81_FR_2102 81 FR 2092 - Temporary Assistance for Needy Families (TANF) Program, State Reporting On Policies and Practices To Prevent Use of TANF Funds in Electronic Benefit Transfer Transactions in Specified Locations

81 FR 2092 - Temporary Assistance for Needy Families (TANF) Program, State Reporting On Policies and Practices To Prevent Use of TANF Funds in Electronic Benefit Transfer Transactions in Specified Locations

DEPARTMENT OF HEALTH AND HUMAN SERVICES
Administration for Children and Families

Federal Register Volume 81, Issue 10 (January 15, 2016)

Page Range2092-2106
FR Document2016-00608

This final rule makes regulatory changes to the Temporary Assistance for Needy Families (TANF) regulations to require states, subject to penalty, to maintain policies and practices that prevent TANF funded assistance from being used in any electronic benefit transfer transaction in any liquor store; any casino, gambling casino, or gaming establishment; or any retail establishment that provides adult-oriented entertainment in which performers disrobe or perform in an unclothed state for entertainment. This rule implements provisions of Section 4004 of the Middle Class Tax Relief and Job Creation Act of 2012.

Federal Register, Volume 81 Issue 10 (Friday, January 15, 2016)
[Federal Register Volume 81, Number 10 (Friday, January 15, 2016)]
[Rules and Regulations]
[Pages 2092-2106]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-00608]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Administration for Children and Families

45 CFR Parts 262, 264, and 265

RIN 0970--AC56


Temporary Assistance for Needy Families (TANF) Program, State 
Reporting On Policies and Practices To Prevent Use of TANF Funds in 
Electronic Benefit Transfer Transactions in Specified Locations

AGENCY: Office of Family Assistance (OFA), Administration for Children 
and Families (ACF), Department of Health and Human Services (HHS).

ACTION: Final rule.

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SUMMARY: This final rule makes regulatory changes to the Temporary 
Assistance for Needy Families (TANF) regulations to require states, 
subject to penalty, to maintain policies and practices that prevent 
TANF funded assistance from being used in any electronic benefit 
transfer transaction in any liquor store; any casino, gambling casino, 
or gaming establishment; or any retail establishment that provides 
adult-oriented entertainment in which performers disrobe or perform in 
an unclothed state for entertainment. This rule implements provisions 
of Section 4004 of the Middle Class Tax Relief and Job Creation Act of 
2012.

DATES: Effective Date: Provisions of this final rule become effective 
January 15, 2016.
    Compliance Date: For states, the District of Columbia, and 
territories (hereafter referred to as states), HHS will determine 
compliance with provisions in this final rule through review and 
approval of reports that states submit annually. Initial reports 
describing the policies and practices states implemented were due on 
February 22, 2014. All states submitted reports by this deadline. 
Hereafter, states will submit reports describing the policies and 
practices required by 45 CFR 264.60 and Section 4004 of the Middle 
Class Tax Relief and Job Creation Act of 2012 in the Annual Report on 
TANF and maintenance-of-effort (MOE) Programs in accordance with 45 CFR 
265.9(b)(10). As provided at 45 CFR 265.10, this report is due by 
November 14 of each fiscal year, which is the same time as the fourth 
quarter TANF data report, as provided in 45 CFR 265.4.

FOR FURTHER INFORMATION CONTACT: Rebecca Shwalb, Office of Family 
Assistance, 202-260-3305 (not a toll-free call). Deaf and hearing 
impaired individuals may call the Federal Dual Party Relay Service at 
1-800-877-8339 between 8:00 a.m. and 7:00 p.m. Eastern Time.

SUPPLEMENTARY INFORMATION: 

Table of Contents

I. Background
II. Notice of Proposed Rulemaking
III. Overview of Final Rule
IV. Statutory Authority
V. Section-by-Section Discussion of Comments and Regulatory 
Provisions
    Part 262--Accountability Provisions--General
    Section 262.1 What penalties apply to States?
    Section 262.2 When do the TANF penalty provisions apply?
    Section 262.3 How will we determine if a State is subject to a 
penalty?
    Part 264--Other accountability provisions: Subpart A--What 
specific rules apply for other program penalties?
    Section 264.0 What definitions apply to this part?
    Section 264.60 What policies and practices must a State 
implement to prevent assistance from being used in electronic 
benefit transfer transaction in locations prohibited by the Social 
Security Act?
    Section 264.61 What happens if a State fails to report or 
demonstrate it has implemented and maintained the policies and 
practices required in Sec.  264.60 of this subpart?
    Part 265--Data Collection and Reporting Requirements
    Section 265.9--What information must the State file annually?
VI. Paperwork Reduction Act
VII. Regulatory Flexibility Act
VIII. Regulatory Impact Analysis
IX. Unfunded Mandates Reform Act of 1995
X. Congressional Review
XI. Executive Order 13132
XII. Treasury and General Government Appropriations Act of 1999

[[Page 2093]]

I. Background

    Authorized by title IV-A of the Social Security Act, TANF is a 
block grant that provides states, territories, and tribes federal funds 
to design and operate a program to accomplish the purposes of TANF. The 
purposes are to: (1) Assist needy families so that children can be 
cared for in their own homes or in the homes of relatives; (2) reduce 
the dependency of needy parents by promoting job preparation, work, and 
marriage; (3) prevent out-of-wedlock pregnancies; and (4) encourage the 
formation and maintenance of two-parent families. In addition to 
federal TANF block grant funds, each state must spend a certain minimum 
amount of non-federal funds to help eligible families in ways that 
further a TANF purpose. This is referred to as maintenance-of-effort 
(MOE).
    In general, federal TANF and state MOE funds may be expended on 
benefits and services targeted to needy families, and activities that 
aim to prevent and reduce out-of-wedlock pregnancies or encourage the 
formation and maintenance of two-parent families, as well as 
administrative expenses. In particular, federal TANF and state MOE 
funds may be expended on ``assistance,'' defined at 45 CFR 260.31(a)(1) 
as including cash payments, vouchers, and other forms of benefits 
designed to meet a family's ongoing basic needs (i.e., food, clothing, 
shelter, utilities, household goods, personal care items, and general 
incidental expenses). Assistance also includes supportive services such 
as transportation and child care provided to families who are not 
employed (see 45 CFR 260.31(a)(3)). TANF funds also can be used for a 
wide range of benefits and services that do not fall within the 
definition of assistance; such expenditures are considered ``non-
assistance.'' This rule pertains only to assistance expenditures.
    Based on the most recent information provided to us by states, 
there are currently four means that states use to provide assistance 
payments to eligible low-income families with children: Paper checks, 
Electronic Funds Transfers (EFT), Electronic Benefit Transfer (EBT) 
cards, and Electronic Payment Cards (EPC). Most states have replaced 
paper checks with one or more of the other three delivery methods in 
order to provide benefits in a timelier manner, reduce theft and fraud, 
and eliminate the need for recipients to pay check-cashing fees. Some 
states automatically transfer assistance payments directly into a 
recipient's own private bank account through EFT. However, this option 
is not available if a recipient does not have access to or qualify for 
a checking account. Most states load the amount of assistance on EBT 
cards or EPCs, both of which allow recipients to use a debit-like card 
to access their benefits through automated teller machines (ATMs) and 
point-of-sale (POS) devices. EPCs differ from government EBT cards in 
that they are network-branded (e.g., Visa or MasterCard) prepaid cards 
that recipients may use virtually anywhere the brand's logo is 
displayed. EBT cards may be used in fewer locations, as retailers and 
ATMs must be authorized to accept EBT cards.
    Among its provisions, the Middle Class Tax Relief and Job Creation 
Act of 2012, Public Law (Pub. L.) 112-96, requires states to maintain 
policies and practices to prevent TANF assistance from being used in 
any EBT transaction (as defined at 42 U.S.C. 608(a)(12)(B)(iii)) in any 
liquor store; any casino, gambling casino, or gambling establishment; 
or any retail establishment which provides adult-oriented entertainment 
in which performers disrobe or perform in an unclothed state for 
entertainment.
    The legislation at Section 4004(b) also imposes a new reporting 
requirement as well as a new penalty. Each state is required to report 
annually to the Department of Health and Human Services (HHS) on its 
implementation of policies and practices related to restricting 
recipients from using their TANF assistance in EBT transactions at the 
prohibited locations. HHS will reduce a state's block grant by not more 
than five percent of the state family assistance grant in fiscal year 
(FY) 2014 and annually thereafter if the state fails to comply with 
this reporting requirement or if, based on the information that the 
state reports, HHS finds that the state has not implemented and 
maintained the required policies and practices. The statute provides 
the Secretary of HHS the authority to reduce the amount of the penalty 
based on the degree of noncompliance of the state.
    Finally, states are required under Section 4004(c) of Public Law 
112-96 to include in their state TANF plans a statement outlining how 
they intend to implement policies and procedures to prevent access to 
assistance through EFTs at casinos, liquor stores, and establishments 
providing adult-oriented entertainment. The state plan also must 
include an explanation of how the state will ensure that (1) recipients 
of the assistance have adequate access to their cash assistance, and 
(2) recipients of assistance have access to using or withdrawing 
assistance with minimal fees or charges, including an opportunity to 
access assistance with no fee or charges; are provided information on 
applicable fees and surcharges that apply to electronic fund 
transactions involving the assistance; and that such information is 
made publicly available. This rule does not regulate the state plan 
provisions at Section 4004(c) of Public Law 112-96, but it incorporates 
the statutory state plan language under the Middle Class Job Creation 
and Tax Relief Act of 2012. Following publication of the final rule, 
HHS plans to issue additional guidance regarding the adequate access 
provision.

II. Notice of Proposed Rulemaking

    HHS published a notice of proposed rulemaking (NPRM) (79 FR 7127) 
on February 6, 2014, to regulate the TANF provisions in Section 4004(a) 
and (b) of Public Law 112-96. The proposed rule added new penalties for 
failure to report or adequately demonstrate implementation of the 
requirements outlined in Public Law 112-96, defined terms relevant to 
the new requirements, specified when the penalty takes effect, and 
identified how HHS will determine whether a state warrants a penalty. 
It also provided details regarding what types of policies and practices 
HHS would accept as complying with the statutory requirements. In 
addition to general comments, the NPRM sought input from commenters 
regarding two specific issues: TANF assistance deposited directly in 
recipients' bank accounts and accessed with a personal debit card, and 
internet transactions.
    HHS received a total of 28 comments, including comments from six 
states, seven membership and research/advocacy organizations, and three 
EBT industry organizations. The remaining commenters were members of 
the public. We include a detailed summary of comments as well as HHS's 
responses to comments in Section V of this final rule. Public comments 
on the proposed rule are available for review on www.regulations.gov.

