a household expense.

Examples:

1. Public assistance grants (TEA cash assistance or SSI) diverted to a protective payee for the purpose of managing the household's expenses.
2. Monies diverted from court-ordered support or alimony payments to a third party for a household expense - e.g. the rent payment is made from the support payment by the court. (This applies only when there is not a court order or other legally binding agreement which requires direct payment to a third party.)
3. Monies diverted from funds owed to the household to pay a third party for a household expense - e.g. VA deposits the Veteran's check in a special account and the bank authorized payments for household expenses.

Some states have a General Assistance (GA) Program. (Arkansas does not have a GA Program.) In those states, some GA vendor payments are provided for living expenses. Only those GA vendor payments provided to cover housing expenses, exclusive of energy or assistance expenses, will be included as income. GA vendor payments provided for the purpose of energy assistance will be excluded as income. (Also see [FSC 5405, item 4].)

This policy applies only to those households into which foster care placements have been made by a Federal, State or local governmental foster care program - e.g., Division of Children and Family Services or Mental Health Services (Children "taken in" by neighbors, friends or relatives without any type of formal placement are not considered foster children for the purpose of applying this policy. They will be included as household members if otherwise eligible.) Households which provide foster care will have two options.

Option 1 - The household may elect to consider the person in foster care as a boarder. If the person in care is considered to be a boarder, the foster care payment will be excluded as income to the household.

Option 2 - The household may elect to include the person in foster care as a household member. If the person in care is included as a household member, the foster care payment will be included as income to the household.

Guardianship payments are payments made to a person who becomes a child’s legal guardian. There are two types of guardianship payments – Kinship Care and subsidized guardianships. Guardianship payments are treated the same as foster care payments with the same two options.

A monetary gift or prize on a one-time basis will not be considered income to the household. A monetary gift received for a birthday present or a Christmas present is an example of a one-time gift.

Gifts received on a one-time basis will be considered a lump sum payment and handled as instructed in [FSC 4950].

If a household member receives a recurring gift or prize which exceeds $30 per quarter, the gift or prize will be counted in the household’s budget as unearned income. Recurring gifts or prizes in excess of $30 per calendar quarter may either be averaged forward over the period of intended use or counted as income in the month received.

Income resulting from an owner-financed sale of property is counted as unearned income; no earned income deduction will be allowed. However, the installment contract will be handled in the same way as self-employment income is handled.

The following items will be allowed as costs of doing business.

1. Costs incurred by the holder of the installment contract for real estate taxes and/or insurance on the financed property.
2. Costs incurred by the holder of the installment contract for interest payments on a pre-existing mortgage on the financed property - (e.g. - a man sells a house upon which he is still making payments).
3. On a one-time basis, as-incurred, broker's fees paid by the holder of the installment contract. (For example, if a property is sold on June 11, and the household reports this sale on June 18, the broker's fees may be excluded from the July payment.)

Example 1: - Mr. Green owns 20 acres of land which he purchased in 1980. His payments on the land are $150 per month which includes $60 per month interest and a $30 escrow payment. The escrow account is used to pay real estate taxes of $200 and annual insurance payments of $100.

In 1996, Mr. Green sold this land to Mr. Redd.  Mr. Redd paid Mr. Green $1,000 down and agreed to pay $175 per month for 240 months. Mr. Green will continue to pay the bank $150 per month on the original mortgage. Since the taxes and insurance are included in this payment, Mr. Green will continue to incur these costs until the original mortgage is paid. Mr. Redd agreed to pay all brokerage fees.

The $1,000 down payment will be excluded as income since it is considered a lump sum payment. The full $175 payment (less exclusions for the allowable costs of doing business) will be counted as unearned income. The allowable costs of doing business are the costs of taxes and insurance incurred by Mr. Green and the interest Mr. Green pays on the original mortgage.

Taxes       $200
Insurance $100
                 $300           Yearly Costs - 12 months = $25 per month

Monthly Interest Payments Made by Mr. Green     $60 per month
Monthly Costs of Taxes and Insurance                     25 per month
Total Excludable Costs Per Month                         $85

Monthly Payments Received by Mr. Green         $175
Total Monthly Costs of Doing Business                 - 85
Portion of Payment to be Counted in Budget      $ 90

Example 2:  Mr. Long also sold 20 acres of land to Mr. Redd. He will also receive $1,000 down and $175 per month for 240 months.

There are no mortgages on the property Mr. Long sold. Mr. Redd pays all taxes and insurance costs on the property and paid all brokerage fees at the time of the sale.

The entire $175 monthly payment will be counted as income in Mr. Long's food stamp budget.

The following are examples of interest, dividend, or royalty payments that are considered unearned income:

1. Interest

Interest payments received by any household member for money held in any type of account – checking, savings, certificate of deposit, etc. Interest is considered unearned income even is not paid directly to the household but added to the account balance.