III. Overview of Final Rule

    The final rule amends the TANF program regulations in the following 
three ways: (1) It adds a requirement to implement policies and 
practices to prevent TANF assistance from being used in any electronic 
benefit transfer transaction in any: liquor store; any casino, gambling 
casino or gaming establishment; and any retail establishment which 
provides adult-oriented entertainment in which performers disrobe or 
perform in an unclothed state for entertainment, (2) it adds a 
requirement to report on policies and practices in an annual report, 
and

[[Page 2094]]

(3) it adds a penalty for failure to report on implementation and 
maintenance of these policies and practices. In response to comments on 
the proposed rule, we have made changes in the final rule where 
appropriate to address policy and other concerns raised by commenters, 
as well as to incorporate suggested clarifications and improvements. In 
this section, we provide an overview of the final rule and generally 
describe major changes in response to comments. A more detailed summary 
of comments in each area and reason for changes is included in the 
section-by-section discussion of comments later in this final rule.
    (1) When incorporating the requirement at 45 CFR 264.60 to 
implement policies and practices to prevent TANF assistance from being 
used in any electronic benefit transfer transaction in any liquor 
store; any casino, gambling casino or gaming establishment; and any 
retail establishment which provides adult-oriented entertainment in 
which performers disrobe or perform in an unclothed state for 
entertainment, we mirror the statutory language at Section 4004(a) of 
Public Law 112-96. The preambles to the NPRM and the final rule provide 
details on the types of policies and practices HHS would accept as 
complying with the statutory requirements, and identify those that do 
not. In doing so, we identify that different approaches may be 
acceptable depending on the method of delivery (EBT, EPC, or direct 
deposit). We also correct an error we made in the NPRM suggesting that 
bank identification number (BIN) blocking was a potential approach to 
preventing TANF assistance from being used in POS terminals in the 
specified locations. Finally, we reiterate that states have a 
responsibility to develop appropriate policies for preventing TANF cash 
assistance administered by state programs from being used at any of the 
three types of businesses, including those located on tribal land. In 
general, we have provided flexibility in meeting the statutory and 
regulatory requirements so that states may develop cost-effective 
implementation strategies that fit within the existing structures of 
state operations.
    We also have added the relevant accompanying definitions to the 
TANF regulations at 45 CFR 264.0. Regarding the definitions of the 
three types of establishments, we have made some changes to those we 
proposed in the NPRM. For example, we are striking from our definition 
of ``retail establishment which provides adult-oriented entertainment 
in which performers disrobe or perform in an unclothed state for 
entertainment,'' the language, ``such an establishment that prohibits 
the entrance of minors under the age specified by state law.'' 
Commenters noted that local ordinances, rather than state law, apply to 
such establishments, and can vary considerably from jurisdiction to 
jurisdiction. Since we are no longer expanding upon the statutory 
definition, we have deleted the definition of ``retail establishment 
which provides adult-oriented entertainment in which performers disrobe 
or perform in an unclothed state for entertainment'' from Sec.  264.0. 
Rather, we encourage states to exercise the flexibility provided by the 
statute to build on the required restrictions with respect to these 
establishments, consistent with state and local policies. Furthermore, 
in response to comments suggesting we quantify the term ``primarily'' 
in the definitions for ``casino, gambling casino, or gaming 
establishment'' and ``liquor store,'' we will defer to states' 
reasonable interpretation of the law. Additionally, we interpret 
Congress's use of ``liquor'' to refer to alcoholic beverages broadly, 
rather than a narrow definition that excludes alcoholic beverages such 
as beer and wine.
    We are clarifying that the broad definition of ``electronic benefit 
transfer transaction'' includes transactions using or accessing TANF 
funds in private bank accounts because those funds may be accessed by a 
TANF recipient in a manner that the statutory definition specifies, 
i.e., through use of a credit or debit card, ATM, point-of-sale 
terminal, or an online system for the withdrawal of funds or the 
processing of a payment. We subsequently discuss, see the discussion of 
Sec.  264.60, examples of policies and practices that HHS considers 
acceptable with regard to personal accounts and debit cards. We 
reiterate that the language used demonstrates that Congress intended to 
apply the requirements in Public Law 112-96 to EPCs. At the same time, 
we agree with all commenters that Congress did not intend to apply the 
requirements to internet transactions, pointing to language in the 
statute such as ``establishment,'' ``store,'' ``located in a place,'' 
and ``transactions in.''
    (2) In order to add the requirement to report on relevant policies 
and practices to the TANF regulations, we are amending 45 CFR parts 
262, 264, and 265. The regulations at 45 CFR 262.3 and 264.61 tie the 
reporting requirement to the penalty specified at 45 CFR 262.1(a)(16). 
We reiterate that we are requiring an annual EBT report in order to 
determine whether states have maintained the required policies and 
practices in each fiscal year following FY 2014. One commenter 
suggested that the statute does not provide authority for annual 
reporting, maintaining that the statute obligates HHS to impose a 
penalty only if a state fails to submit one required report; that state 
would be subject to a penalty for FY 2014 (for its failure to report by 
February 22, 2014) and each fiscal year until it submits a report. We 
disagree with this interpretation and do not believe that it comports 
with the statute.
    In response to suggestions for ways to ease the reporting burden, 
we have incorporated this reporting requirement in the Annual Report on 
TANF and MOE Programs under 45 CFR 265.9(b)(10), rather than requiring 
the submission of a separate EBT report. Accordingly, we are amending 
the regulation at 45 CFR 265.9(b).
    We continue to require that the reports address specific areas that 
will allow us to determine whether states have implemented policies and 
practices that comply with the statutory requirements. The NPRM 
identified these areas as follows: Identifying locations; methods to 
prevent use of TANF assistance via EBT transactions in restricted 
locations; monitoring; and enforcement of compliance. With this final 
rule, we are providing clearer descriptions of the type of information 
we are requesting. For example, we have amended the request for 
information on ``monitoring,'' to ``ongoing monitoring to ensure 
policies are being carried out as intended,'' and instead of 
``enforcement of compliance,'' this component should read ``responding 
to findings of non-compliance or program ineffectiveness.'' This way, 
we do not imply that specific practices, such as monitoring of 
transaction reports, are required. At the same time, we would like 
reports to describe how states will review and evaluate the policies 
and practices implemented, and correct for non-compliance and 
ineffectiveness. In sum, in 45 CFR 265.9(b)(10), the four areas we are 
requiring states to address in their reports are: (1) Procedures for 
preventing the use of TANF assistance via electronic benefit transfer 
transactions in any liquor store; any casino, gambling casino, or 
gaming establishment; and any retail establishment which provides 
adult-oriented entertainment in which performers disrobe or perform in 
an unclothed state for entertainment; (2) how the state identifies the 
locations specified in the statute; (3) procedures for ongoing 
monitoring to ensure policies are being carried out as intended; and 
(4) how the state

[[Page 2095]]

responds to findings of non-compliance or program ineffectiveness. 
Finally, we have reduced the burden hour estimate described in the 
Paperwork Reduction Act section of this final rule, as initial reports 
have been submitted and subsequent reports should not be as time-
consuming.
    (3) We are amending 45 CFR 262.1 and 264.61 to add the penalty for 
failure to report or demonstrate implementation and maintenance of 
these policies and practices. At 45 CFR 262.62, we specify that this 
penalty will be imposed for FY 2014 and each succeeding fiscal year in 
which a state fails to submit a report that demonstrates it has 
implemented and maintained the relevant policies and practices. Even 
though one commenter suggested that this approach exceeds our statutory 
authority, we maintain that the statute allows HHS to impose a penalty 
in ``each succeeding fiscal year in which the State does not 
demonstrate that such State has implemented and maintained such 
policies and practices.'' Furthermore, in response to commenters' 
recommendations, we have added language to the regulation related to 
reducing the penalty based on the degree of noncompliance. We also 
clarify in the regulations that states are not held responsible for 
individuals' fraudulent activities, as provided by the statute.

IV. Statutory Authority

    This final rule is being issued under the authority granted to the 
Secretary of Health and Human Services (HHS) by the Middle Class Tax 
Relief and Job Creation Act of 2012 (Pub. L. 112-96), Section 408 of 
the Social Security Act (42 U.S.C. 608), Section 409 of the Social 
Security Act (42 U.S.C. 609), and Section 1102 of the Social Security 
Act (42 U.S.C. 1302), which authorizes the Secretary to make and 
publish such rules and regulations, not inconsistent with the Act, as 
may be necessary to the efficient administration of functions under the 
Act.
    The statute at 42 U.S.C. 617 limits the authority of the federal 
government to regulate state conduct or enforce the TANF provisions of 
the Social Security Act, except as expressly provided. We have 
interpreted this provision to allow us to regulate where Congress has 
charged HHS with enforcing certain TANF provisions by assessing 
penalties. Because the legislation includes a TANF penalty, HHS has the 
authority to regulate in this instance.

V. Section-by-Section Discussion of Comments and Regulatory Provisions

Part 262--Accountability Provisions--General

    The final rule in part 262 adds new penalties for failure to report 
or adequately implement the new requirements outlined in Public Law 
112-96, specifies when a penalty takes effect, and identifies the 
reporting form that HHS will use to determine whether a state warrants 
a penalty.
Section 262.1 What penalties apply to States?
    Sec. 4004(b) of Public Law 112-96 at Sec. 409(a)(16) of the Social 
Security Act (the Act) creates a new TANF penalty. As provided in the 
statute, the penalty will be imposed if a state fails to report to HHS 
its implementation of the policies and practices to prevent assistance 
provided under the state program funded under this part from being used 
in any electronic benefit transfer transaction in: (i) Any liquor 
store; (ii) any casino, gambling casino, or gaming establishment; or 
(iii) any retail establishment which provides adult-oriented 
entertainment in which performers disrobe or perform in an unclothed 
state for entertainment. Furthermore, HHS may impose a penalty if it 
determines, based on the information provided in a state report, that 
the state has not demonstrated that it has implemented and maintained 
such policies and practices. This penalty may be imposed for FY 2014 
and each succeeding fiscal year in which a state does not demonstrate 
that it has implemented and maintained such policies and practices. If 
HHS determines that the state should be subject to a penalty, it will 
reduce the state family assistance grant in the succeeding fiscal year 
by five percent, or a lesser amount based on the degree of 
noncompliance. States should note that the regulations at 45 CFR 262.4 
through 262.7, concerning the processes for appealing a penalty, 
presenting a reasonable cause justification, and submitting a 
corrective compliance plan, apply to the new penalty added to 45 CFR 
262.1.
    Accordingly, this final rule adds paragraph (i) to Sec.  
262.1(a)(16) to provide that a penalty of not more than five percent of 
the adjusted State Family Assistance Grant (SFAG) will be applied for 
failure to report annually as part of the Annual Report on TANF and MOE 
Programs under 45 CFR 265.9(b)(10), on the state's implementation of 
policies and practices related to these prohibited EBT transactions. 
The final rule also adds paragraph (a)(16)(ii) to provide that a 
penalty likewise will be applied for FY 2014 and each succeeding fiscal 
year if the state does not demonstrate that it has implemented and 
maintained such policies and practices. Note that if a state fails to 
submit a report for a fiscal year and, when it ultimately submits a 
report, also fails to demonstrate its implementation of policies and 
practices, the combined penalty will not exceed five percent of its 
adjusted SFAG. Conforming changes have been made at Sec.  262.1(c)(2) 
to add reference to the penalties in paragraphs (a)(16)(i) and (ii).
    Comment: A few commenters remarked on the penalty calculation, 
suggesting that the rule mirror the statute's allowance for the 
Secretary to reduce penalties based on the degree of noncompliance and 
clarify that states are not responsible for fraudulent activity by any 
individual receiving TANF assistance in an attempt to circumvent the 
policies and practices required by section 608(a)(12). Further, 
commenters were concerned that the proposed rule does not adequately 
explain how the ``degree of noncompliance'' will be determined or how 
it would be translated into the penalty amount.
    Response: While we included language related to reducing the 
penalty based on the degree of noncompliance and clarifying that states 
are not held responsible for individuals' fraudulent activities in the 
preamble of the NPRM, we agree that this language should also be added 
to the regulation. We have added language in Sec. Sec.  262.1(a)(16) 
and 264.61 to address the statutory provisions. At the same time, we 
note that while states are not held responsible for an individual's 
fraudulent activities, reoccurring fraudulent activity could be an 
indication of deficiencies in a state's policies and practices and 
should be addressed.
    When determining ``degree of noncompliance'' with respect to 
reports submitted after the deadline, the Secretary may take into 
account factors such as the length of time a report was late and any 
extenuating circumstances that may have caused late reporting. When 
determining ``degree of noncompliance'' with respect to inadequate 
policies and practices, the Secretary may consider the steps taken to 
develop policies to comply with the requirements (even if not fully 
implemented), whether there are procedures related to identifying some 
or all of the types of locations specified in the statute, whether 
procedures take into account transactions at both ATMs and POS 
terminals, and whether the

[[Page 2096]]

state provides information for some or all of the components required 
in the annual report (described later in this preamble).
    Comment: One individual commented that imposing a penalty will be 
counterproductive because financial sanctions may inhibit a state's 
ability to implement EBT policies and practices, suggesting we increase 
the compliant states' block grants, provided that they consult and 
provide technical assistance to non-compliant states.
    Response: The statute requires a penalty for failure to meet the 
requirements of the statute; however, before we impose a financial 
penalty, states may request reasonable cause or submit a corrective 
compliance plan in response to a penalty, as provided at sections 
409(b) and (c) of the Social Security Act. We do not have the authority 
to increase compliant states' block grants.
Section 262.2 When do the TANF penalty provisions apply?
    The final rule amends Sec.  262.2 to add new paragraph (e) 
indicating that the penalty for failure to report on how the state is 
implementing and maintaining policies and practices to prevent 
assistance from being used in electronic benefit transfer transactions 
in specified locations will be imposed for FY 2014 and each succeeding 
fiscal year in which the state does not demonstrate it has implemented 
and maintained the policies and practices in accordance with 45 CFR 
264.60.
    Comment: One state commented that the statute does not require an 
annual reporting requirement. Rather, the commenter argued the statute 
required HHS to impose a penalty on an annual basis on states that had 
not submitted a report by February 22, 2014, and each subsequent year 
it had still not submitted a report. In other words, if a state 
submitted its initial report that describes the policies it implemented 
and how it will maintain them, it had met the requirements of the law 
and can no longer be subject to a penalty. On the other hand, a state 
that did not submit the initial report by February 22, 2014, would be 
subject to a penalty for FY 2014, as well as each fiscal year until it 
submits a report.
    Response: We do not agree with this interpretation and do not 
believe that the statutory requirements, particularly the requirement 
that states demonstrate that they are implementing and maintaining the 
relevant policies and practices, can be met through a one-time report. 
The statute provides that HHS shall impose a penalty in ``each 
succeeding fiscal year in which the State does not demonstrate that 
such State has implemented and maintained such policies and 
practices.'' Through these reports, we must assess whether states are 
implementing and maintaining EBT policies and practices to determine 
whether or not we should impose a penalty.
Section 262.3 How will we determine if a State is subject to a penalty?
    This final rule amends Sec.  262.3 by adding a new paragraph (g) to 
specify that in order to determine if a state is subject to a penalty 
under 45 CFR 262(a)(16)(i) and (ii), HHS will use the submission of the 
initial report that was due by February 22, 2014, and beginning in FY 
2015, the Annual Report on TANF and MOE Programs under 45 CFR 
265.9(b)(10). We are amending the Annual Report on TANF and MOE 
Programs under 45 CFR 265.9(b) in order to include reporting for 
electronic benefit transfer transaction policies and practices. The 
Annual Report on TANF and MOE Programs at 45 CFR 265.9(b) is due at the 
same time as the fourth quarter TANF data report, within 45 days 
following the end of the fourth quarter. Note that this reporting 
requirement is distinct from the provisions of Public Law 112-96 
related to additional state plan requirements (see Sec. 4004(c)).
    Comment: We received a number of comments raising concerns about a 
separate annual electronic benefit transfer transaction report 
requirement. They argued this requirement places an undue reporting 
burden on states and contradicts the intent of the statute. One 
commenter believed that because the statute requires states to describe 
their EBT policies and practices in the state plan, they will already 
be providing consistent reports on implementation, and should not be 
required to submit an additional report. A number of states recommended 
we use the state plan or the Annual Report on TANF and MOE programs as 
the reporting mechanism.
    Response: We agree that the Annual Report is an effective reporting 
mechanism and will ease the reporting burden on states. As described 
below, with this final rule, we are amending Sec.  265.9(b) of the TANF 
regulations to add to the annual report a section for states to 
describe their policies and practices related to electronic benefit 
transfer transactions.

Part 264--Other Accountability Provisions

Subpart A--What specific rules apply for other program penalties?
    The final part 264 explains in further detail what HHS expects of 
states when implementing the new requirements of Public Law 112-96 by 
specifying the policies and practices required, providing relevant 
definitions, and addressing consequences if a state fails to meet the 
requirement.
Section 264.0 What definitions apply to this part?
    In order to clarify the types of locations where states are 
required to prohibit the use of TANF assistance via electronic benefit 
transfer transactions and to ensure that the policies and practices are 
applied consistently between states, we are amending Sec.  264.0(b) to 
define the terms included in Section 4004 of Public Law 112-96. The 
following is a discussion of the definitions of the terms in 
alphabetical order.
    Casino, Gambling Casino, or Gaming Establishment: As we mentioned 
in the NPRM, the statute provides exclusions to the phrase ``casino, 
gambling casino, or gaming establishment,'' but does not provide a 
further definition. One such exclusion refers to establishments that 
offer casino, gambling, or gaming activities incidental to the 
principal purpose of the business. With this exclusion in mind, we 
proposed to interpret the statutory reference to ``casino, gambling 
casino, or gaming establishment'' to mean an establishment with a 
primary purpose of accommodating the wagering of money. Based on the 
statutory definition provided, this does not include a grocery store 
which also offers, or is located within the same building or complex as 
a, casino, gambling, or gaming activities, or any other establishments 
where such activities are incidental to the principal purpose of the 
business. We are not making any changes to this proposed definition in 
this final rule.
    Comment: Generally, commenters agreed with our definition, but also 
provided suggestions to address specific concerns. For example, one 
state and one advocacy organization stated the definition does not 
address co-joined businesses such as a hotel, grocery store, or 
restaurant connected to or within the casino. In order to clarify the 
definition and ensure that it could not be interpreted broadly, one 
commenter recommended that we add language that prohibits the entrance 
of minors under the age specified by state law, similar to

[[Page 2097]]