An interest payment will be counted as unearned income in the month received, or prorated over the period of time the payment is intended to cover, whether received on a quarterly or annual basis. The household selects the method to be used.

Example: On 11/10 a household member received a quarterly interest payment in the amount of $15.00 from his savings account. He may choose to either consider the entire $15.00 as income for the month of November, or may have it prorated over the three-month period of November, December, and January.

2. Dividends

Dividends are payments received from investment such as, but not limited to stocks, bonds, insurance, etc. owned by the household. Dividends may be received on a monthly, quarterly or annual basis. Dividends are counted as unearned income either in the month received or are prorated over the period of time the payment was intended to cover.

3. Royalties

Royalties are: 

1. payments received as profits from the sale of a product, 

2. payments from oil or gas leases, or 

3. payments made from the sale of items under a patent.

Royalties may be issued on a monthly, quarterly, or annual basis. Royalties will either be counted as income in the month of receipt or prorated over the period of time the payment is intended to cover.

A pension is a fixed sum paid regularly under certain conditions to an individual or to that individual’s surviving dependent following years of military service or employment.

The following households contain members who may receive pensions:

1. Households with aged or disabled members with a prior military service or members who are disabled or under age 18 and who are a surviving dependent of a person with prior military service;
2. Households with members retired (by age or disability) from a private firm like a factory or a utility company;
3. Households with members who retired from Federal or State employment by reasons of age or disability and their surviving dependents if the dependents are aged, disabled or minor children; or
4. Households with members retired from a school, college, or university due to age or disability.

When a portion of a pension is awarded to an ex-spouse by the court in a divorce or legal separation settlement, the portion diverted to the ex-spouse is excluded as income as long as the payment goes directly to the ex-spouse.

Example - Mr. G. is in receipt of civil service retirement benefits. The court awarded 49 percent of his retirement to his ex-wife. Mr. G. receives only the 51 percent that the court allocated to him. He receives an annual statement that indicates his total benefit and the wife's portion of the total amount. Only the portion of the retirement benefits Mr. G. actually receives will be counted in his food stamp budget.

Railroad Retirement benefits are paid to individuals and spouses covered under the Railroad Retirement Act. An individual may receive both Railroad Retirement and Social Security, if covered under both programs. The spouse of a Railroad Retirement beneficiary may receive a spouse's pension while receiving Social Security under his or her own record. Railroad Retirement benefits are counted as unearned income.

See the [Unearned Income Appendix] for additional information.

If a household is reimbursed for normal household expenses such as rent, mortgage, personal items or food that is eaten at home, the reimbursement is considered to be a gain or benefit and is counted as unearned income. (For situations which reimbursements are excluded, see [FSC 5411].)

If the reimbursement is provided by an employer and considered compensation for actual work performance, the income will be counted as earned income.

NOTE: This section does not deal with income from boarders. See [FSC 5620] for instructions on handling income from boarders.

Rental income is money received as the result of the rent or lease of property owned by a household member or members. The amount of the rental income to be shown in the food stamp budget will be the gross amount of rental income received less the "costs of doing business". Costs of doing business include real estate taxes on the property, insurance premiums paid for insurance to cover the property, and interest paid on a loan on the rental property.

If the costs of doing business cannot be distinguished from a household's shelter costs, then these costs will not be allowed. For example, a household owns a house with a garage apartment. The garage apartment is rented for $200 per month. The household makes one payment on the property. The taxes and insurance are included in the payment. The household states there is no way to identify the portion of taxes, insurance or interest paid on the garage apartment; therefore, the county office worker allows the entire property payment as a shelter cost. The entire $200 payment received for rent on the garage apartment is shown as income.

If a household member is engaged in the management of the property at least 20 hours per week, rental income is considered earned income. Otherwise, the rental income is considered unearned income. If rental income is considered earned income, the earned income deduction explained in [FSC 6200] will be applied to the net rental income.

Land rent is income received on an annual basis for the rental of property used in an agricultural endeavor. Since an agreement must be reached regarding the amount of land rent to be received, land rent is considered to be contractual income and will be annualized as instructed in [FSC 7519].

In some situations, an individual will live in a house owned by someone else and will make the payments on that house in lieu of a rental payment. In situations like this, the house payment will be considered rental income to the owner. All allowable costs of doing business will be excluded from the gross amount of the house payment before it is added to the owner's food stamp budget.

Severance pay is an allowance or income payable to an employee upon termination of employment. Severance pay is usually based upon length of service.

Severance payments designated to be paid in monthly installments are considered unearned income in the month(s) received. If, however, a terminated employee receives a lump sum severance payment, the severance must be counted as a resource. (Refer to [FSC 4950] for handling lump sum severance payments counted as a resource.)