that in the proposed definition of ``Retail establishment which 
provides adult-oriented entertainment in which performers disrobe or 
perform in an unclothed state for entertainment.''
    Response: We disagree that language that related to prohibiting the 
entrance of minors under the age specified by state law is necessary, 
and we do not believe it solves the problem the commenters identified. 
The law addresses co-joined businesses by excluding from the definition 
a grocery store which also offers, or is located within the same 
building or complex as a casino, gambling, or gaming activities. We 
defer to a state's reasonable interpretation of the statute, to 
determine what other types of establishments that the statute excludes 
from the definition of ``casino, gambling casino, or gaming 
establishment,'' including co-joined businesses.
    Comment: One state is concerned with the phrase, ``an establishment 
with a primary purpose of accommodating the wagering of money.'' The 
regulatory definition does not quantify what ``primarily'' means. 
Because this is one area where regulations could provide consistency 
between states, it recommends establishing criteria states can apply in 
making this determination.
    Response: We defer to states' reasonable interpretations on this 
part of the definition. States may have different approaches of 
determining whether a business satisfies this standard, and we do not 
find it necessary to draw a line, or to impose uniformity here, while 
we provide flexibility in other areas.
    Electronic Benefit Transfer Transactions: The final rule will 
incorporate the statutory definition of ``electronic benefit transfer 
transaction,'' which is ``the use of a credit or debit card service at 
an automated teller machine, point-of-sales terminal, or access to an 
online system for the withdrawal of funds or the processing of a 
payment for merchandise or service.''
    Comment: Our NPRM noted the broad nature of this language and that 
questions had been raised about whether it includes TANF assistance 
deposited directly by a state into a recipient's bank account (i.e., 
via EFT) and accessed with a personal debit card. We requested comments 
related to whether states and banks have, or reasonably could have, the 
capacity to apply the EBT transaction restrictions to assistance funds 
deposited in private bank accounts and to monitor whether recipients 
use such funds in a prohibited manner. We received many comments 
responding to this request, all of which were in agreement that the 
requirements should not be applied to personal debit cards, supporting 
their recommendations with information pertaining to the following: (1) 
Infeasibility, (2) negative consequences that would result from 
applying the requirements to personal debit cards, and (3) 
Congressional intent.
    Although one commenter acknowledged that it may be theoretically 
possible for a deposit account to consist of a sub-account for TANF 
funds and a subaccount for all other funds, all agreed that 
implementing such a requirement would be practically infeasible. If 
implemented, the banks would face requirements to identify customers 
who receive cash benefits, determine the dollars in a checking or 
savings account that are ``TANF'' dollars versus wages or other income 
from the state, such as child support. Requiring the entire United 
States banking system to develop the appropriate capabilities (TANF 
funds recipients could have deposit accounts at any of the nearly 7,000 
banks and thousands more credit unions in the U.S.) would result in an 
extraordinary burden and high costs. While one commenter stated that 
the banks would need to develop the ability to monitor where funds are 
used, as there is no current mechanism for a state to monitor the use 
of such funds, another stated that current bank infrastructure could 
not support identification of individual retailers. Commenters 
emphasized that the capacity and infrastructure to apply the 
requirements to personal bank accounts/debit cards simply do not exist 
at this point, and the costs that would need to be devoted to this 
effort would not outweigh the benefit.
    A few commenters maintained that because states could not actually 
implement procedures in order to comply with this requirement, they 
would have to discontinue the option of direct deposit. One commenter 
maintained that even if states provided the option of direct deposit, 
the difficulties with applying the statutory requirement to TANF 
assistance in personal bank accounts would provide disincentives for 
banks to work with TANF customers. Commenters argued these would be 
unfortunate consequences of this legislation because there are many 
benefits of being ``banked'' (e.g., the ability to avoid unnecessary 
fees for accessing benefits and paying bills, promoting savings and 
financial management, permitting TANF recipients to build a credit 
history, etc.). Commenters emphasized that diminishing the ability of 
TANF recipients to establish and maintain bank accounts conflicts with 
the broader TANF goals of promoting work and self-sufficiency, and that 
HHS should be encouraging states to provide benefits through direct 
deposit, not discouraging it.
    Finally, a number of commenters maintained that Congress did not 
intend to include transactions with personal debit cards within the 
definition of ``electronic benefit transfer transaction'' in Public Law 
112-96, and that only accounts established by a government agency were 
intended to fall within Congress's definition of EBT systems.
    Ultimately, all commenters recommended that the restrictions not 
extend to TANF funds deposited into private bank accounts. One advocacy 
group recommended that if, in the future, there is sufficient evidence 
that TANF assistance recipients' use of bank accounts to purchase 
prohibited goods and services threatens the integrity of the TANF 
program, any new expansion of the current restrictions should be added 
only within the context of a full TANF reauthorization.
    Response: HHS considered all of the comments received. The broad 
statutory definition of ``electronic benefit transfer transaction,'' 
applies to TANF funds deposited in private bank accounts because the 
funds can be accessed using a credit or debit card, ATM, point-of-sale 
terminal, or an online system for the withdrawal of funds or the 
processing of a payment. However, HHS recognizes that TANF recipients 
may have private bank accounts that include TANF funds as well as 
income from other sources, including earnings from employment, 
refundable tax credits for working families, and child support. Because 
there is currently no feasible way to distinguish TANF funds from other 
sources in a private bank account, states are responsible for 
implementing policies and practices that apply to transactions using or 
accessing TANF funds directly deposited in private bank accounts, only 
in cases where TANF is the sole source of funds in those accounts. 
Further, given the current state of technology, we have concluded that 
there is no feasible enforcement mechanism for funds in private bank 
accounts, and therefore the state may meet the requirements of this 
regulation by providing notice to recipients that they cannot access 
TANF funds from private bank accounts at a prohibited location.
    Comment: One state maintained that the definition of ``electronic 
benefit transfer transaction'' should not include EPCs, which the state 
described as ``non-government issued, payee owned, pre-paid debit card 
loaded via `electronic funds transfer.''' The

[[Page 2098]]

commenter maintained that only accounts established by a government 
agency were intended to fall within Congress's definition of EBT 
systems.
    Response: HHS disagrees with the state's reading of the statute, 
given the definition of ``electronic benefit transfer transaction'' is 
so broad, as discussed above.
    Comment: We received many comments regarding whether or not 
internet transactions should be included in the definition of 
``electronic benefits transfer transaction.'' All commenters agreed 
that the regulations should not extend to internet transactions, 
particularly at this time. A few commenters noted that language in the 
statute, such as ``establishment,'' ``store,'' ``located in a place,'' 
and ``transaction in,'' suggests that the intent of Congress was to 
prevent TANF benefits from being used at certain physical locations. 
One commenter stated that the term ``online system'' in the definition 
of ``electronic benefit transfer transaction'' is vague because one may 
interpret it as payments made in near real time, such as the use of 
debit cards for purchases at a merchant location, or as the purchase of 
goods and services over the internet. The commenter argued most 
consumers understand ``online system'' to include purchases of goods 
and services via the internet, but suggests that we clarify this in the 
regulation. Another commenter argued that Congress intended to create 
an enforceable approach by limiting transactions to physical locations. 
While this comment did not object on principal to regulating internet 
transactions, it, along with responses from other commentators, 
explained that the logistics of applying this restriction to internet 
transactions would be unfeasible. Some comments suggested that the 
restrictions should apply if and when states can feasibly monitor such 
transactions and/or when data shows that online TANF assistance 
spending on prohibited goods and services becomes a major problem.
    Response: We agree the terms ``establishment,'' ``store,'' 
``located in a place,'' and ``transaction in'' point to Congress's 
intent to apply the requirements only to physical locations and not 
internet transactions. Therefore, the regulations do not apply to web-
based transactions. If the technology allows, a state has the 
flexibility to restrict internet transactions with EBT cards, but 
federal law does not require it.
    Liquor Store: The final rule will incorporate the statutory 
definition of ``liquor store,'' which is ``any retail establishment 
which sells exclusively or primarily intoxicating liquor. Such term 
does not include a grocery store which sells both intoxicating liquor 
and groceries including staple foods (within the meaning of section 
3(r) of the Food and Nutrition Act of 2008 (7 U.S.C. 2012(r))).''
    Comment: Five commenters commented on the definition of ``liquor 
store,'' with most supporting the approach of mirroring the definition 
in the statute. We also received a few recommendations for clarifying 
the definition. For example, one state highlighted the fact that the 
regulatory definition does not quantify what ``primarily'' means, and 
that this is one area where regulations could provide consistency 
between states by establishing certain criteria states can apply in 
making this determination.
    Response: Regarding the recommendation to quantify what 
``primarily'' means, just as in the definition of ``casino, gambling 
casino, or gaming establishment,'' we defer to states' reasonable 
interpretations on this part of the definition. States may have 
different ways of determining whether a business satisfies this 
standard, and we do not find it necessary to draw a line, or to impose 
uniformity here, while we provide flexibility in other areas.
    Comment: A few commenters pointed out that ``liquor'' has a very 
specific definition that sets it apart from other types of alcoholic 
beverages such as beer and wine. The commenters maintained that since 
the term ``liquor'' is used instead of ``alcohol,'' places that sell 
beer and wine only do not fall under this definition. They recommended 
that states should be given the flexibility to implement the definition 
in a way that best suits their state and local laws and population.
    Response: We disagree and continue to interpret Congress's use of 
``liquor'' to refer to alcohol broadly, including beer and wine, so 
that the term ``liquor store'' is inclusive of locations that serve 
primarily alcoholic beverages.
    Retail Establishment which Provides Adult-Oriented Entertainment in 
which Performers Disrobe or Perform in an Unclothed State for 
Entertainment: In the NPRM we proposed to clarify the intended 
locations to which restrictions apply, by adding ``such an 
establishment that prohibits the entrance of minors under the age 
specified by state law'' to the statutory definition. However, after 
considering the comments received and for the reasons discussed in the 
response below, we have decided against adding this language to the 
statutory definition. Since we are no longer expanding upon the 
statutory definition, we are not including this term in the list of 
definitions at 45 CFR 264.0 of the final regulation.
    Comment: Seven commenters commented on the proposed definition of 
``retail establishment which provides adult-oriented entertainment in 
which performers disrobe or perform in an unclothed state for 
entertainment.'' Only one commenter believed that it accurately 
described the types of locations where Congress intended to restrict 
access, and provided states with sufficient clarity to implement these 
provisions. All other commenters expressed concern about the statement 
we proposed to add to the statutory definition. They believed the 
proposed regulation expands the scope of prohibited establishments as 
it might be read to include book stores or establishments that serve 
liquor by the drink, and maintained that the statutory wording is clear 
and should be retained. Some comments also noted that not all states 
have a state law establishing entrance restrictions based on age with 
respect to places that provide entertainment where performers disrobe 
or perform in an unclothed state. In many states, local ordinances 
rather than state law apply to such establishments, and can vary 
considerably from jurisdiction to jurisdiction.
    Response: While we disagree that the addition of ``such an 
establishment that prohibits the entrance of minors under the age 
specified by state law'' expands the scope of prohibited 
establishments, we understand it can be problematic given the variation 
among states regarding whether state laws or local ordinances apply to 
these types of establishments. We are therefore removing this language 
and encourage states to exercise the flexibility provided by the 
statute to build on the required restrictions, with respect to any of 
these types of establishments, consistent with state and local 
policies. The term ``retail establishment which provides adult-oriented 
entertainment in which performers disrobe or perform in an unclothed 
state for entertainment'' itself is descriptive and specific, so we 
have decided it is not necessary to add a definition at Sec.  264.0.
    Comment: One commenter noted that we interpreted the statutory 
definition as applying beyond live entertainment, specifically to 
theaters and cinemas where state law prohibits entrance to minors under 
the age specified by state law. This commenter recommended that the 
restriction be limited to establishments that provide live 
entertainment.

[[Page 2099]]

    Response: We disagree that the statute applies only to 
establishments that provide live adult entertainment. We see no reason 
to exclude stores and theaters that exclusively or primarily sell or 
feature adult-oriented videos and movies.
Section 264.60 What policies and practices must a State implement to 
prevent assistance from being used in electronic benefit transfer 
transaction in locations prohibited by the Social Security Act?
    This final rule adds Sec.  264.60 under subpart A, which requires 
states to implement policies and practices to prevent assistance 
(defined at Sec.  260.31(a)) provided with federal TANF or state TANF 
MOE funds from being used in any electronic benefit transfer 
transaction in any: (a) Liquor store; (b) casino, gambling casino or 
gaming establishment; or (c) retail establishment which provides adult-
oriented entertainment in which performers disrobe or perform in an 
unclothed state for entertainment. The NPRM often used the phrase 
``policies and procedures'' in the discussion of this section. The 
final rule revises the language, instead referring to ``policies and 
practices,'' in order to mirror the statutory language. As we proposed 
in the NPRM, HHS will accept any reasonable approaches that further 
these goals and comply with the statutory and regulatory requirements. 
States' policies and practices must prohibit the use of TANF funds at 
the specified locations, while ensuring reasonable access to cash 
assistance, as directed by Congress.
    Comment: We received several comments from states supporting our 
statements in the NPRM that states would have ``flexibility in 
determining appropriate policies and practices'' and that we would 
accept ``any reasonable approaches'' states use to implement the 
transaction restrictions. For example, one commenter commented that we 
should not use our authority within this law to restrict state 
flexibility without a compelling reason, and that we should make 
reasonable choices that help promote employment and economic self-
sufficiency (to the extent that the ambiguity in the statutory language 
allows). Additionally, a few commenters argued that as technology 
evolves rapidly, regulations should allow room for approaches that have 
not been developed at this time. On the other hand, a few commenters 
stated that we should ``provide more of a standard so that there is 
more consistency in the calculation and then the implementation of the 
penalties.'' One advised that an over-arching framework for 
implementing the restrictions in the law should be shaped by the goals 
of TANF, and that we should avoid overly-broad interpretations of the 
law that would undercut rather than further the Congressional intent to 
bolster public confidence in TANF's program integrity. Another 
suggested that the proposed rule needs to be more stringent.
    Response: We believe that, given the various types of systems 
states use to deliver TANF assistance, it is important to provide 
states flexibility to implement policy and practices that comply with 
these statutory and regulatory requirements. Our intention is to inform 
states of their options while ensuring they fulfill the provisions of 
the law. These options include: Requiring that third-party processor 
agreements include language related to the TANF prohibitions; requiring 
retailers to meet certain eligibility criteria in order to accept EBT 
cards or EPCs; reviewing and revising state licensing requirements for 
casinos, liquor stores, and adult entertainment venues to include 
conditions for license issuance related to restricting TANF benefit 
use; amending or creating new educational materials for cardholders and 
retailers; pre-screening retailers prior to authorizing them to accept 
EBT cards; engaging EBT vendors to determine possible procedures for 
identifying electronic benefit transfer transactions with TANF 
assistance at prohibited locations; requiring cardholders to agree in 
writing not to use TANF assistance at prohibited locations as a 
condition of receipt; engaging relevant business owners, for example 
through the appropriate state licensing agencies, and instructing 
retailers to refuse EBT cards or EPCs at their locations; requiring 
that relevant business owners or ATM owners post a notification that 
EBT cards or EPCs may not be used for purchases or cash withdrawal at 
prohibited locations. While states may impose sanctions, assign a 
protective payee, or impose a conciliation process for individuals 
found in violation, the statute does not require that states do so.
    In their initial reports, a few states described procedures that 
involve informing recipients and/or owners of the restricted businesses 
of the rules (e.g., via letter, flyer, or brochure; posting information 
on TANF and regulatory agencies' Web sites; displaying posters that 
detail the EBT restrictions in relevant establishments or local welfare 
offices), without taking additional actions that aim to ensure the 
relevant parties are complying with the policy. Absent final rules, ACF 
accepted such approaches as complying with the statutory requirements. 
However, with the publication of this final rule, we clarify that 
notification approaches are only sufficient in situations where further 
action is not feasible, such as in the case of TANF funds accessed from 
private bank accounts or TANF funds used in other states. Where 
possible, we expect states to implement procedures that enforce 
policies, and take corrective actions when instances of non-compliance 
or ineffectiveness are identified.
    Comment: One state pointed out that Sec.  264.60 leaves out the key 
words ``as necessary'' following the phrase, ``states are required to 
implement policies and practices.'' Another state suggested replacing 
the word ``use'' with ``access'' in the proposed Sec.  264.60 heading 
and elsewhere in the narrative to carry a clearer meaning.
    Response: We agree that the words ``as necessary'' should be added 
to the regulation in order to be consistent with the statute. Regarding 
the proposed language change from ``use'' to ``access,'' the statute 
itself refers to ``use in electronic benefit transfer transaction.'' We 
think the best approach is to track the statutory language as much as 
possible. Therefore, we maintain the current text.
    Comment: A few commenters expressed concern with approaches that 
focus on penalizing individuals rather than preventing transactions in 
the first place, as they do not further public support for the program 
and place too much of the burden for compliance on recipients. Yet 
another commenter stated that we should not encourage states to have 
vendors post public signs because they unfairly stigmatize and shame 
public benefits recipients. These commenters suggested that we indicate 
to states that if a non-systemic approach to preventing TANF EBT use at 
prohibited locations (e.g., centralized electronic blocking of 
prohibited transactions) is not reasonably effective, then compliance 
actions will require a more systemic approach to prevention. They also 
argued that we should stress that prevention rather than severity of 
penalties furthers the goal of the legislation.
    Response: We appreciate this suggestion, and while we encourage 
comprehensive policies and practices that involve more than one method 
of preventing TANF EBT use at prohibited locations (e.g., notices to 
merchants coupled with monitoring of transaction records), we do not 
prescribe one specific approach or set of approaches. The intent of the 
law is to prevent transactions in the designated locations, and there 
is good reason to believe that

[[Page 2100]]

prevention cannot be achieved by placing the entire burden on the 
individual. At the same time, given the broad discretion that states 
have under TANF, we do not believe that there is a basis for us to 
require any specific approach so long as a state's approach is 
reasonable.
    We do encourage states to periodically evaluate the effectiveness 
of their policies and practices, and adapt or revise them as necessary. 
In doing so, they maintain the flexibility afforded by the regulation 
to implement either systemic or non-systemic approaches. We have 
suggested a number of options for how states may structure policies. We 
require states to describe how they plan to correct for non-compliance 
and ineffectiveness in the annual report.
    Comment: Two commenters stated that bank identification number 
(BIN) blocking at the point of sale cannot be done systematically as of 
now, though they do point out it is possible at ATMs. One of these 
commenters also suggested that we require that a TANF agency or its EBT 
vendor notify relevant merchants that they must contact the third party 
processor (that routes electronic transactions through the commercial 
debit and credit networks) with which they have a processing agreement 
and request that the third party processor disable or remove EBT access 
from their (the relevant merchant's) account. Further, the commenter 
suggested that we require merchants to have their processors send the 
merchant category code in the authorization message when an EBT card is 
swiped at the point of sale, and the TANF agency or its EBT vendor 
could then make a decision to approve or decline the transaction based 
on the merchant category code. Yet another commenter suggested that it 
would be easiest for states to require that all existing ATMs be 
reprogrammed and merchants would then have to apply to determine if 
they could be authorized to use EBT funds.
    Response: We apologize for our error in stating that a state may 
systematically prevent transactions via BIN blocking at the point of 
sale. Additionally, we appreciate these commenters' suggestions for 
ways states may comply with the statute, but note that, as we explained 
above, we do not prescribe any one approach for states to implement. 
Again, states may develop approaches that are cost effective and fit 
within the existing structure of state operations, yet at the same time 
meet the requirements of the law.
    Comment: One state recommended that we identify and address the 
differences between EBT and EPC when discussing the options for 
complying with the requirements, in particular with respect to the four 
components of reports. Specifically, HHS should acknowledge that EPC 
and EBT cards are subject to different federal laws and regulations, as 
well as industry and network standards depending on the type of card, 
then discuss options and any unique limitations or issues for policies 
and procedures related to each type of card within each component.
    Response: We understand the unique challenges associated with EPCs, 
and we have been mindful of limitations as we have reviewed state 
reports. For example, we are aware that banking and privacy laws 
prevent states from receiving transaction information that would allow 
them to track the places where individuals redeem their benefits (with 
very limited exceptions). The Privacy Act of 1974 (at 5 U.S.C. 552a) 
protects individuals' information maintained by federal agencies and 
the federal Right to Financial Privacy Act (at 12 U.S.C. 3401) protects 
personal and financial information of bank customers from disclosure to 
governmental agencies by banks and their agents. We are mindful of the 
limitations and will take them into consideration as we review state 
reports. States that use EPCs described in their initial reports 
policies and practices including: Blocking certain merchant category 
classification codes so as to prohibit the usage of the cards in 
businesses meeting the definition within the law; conducting outreach 
to businesses to educate impacted vendors and retailors on the 
prohibition; ensuring recipients are aware of the prohibition by 
informing applicants and re-applicants through notification; and 
assigning a protective payee to cases where it comes to the attention 
of the county eligibility worker or the TANF program administrator that 
an adult member of the household has demonstrated inappropriate use of 
funds. Regarding monitoring procedures, in its initial EBT transaction 
report submitted by the February 22, 2014 deadline, one state described 
a process for sending an electronic file to IRS approximately once a 
month for all new and current recipients in order to identify any 
gambling winnings claimed on tax returns; this information is used as a 
lead to determine possible fraud. Another state's EBT transaction 
report explained that the state TANF program receives a monthly Program 
Market Segment Report from the financial institution that issues the 
state's EPCs. The Program Market Segment Report displays merchant 
category codes, the cardholder count that completed a transaction at 
each type of business, the number of transactions completed, the 
percent of the total transactions by merchant category code, and the 
transaction amount by merchant category code. This information allows 
the state to monitor card and transaction activity.
    Comment: One state commented that states that have commingled funds 
in EBT accounts, such as child support funds, should not be required to 
restrict access to non-TANF programs. One state suggested that 
regulations should allow flexibility in this area and allow states to 
define policies and practices that restrict TANF but allow access for 
the other cash program benefits comingled with the TANF funds in the 
EBT accounts.
    Response: We agree that states have flexibility to define policies 
and practices that restrict TANF but allow access to the other cash 
program benefits that may be on a benefit card. We emphasize that the 
statutory restriction here solely applies to TANF assistance, not to 
child support funds or to other family benefits or resources other than 
TANF assistance.
    Comment: A few commenters expressed concern that certain terms in 
the NPRM indicated we would not support state flexibility, namely 
``consistently applied,'' ``required to block,'' and ``adequately 
implement.'' The commenters suggested that using such terms may lead 
states to feel compelled to adopt specific suggestions. A few 
commenters requested that we not include a specific list of four 
required reporting components (which are identifying locations; methods 
to prevent use of TANF assistance via EBT transactions in restricted 
locations; monitoring; and enforcement of compliance) in regulations, 
as doing so limits flexibility.
    Response: It was not our intention to limit state flexibility or be 
overly prescriptive, but rather to ensure that we receive complete 
reports describing the procedures states have chosen to implement to 
comply with the statutory requirements. We maintain that for states to 
demonstrate that they are implementing the required policies and 
practices, their implementation strategies must address all four 
components identified. At the same time, states have flexibility within 
each category with respect to the specific policies and practices they 
choose to implement. For further information on this topic, see the 
discussion related to Sec.  265.9 below, which explains our actions in 
relation to this issue. As