Social Security Benefits are monthly checks paid to retired or disabled individuals based upon contributions the individual made while employed. Social Security Benefits are also payable to the individual's spouse and/or children in particular instances. (Social Security benefits are rounded down to the nearest dollar by SSA prior to payment.) Social Security benefits are counted as unearned income.

A full description of the criteria for receipt of SSA may be found in the [Unearned Income Appendix].

SSI is a Federally administered cash assistance program for aged, blind or disabled individuals with little or no income or resources. SSI is paid on a monthly basis. SSI payments are counted as unearned income.

A full description of the SSI program may be found in the [Unearned Income Appendix].

Under a PASS (Plans for Achieving Self-Support) any blind or disabled SSI claimant or recipient may set aside income for a work goal such as education, vocational training, work related equipment or starting a business. Monies set aside under a PASS are excluded as income and as a resource in the Food Stamp Program.

See [FSC 4450, item 12], for the resource exclusion provisions.

See [FSC 5405, item 18], for the income exclusion provisions.

Food stamp benefits will not be increased when a household's SSI benefits are reduced, terminated or suspended due to an intentional failure to comply with SSI Program rules. See [FSC 12110].

VA benefits are monthly checks issued to certain individuals who served in a branch of the United States Armed Services. VA checks are also issued to a veteran's dependents under certain conditions. VA benefits are counted as unearned income.

For VA disability pensions, a monthly check and an annual "adjustment" check is sent. At the end of the year (October for most disabilities), the VA sends out a letter asking the household to verify the past year's income and out-of pocket medical and educational expenses for the veteran and his/her spouse. The VA will either establish a claim for any overissuance or make a retroactive income payments. Monthly amounts in the coming year may also be adjusted. If the household receives an income adjustment lump-sum payment, the payment will be excluded as income. Since this is considered a retroactive income adjustment and not a reimbursement for medical expenses, out-of-pocket expenses may be deducted by the household if the member who incurred the expense is aged or disabled.

Some veterans receive an aid and attendance payment. These payments, which are intended to be used by the veteran to pay the cost of a nurse or attendant, are counted as income in the food stamp budget. If the veteran does use the funds to pay for nursing care or an attendant, these costs will be deducted as a medical expense. See [FSC 6500].

Educational benefits paid under the Montgomery GI Bill to students enrolled in an institution of ppost-secondary education are excluded as income.  See [FSC 1622.3].  

Worker's compensation payments are insurance payments made as a result of injury or death on a work site. Such payments may be received by the injured individual on a bi-weekly basis or as a lump sum payment. When a death occurs, a lump sum payment will be made to the individual's survivors. (Lump sum payments are considered a resource - See [FSC 4950].) Worker’s compensation payments received on a bi-weekly basis are counted as unearned income.

Not all work sites are covered by Worker's Compensation. However, whenever a household claims a job-related injury, or death, the possible receipt of Worker's Compensation Benefits must be explored with the household. See the [Unearned Income Appendix] for additional information.

Unearned income must be verified at initial application. At recertification, income must be verified if the source of the income has changed or the amount has changed by more than $25.00. Unearned income reported to be unchanged or changed by less than $25.00 must be verified only when information regarding this income is considered incomplete, inaccurate, inconsistent or outdated.

Acceptable verification of unearned income is listed below in order of preference.

1. Award letters or notices when the current income is indicated on the letter or notice.
2. Correspondence from the source of the income when the correspondence indicates the current income amount.
3. A properly completed DCO-70, Check Verification Form.
4. Viewing the check. (When making copies of checks, ensure that the signature on the check is properly masked.)
5. Collateral contact with the source of the income.
6. Collateral contact with someone other than the source of the income who can verify the amount.

1. TEA Cash Assistance

Use the WADC screen, case record, or the current payroll. All are available in the county office.

2. Foster Care Payments

Verification may be obtained through letters or notices from the agency providing the payment. If no letters or notices or available, verification may be obtained through direct contact with the Agency.

3. SSA/SSI

SSA and/or SSI income may be verified through SSA Query Screen (WQRY). The household may also present correspondence from Social Security.

4. Unemployment Compensation (UI)

UI benefits will normally be verified via the WESD screen. If the information does not appear on the screen or the information on the screen appears to be inaccurate, the household will be asked to furnish verification. The local ESD office will not be contacted.

5. Charitable Donations

The amount of the charitable donation received in each month of the current Federal fiscal quarter must be verified. See FSC 5705 for a list of the Federal fiscal quarters.

Document: 1. The name of the person who receives the unearned income;

2. The source of the unearned income; and

3. The verification obtained.

A reference list is provided to assist the caseworker in locating the section of policy which describes the process for determining countable income.