[[Page 2101]]

stated there, we are revising the text of the four components, but not 
eliminating the requirement.
    Comment: We received a few comments responding to suggestions 
presented in the NPRM for how states can identify locations specified 
in the law. In particular, one state seems to believe that we proposed 
requiring states to maintain a list of the establishments subject to 
the restrictions, and for state TANF agencies to provide a separate and 
additional notification to impacted merchants. The state recommended 
that we allow states to comply with the requirements of Public Law 112-
96 by requiring the appropriate state licensing agency to notify the 
entities that license businesses that are subject to the prohibitions, 
through broader public notice of the requirements for such locations to 
restrict access, by conducting periodic targeted reviews of EBT 
transactions, by following up on suspect locations, and by establishing 
appropriate penalties for the venues violating the restrictions. 
Additionally, one commenter warned against relying on internet 
searches, and suggested that states attempt to work through national 
associations of these businesses and their state affiliates.
    Response: We did not intend to imply that we are requiring a 
particular method for identifying locations subject to the 
requirements. Similarly, we do not require states to maintain a list of 
affected businesses. We want states to describe their processes for how 
they identify locations subject to these requirements in their reports. 
However, because the method or combination of methods states use for 
identifying locations depends on the policies and practices they 
implement, states should have flexibility in deciding how best to do 
so. For example, if a state's policy involves monitoring transaction 
reports, ``identifying locations'' could mean developing criteria for 
being able to recognize on the transaction reports that a transaction 
occurred at one of the three types of locations (e.g., what words or 
data elements do reviewers look for?). A state that blocks access at 
certain locations should describe its procedures for determining which 
locations should be blocked. Other ways states may identify locations 
subject to the TANF statutory requirements include working with 
entities that license businesses or national associations of these 
businesses and their state affiliates, using merchant category codes, 
or having states apply for an authorization to accept a state's benefit 
card based on the percentage of their gross revenue that is derived 
from the sale of alcoholic beverages, legalized games of chance, 
sexually oriented materials, coin-operated amusement machines, etc.
    Comment: We received one comment in relation to preventing access 
to TANF cash assistance by state programs at any type of business 
specified in the law that is located on tribal land. This commenter 
believed we inappropriately overstepped tribal authority because we 
``extended'' the requirements to tribal programs.
    Response: We reiterate that we are not extending the requirements 
to tribal TANF programs. We agree that Congress did not apply these 
requirements to TANF assistance administered by a tribal TANF program. 
However, states do have a responsibility to develop appropriate 
policies for preventing TANF cash assistance administered by state 
programs from being used at any of the three types of businesses, 
including those located on tribal land, to the extent practicable. As 
we stated in the NPRM, we encourage states to work with tribes to try 
to prevent state TANF assistance from being used at the prohibited 
locations on sovereign tribal land. We would consider it sufficient for 
states to provide notice to recipients that the prohibition of use 
extends to tribal lands.
    Comment: We received two comments related to whether a state should 
be responsible for restricting use of its TANF assistance in another 
state. Both maintained that it would be too challenging and costly for 
states to attempt to block transactions in businesses located in other 
states and recommended that we not require states to restrict 
transactions at locations outside their borders. At the same time, 
Illinois pointed out that this would not prevent states from reviewing 
and following up on cardholders' out-of-state spending of TANF benefits 
in the three restricted types of businesses.
    Response: We did not include a discussion of this issue in the 
preamble of the NPRM, and think it is important to provide clarity in 
the final rule. States are responsible for restricting transactions 
using state-provided assistance at prohibited locations whether or not 
the transaction occurs within the state. We recognize the infeasibility 
of restricting transactions in other states; and, therefore, the agency 
would consider providing a notice to recipients to be sufficient 
implementation of a policy or practice with respect to out-of-state 
transactions.
    Comment: We received a few comments regarding access and fees, 
raising concerns about protections for those living in isolated areas 
and noted that the regulations do not provide any exceptions or 
guidelines about how states may ensure access to cash assistance. 
Further, they highlighted that the statute's requirement to ensure 
access to cash assistance and minimal fees may benefit recipients, as 
the yearly amount of surcharges associated with cash assistance 
withdrawals is extraordinarily high. To minimize fees, they suggested 
that states allow a certain number of free withdrawals per month or 
eliminate withdrawal surcharges. One commenter suggested that the 
regulations should require states to allow TANF recipients to choose 
between benefits via direct deposit or an EBT card. It also suggested 
that the regulations should specify the ways in which states may 
implement guaranteed, surcharge free transactions (e.g., free ATM 
balance inquiries and surcharge subsidies), and HHS should provide 
technical assistance to states about promising practices for 
guaranteeing access.
    Response: We believe it is critical that states take steps to 
ensure access to cash assistance and minimize, or eliminate, fees for 
families who are working toward self-sufficiency. We strongly encourage 
states to develop strategies to ensure adequate access to benefits, 
such as guaranteeing a minimum number of free cash withdrawals per 
month or providing new options for cash assistance withdrawal in 
isolated areas. We will continue to work with states on an individual 
basis regarding these strategies.
    Finally, we want to reiterate that while one of the new state plan 
requirements at Sec. 4004(c) of Public Law 112-96 conveys a clear 
emphasis that states ensure adequate access to cash assistance for 
recipients, this language does not provide states the option to avoid 
imposing a restriction at an ATM or POS terminal located in any of the 
three types of specified businesses in order to ensure adequate access. 
Rather, it conveys a responsibility for states to take corrective 
actions to increase locations where TANF recipients may access their 
cash assistance if they find that there are an insufficient number of 
access points in a geographic area.
Section 264.61 What happens if a state fails to report or demonstrate 
it has implemented and maintained the policies and practices required 
in Sec.  264.60 of this subpart?
    We are adding a Sec.  264.61 to address the penalty associated with 
the new requirements. Under paragraph (a), HHS will impose a penalty of 
not more than five percent of a state's adjusted SFAG

[[Page 2102]]

for failure to submit annually a report demonstrating the state's 
implementation of policies and practices to prevent EBT use in the 
locations specified in Public Law 112-96. Under paragraph (b), HHS will 
impose a penalty of not more than five percent of a state's adjusted 
SFAG each fiscal year succeeding FY 2014 in which the state does not 
demonstrate it has implemented and maintained the required policies and 
practices. Note that we have revised the phrasing we used in the NPRM 
for the title of this section in order to clarify that the penalty will 
be imposed for a state's failure to demonstrate in the report its 
implementation and maintenance of policies and practices, rather than a 
failure to implement and maintain the policies and practices.
    In order to meet this requirement, states' reports must fully 
explain the policies and practices that are being implemented and 
maintained. Note that if a state submits a late report and once 
submitted, also fails to demonstrate its implementation of policies and 
practices, the combined penalty will not exceed five percent of its 
adjusted SFAG. Any deficiencies that arise with respect to a state's 
reporting of its EBT policies and practices in the Annual Report (i.e., 
for failure to submit a complete or timely report) will not trigger a 
separate penalty under 45 CFR 262.1(a)(3) or 265.8.
    All penalties will be imposed in accordance with 45 CFR part 262, 
which provides states with procedures for appealing a penalty, and 
submitting a reasonable cause justification or corrective compliance 
plan.
    Furthermore, Sec. 409(a)(16)(C) of the Act, as amended by Sec. 
4004(b) of Public Law 112-96 provides HHS the discretion to reduce the 
penalty amount based on the degree of noncompliance of the state. Sec. 
409(a)(16)(C) of the Act, as amended by Sec. 4004(b) of Public Law 112-
96, also specifies that ``Fraudulent activity by any individual in an 
attempt to circumvent the policies and practices required by Sec. 
408(a)(12) shall not trigger a state penalty under subparagraph (A);'' 
as such, HHS will not base any penalty on such information. We have 
added paragraphs (c) and (d) in this section of the regulation, 
incorporating these two provisions of the statute.
    Please see discussion after 45 CFR 262.1 for comments and responses 
related to these penalty provisions.

Part 265--Data Collection and Reporting Requirements

Section 265.9--What information must the state file annually?
    In response to comments expressing concern over the burden of 
having a separate annual report due on February 22 of each fiscal year, 
we are amending Sec.  265.9, by adding paragraph (b)(10) to state that 
in accordance with Sec. Sec.  264.60 and 264.61, a report of policies 
and practices to prevent assistance (defined at Sec.  260.31(a)) 
provided with federal TANF or state TANF MOE funds from being used in 
any electronic benefit transfer transaction in any liquor store; any 
casino, gambling casino, or gaming establishment; and any retail 
establishment which provides adult-oriented entertainment in which 
performers disrobe or perform in an unclothed state for entertainment. 
In an effort to receive reports that demonstrate whether states have 
implemented and maintained the required policies and practices, we are 
revising the Annual Report on TANF and MOE Programs under 45 CFR 
265.9(b). In doing so, we will require states to complete four 
sections, specifying: (1) Procedures for preventing the use of TANF 
assistance via electronic benefit transfer transactions in any liquor 
store; any casino, gambling casino, or gaming establishment; and any 
retail establishment which provides adult-oriented entertainment in 
which performers disrobe or perform in an unclothed state for 
entertainment; (2) how the state identifies the locations specified in 
the statute; (3) procedures for ongoing monitoring to ensure policies 
are being carried out as intended; and (4) how the state plans to 
respond to findings of non-compliance or program ineffectiveness. We 
believe that for states to demonstrate that they are implementing the 
required policies and practices, their implementation strategies must 
address all four components identified. At the same time, states have 
flexibility within each category with respect to the specific policies 
and practices they choose to implement.
    Comment: We received several comments responding to the expectation 
that states establish and report annually on policies and practices in 
four specific areas identified in the NPRM, namely: (1) Identifying 
locations; (2) preventing the use of TANF assistance via EBT 
transactions; (3) monitoring; and (4) enforcement of compliance. While 
two commenters agreed with our proposed framework and believed it would 
support the integrity of the program, other commenters argued that 
following this requirement would be labor intensive, cost prohibitive, 
and contrary to the philosophy of state flexibility in a block grant 
program. Some argued that states should have the flexibility to develop 
policies and practices best suited to them, which might not match the 
four stated areas. One state argued that requiring that reports address 
these four areas exceeded statutory authority and suggested that the 
four specific areas serve as suggestions for state policy rather than 
requirements. This commenter further suggested that we could require 
states to report on all four specified components, but allow states to 
determine whether to establish policies in these areas or not. If a 
state chose not to, it would assert that in the report. One commenter 
characterized these four specific components as requirements beyond 
those in the statute, and that they should not be made mandatory.
    Response: We disagree with the suggestion that requiring this 
reporting exceeds statutory authority, as the statute provides us the 
authority to reduce a state's block grant if the ``Secretary 
determines, based on the information provided in State reports, that 
any State has not implemented and maintained such policies and 
practices.'' We are requiring the four areas in the reports, but are 
changing the descriptions of the third and fourth to be clearer about 
what these terms mean. Instead of ``monitoring,'' the third component 
should read ``ongoing monitoring to ensure policies are being carried 
out as intended;'' and instead of ``enforcement of compliance,'' the 
fourth component should read ``plans to respond to findings of non-
compliance and/or program ineffectiveness.'' This way, we do not imply 
that specific practices, such as monitoring of transaction reports, are 
required. At the same time, reports must describe how states will 
review and evaluate the policies and practices implemented, and correct 
any particular aspects that are not leading to the intended results.
    Comment: Two commenters argued that states should be required to 
publish their annual reports online, in order to make this information 
publicly available. Commenters also argued that we should encourage 
information sharing among states by establishing venues for the 
exchange of information about program costs and successes.
    Response: We are not requiring states to publish their annual TANF 
and MOE reports online, but encourage states to do so. States also have 
many existing means to share information with each other, and we 
support states continuing to do so. ACF's Office of Family

[[Page 2103]]

Assistance will explore the feasibility of posting these reports on 
their Web site.

VI. Paperwork Reduction Act

    This rule establishes new information collection requirements in 
Sec. Sec.  262.3(g) and 265.9(b)(10) of the TANF regulations. This 
collection is subject to review by the Office of Management and Budget 
(OMB) under the Paperwork Reduction Act of 1995 (the PRA) (44 U.S.C. 
3501-3520). We did not receive any public comments on the specific 
burden hour estimate identified in the proposed rule. The information 
collection requirements, as described below, are identical to those 
contained in the proposed rule (OMB control number 0970-0437). However, 
now that the initial reporting due February 22, 2014, has passed, we 
have reduced the burden hour estimate by half. We also note that we 
will incorporate this reporting requirement into the Annual Report on 
TANF and MOE Programs under 45 CFR 265.9(b), and will obtain OMB 
approval for a standard form before the next information collection is 
due. The annual report is due at the same time as the fourth quarter 
TANF data report, or within 45 days following the end of the fourth 
quarter.
    As required by the Paperwork Reduction Act of 1995, codified at 44 
U.S.C. 3507, ACF will submit a copy of these sections to the Office of 
Management and Budget (OMB) for review and they will not be effective 
until they have been approved and assigned a clearance number.

----------------------------------------------------------------------------------------------------------------
                                                                                Average  burden
                 Requirement                     Number of          Yearly      per  respondent   Total  burden
                                                respondents       submittals        (hours)           hours
----------------------------------------------------------------------------------------------------------------
Annual reporting on policies and practices                54                1               20            1,080
 to prevent TANF assistance from being used
 in electronic benefit transfer transactions
 in liquor stores; casinos, gambling
 casinos, or gaming establishments; or any
 retail establishment which provides adult-
 oriented entertainment in which performers
 disrobe or perform in an unclothed state
 for entertainment..........................
----------------------------------------------------------------------------------------------------------------

    We estimate the costs of implementing these requirements will be 
approximately $54,000 annually. We calculated this estimate by 
multiplying 1,080 hours by $50 (average cost per hour).

VII. Regulatory Flexibility Act

    The Secretary certifies under 5 U.S.C. 605(b), as enacted by the 
Regulatory Flexibility Act (Pub. L. 96-354), that this final regulation 
will not result in a significant impact on a substantial number of 
small entities. We note that any impact on businesses emanates from 
statutory mandate and the policies that states adopt in implementing 
the statutory requirement.
    In order to address potential concerns of the types of 
establishments specified in the statute, as well as state EBT vendors, 
HHS has drafted the regulation in a manner that minimizes the impact on 
businesses, including small businesses, by providing states flexibility 
when implementing policies and practices that comply with the new 
requirements. In particular, states have the flexibility to implement 
approaches that do not place significant burden or impose large costs 
on their EBT vendors, small businesses, or any particular party. 
Therefore, any costs resulting from policies under which states require 
action by small entities, including small businesses, are the result of 
choices states make when implementing the statutory requirements.
    The direct primary impact of this final regulation is on state 
governments. State governments are not considered small entities under 
the Act.

VIII. Regulatory Impact Analysis

    Executive Orders 12866 and 13563 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts and equity). Executive 
Order 13563 emphasizes the importance of quantifying both costs and 
benefits, of reducing costs, of harmonizing rules, and of promoting 
flexibility. This rule meets the criteria for a significant regulatory 
action under E.O. 12866 and has been reviewed by OMB. For the reasons 
set forth below, ACF does not believe the impact of this regulatory 
action would be economically significant and that the annual cost would 
fall below the $100 million threshold.
    Costs. We received a few comments regarding the costs associated 
with the implementation of the regulation. Individual commentators 
raised general concerns about the regulation's cost/benefit ratio and 
the impact on TANF spending. A few commenters expressed concern that 
states will reallocate TANF money from direct services to resources for 
implementing this regulation.
    Commenters also noted that the regulation's benefits do not 
outweigh its costs, as implementation costs are so large and the 
percentage of TANF cash assistance recipients using EBT cards on 
prohibited transactions is so small. One of these commenters noted that 
some states have considered ending EBT programs and reinstating paper 
checks to exempt themselves from the regulatory requirements. They 
suggested increasing state flexibility in implementing the regulation 
by removing the four components that states must include in their 
implementation report listed in the proposed provision at 45 CFR 
262.3(g).
    We understand that this regulation will impose new costs on states. 
In response to this issue, we have provided flexibility in meeting the 
regulatory requirements so that states may develop cost-effective 
implementation strategies that fit within the existing structure of 
state operations. In general, the costs associated with implementation, 
and the parties that bear these costs, largely depend on the policies 
and practices a state chooses to in enact order to comply with the 
statutory requirements.
    Nevertheless, regardless of the approach a state may take when 
implementing policies in order to comply with the statute and 
regulations, there will be, at a minimum, administrative costs for the 
state agency responsible for administering the TANF benefits. We 
recognize that states will spend funds on the following types of costs 
to implement the changes in order to complete the annual progress 
report to ACF:

    [ssquf] Costs to identify the prohibited locations;
    [ssquf] Costs to modify existing tracking of recipient use of 
electronic benefits and/or electronic banking;
    [ssquf] Costs to monitor recipient use of electronic benefit 
transfers;
    [ssquf] Costs to investigate and follow up on violations of 
electronic benefit transfers;
    [ssquf] Cost to process and respond to appeals.


[[Page 2104]]


    With regard to the reporting requirement, based on our estimate 
described under the Paperwork Reduction Act section of this preamble, 
the total costs for all states to comply with this requirement would 
fall well below the $100 million threshold. We will not remove the four 
components of the report, as commenters recommended. We do agree that 
the language in the components should be clarified (see discussion of 
regulation at Sec.  265.9, above). It was not our intention to limit 
state flexibility or be overly prescriptive. The report components we 
have identified reflect general elements of all policies and practices 
that reflect full compliance with the statute, not specific policies 
and practices. As demonstrated by the initial reports states submitted 
in response to the statutory requirement, a majority of states have 
implemented sufficient policies and practices that take into account 
each of these components. Furthermore, by identifying these components 
in a standard form, we are ensuring that states take a comprehensive 
approach to composing their policies and practices, and that ACF 
receives complete reports describing the procedures states have chosen 
to implement.
    Additionally, the statutory requirements and regulation provide 
potential benefits that coincide with the goal of financial 
responsibility. For example, the policies and practices that states 
implement may result in reductions in inappropriate expenditures of 
government funds, and emphasize to recipients that they should ensure 
assistance is spent only on basic needs. There may also be 
opportunities to educate recipients on financial management and on ways 
to minimize access fees.
    Need for the Regulation: These regulations incorporate statutory 
changes to the TANF program enacted in the Middle Class Tax Relief and 
Job Creation Act of 2012 (Pub. L. 112-96). This regulation is limited 
to the penalty provisions of Section 4004 of Public Law 112-96. Because 
states have a range of systems for disbursement of assistance, and a 
number of questions have arisen regarding the applicability and 
requirements of the statutory language, HHS has published this 
regulation in order to clarify for states the information they should 
submit in order to avoid a penalty.

IX. Unfunded Mandates Reform Act of 1995

    Section 202 of the Unfunded Mandates Reform Act of 1995 requires 
that a covered agency prepare a budgetary impact statement before 
promulgating a rule that includes any federal mandate that may result 
in the expenditure by state, tribal, and local governments, in the 
aggregate, or by the private sector, of $100 million or more in any one 
year. HHS has determined that this rule will not result in the 
expenditure by state, local, and tribal governments, in the aggregate, 
or by the private sector, of more than $100 million in any one year.
    For more detail regarding estimated costs, see the section 
containing the Regulatory Impact Analysis.

X. Congressional Review

    This regulation is not a major rule as defined in the Congressional 
Review Act or CRA (5 U.S.C. Chapter 8). The CRA defines a major rule as 
one that has resulted or is likely to result in: (1) An annual effect 
on the economy of $100 million or more; (2) a major increase in costs 
or prices for consumers, individual industries, federal, state, or 
local government agencies, or geographic regions; or (3) significant 
adverse effects on competition, employment, investment, productivity, 
or innovation, or on the ability of United States-based enterprises to 
compete with foreign-based enterprises in domestic and export markets. 
HHS has determined that this final rule does not meet any of these 
criteria. For more detail regarding estimated costs, see the section 
containing the Regulatory Impact Analysis.

XI. Executive Order 13132

    Executive Order 13132, Federalism, prohibits an agency from 
publishing any rule that has federalism implications if the rule either 
imposes substantial direct compliance costs on state and local 
governments and is not required by statute, or the rule preempts state 
law, unless the agency meets the consultation and funding requirements 
of section 6 of the Executive Order. This final rule does not have 
federalism implications as defined in the Executive Order. Consistent 
with Executive Order 13132, HHS specifically requested comments from 
state and local government officials in the proposed rule regarding 
federalism implications; we did not receive any comments in response to 
this specific solicitation.

XII. Treasury and General Government Appropriations Act of 1999

    Section 654 of the Treasury and General Government Appropriations 
Act of 1999 (Pub. L. 105-277) requires federal agencies to determine 
whether a regulation may negatively impact family well-being. The 
Department has concluded that this final rule does not have a negative 
impact on family well-being, but rather that it will have positive 
benefits. The statutory requirements and regulations promote the goal 
of financial responsibility, helping to ensure that families are using 
their TANF assistance for basic needs. States also may incorporate 
within their policies and practices opportunities to educate recipients 
on budgeting, and their state plans must include an explanation of how 
the state will ensure that recipients have access to using or 
withdrawing assistance with minimal fees.

List of Subjects in 45 CFR Parts 262, 264, and 265

    Administrative practice and procedures, Day care, Employment, Grant 
programs-social programs, Loan programs-social programs, Manpower 
training programs, Penalties, Public assistance programs, Reporting and 
recordkeeping requirements, Vocational education.

    Dated: January 11, 2016.
Mark H. Greenberg,
Acting Assistant Secretary for Children, and Families.
    Approved: January 11, 2016.

Sylvia M. Burwell,
Secretary.

    For the reasons set forth in the preamble, parts 262, 264, and 265 
of 45 CFR are amended as follows:

PART 262--ACCOUNTABILITY PROVISIONS-GENERAL

0
1. The authority citation for 45 CFR part 262 is revised to read as 
follows:

    Authority: 31 U.S.C. 7501 et seq.; 42 U.S.C. 606, 609, and 610; 
Sec. 7102, Pub. L. 109-171, 120 Stat. 135; Sec. 4004, Pub. L. 112-
96, 126 Stat. 197.


0
2. Amend Sec.  262.1 by adding paragraph (a)(16) and revising paragraph 
(c)(2) to read as follows:


Sec.  262.1  What penalties apply to states?

    (a) * * *
    (16)(i) A penalty of not more than five percent of the adjusted 
SFAG (in accordance with Sec.  264.61(a) of this chapter), for failure 
to report annually on the state's implementation and maintenance of 
policies and practices required in Sec.  264.60 of this chapter.
    (ii) A penalty of not more than five percent of the adjusted SFAG 
(in accordance with Sec.  264.61(b) of this chapter), for FY 2014 and 
each succeeding fiscal year in which the state does not demonstrate 
that it has implemented and maintained policies

[[Page 2105]]

and practices required in Sec.  264.60 of this chapter.
    (iii) The penalty under paragraphs (a)(16)(i) and (ii) of this 
section may be reduced based on the degree of noncompliance of the 
state.
    (iv) Fraudulent activity by any individual receiving TANF 
assistance in an attempt to circumvent the policies and practices 
required by Sec.  264.60 of this chapter shall not trigger a state 
penalty under paragraphs (a)(16)(i) and (ii) of this section.
* * * * *
    (c) * * *
    (2) We will take the penalties specified in paragraphs (a)(3) 
through (6) and (8) through (16) of this section by reducing the SFAG 
payable for the fiscal year that immediately follows our final 
decision.
* * * * *

0
3. Amend Sec.  262.2 by adding paragraph (e) to read as follows:


Sec.  262.2  When do the TANF penalty provisions apply?

* * * * *
    (e) In accordance with Sec.  264.61(a) and (b) of this chapter, the 
penalty specified in Sec.  262.1(a)(16) will be imposed for FY 2014 and 
each succeeding fiscal year.

0
4. Amend Sec.  262.3 by adding paragraph (g) as follows:


Sec.  262.3  How will we determine if a State is subject to a penalty?

* * * * *
    (g) To determine if a State is subject to a penalty under Sec.  
262.1(a)(16), we will use the information provided in annual state 
reports at Sec.  265.9(b)(10) of this chapter, in accordance with 
Section 409(a)(16) of the Social Security Act.

PART 264--OTHER ACCOUNTABILITY PROVISIONS

0
5. The authority citation for 45 CFR part 264 is revised to read as 
follows:

    Authority: 31 U.S.C. 7501 et seq.; 42 U.S.C. 608, 609, 654, 
1302, 1308, and 1337.


0
6. Amend Sec.  264.0(b) by adding definitions for ``Casino, gambling 
casino, or gaming establishment''; ``Electronic benefit transfer 
transaction''; and ``Liquor store'' in alphabetical order to read as 
follows:


Sec.  264.0  What definitions apply to this part?

* * * * *
    (b) * * *
    Casino, gambling casino, or gaming establishment means an 
establishment with a primary purpose of accommodating the wagering of 
money. It does not include:
    (i) A grocery store which sells groceries including staple foods 
and which also offers, or is located within the same building or 
complex as, casino, gambling, or gaming activities; or
    (ii) Any other establishment that offers casino, gambling, or 
gaming activities incidental to the principal purpose of the business.
* * * * *
    Electronic benefit transfer transaction means the use of a credit 
or debit card service, automated teller machine, point-of-sale 
terminal, or access to an online system for the withdrawal of funds or 
the processing of a payment for merchandise or a service.
* * * * *
    Liquor store means any retail establishment which sells exclusively 
or primarily intoxicating liquor. Such term does not include a grocery 
store which sells both intoxicating liquor and groceries including 
staple foods (within the meaning of Section 3(r) of the Food and 
Nutrition Act of 2008 (7 U.S.C. 2012(r))).
* * * * *

0
7. Add Sec. Sec.  264.60 and 264.61 to subpart A to read as follows:


Sec.  264.60  What policies and practices must a state implement to 
prevent assistance use in electronic benefit transfer transactions in 
locations prohibited by the Social Security Act?

    Pursuant to Section 408(a)(12) of the Act, states are required to 
implement policies and practices, as necessary, to prevent assistance 
(defined at Sec.  260.31(a) of this chapter) provided with federal TANF 
or state TANF MOE funds from being used in any electronic benefit 
transfer transaction in any: liquor store; casino, gambling casino or 
gaming establishment; or retail establishment which provides adult-
oriented entertainment in which performers disrobe or perform in an 
unclothed state for entertainment.


Sec.  264.61  What happens if a state fails to report or demonstrate it 
has implemented and maintained the policies and practices required in 
Sec.  264.60?

    (a) Pursuant to Section 409(a)(16) of the Act and in accordance 
with 45 CFR part 262, a penalty of not more than five percent of the 
adjusted SFAG will be imposed for failure to report by February 22, 
2014 and each succeeding fiscal year on the state's implementation of 
policies and practices required in Sec.  264.60. The penalty will be 
imposed in the succeeding fiscal year, subject to Sec.  262.4(g) of 
this chapter.
    (b) Pursuant to Section 409(a)(16) of the Act and in accordance 
with 45 CFR part 262, a penalty of not more than five percent of the 
adjusted SFAG will be imposed for FY 2014 and each succeeding fiscal 
year in which the state fails to demonstrate the state's implementation 
of policies and practices required in Sec.  264.60. The penalty will be 
imposed in the succeeding fiscal year subject to Sec.  262.4(g) of this 
chapter.
    (c) A penalty applied under paragraphs (a) and (b) of this section 
may be reduced based on the degree of noncompliance of the state.
    (d) Fraudulent activity by any individual in an attempt to 
circumvent the policies and practices required by Sec.  264.60 shall 
not trigger a state penalty under paragraphs (a) and (b) of this 
section.

PART 265--DATA COLLECTION AND REPORTING REQUIREMENTS

0
8. The authority citation for 45 CFR part 265 continues to read as 
follows:


    Authority: 42 U.S.C. 603, 605, 607, 609, 611, and 613; Pub. L. 
109-171.

0
9. Amend Sec.  265.9 by adding paragraphs (b)(10) and (11) to read as 
follows


Sec.  265.9  What information must a State file annually?

* * * * *
    (b) * * *
    (10) A comprehensive description of the state's policies and 
practices to prevent assistance (defined at Sec.  260.31(a) of this 
chapter) provided with federal TANF or state TANF MOE funds from being 
used in any electronic benefit transfer transaction in any: liquor 
store; casino, gambling casino or gaming establishment; or retail 
establishment which provides adult-oriented entertainment in which 
performers disrobe or perform in an unclothed state for entertainment. 
Reports must address:
    (i) Procedures for preventing the use of TANF assistance via 
electronic benefit transfer transactions in any liquor store; any 
casino, gambling casino, or gaming establishment; and any retail 
establishment which provides adult-oriented entertainment in which 
performers disrobe or perform in an unclothed state for entertainment;
    (ii) How the state identifies the locations specified in the 
statute;
    (iii) Procedures for ongoing monitoring to ensure policies are 
being carried out as intended; and
    (iv) How the state responds to findings of non-compliance or 
program ineffectiveness.
    (11) The state's TANF Plan must describe how the state will:
    (i) Implement policies and procedures as necessary to prevent 
access to assistance provided under the State

[[Page 2106]]

program funded under this part through any electronic fund transaction 
in an automated teller machine or point-of-sale device located in a 
place described in section 408(a)(12) of the Act, including a plan to 
ensure that recipients of the assistance have adequate access to their 
cash assistance; and
    (ii) Ensure that recipients of assistance provided under the State 
program funded under this part have access to using or withdrawing 
assistance with minimal fees or charges, including an opportunity to 
access assistance with no fee or charges, and are provided information 
on applicable fees and surcharges that apply to electronic fund 
transactions involving the assistance, and that such information is 
made publicly available.
* * * * *
[FR Doc. 2016-00608 Filed 1-13-16; 8:45 am]
BILLING CODE P



                                           2092                  Federal Register / Vol. 81, No. 10 / Friday, January 15, 2016 / Rules and Regulations

                                                                                             EPA-APPROVED MISSOURI REGULATIONS—Continued
                                                                                                             State effective
                                            Missouri citation                        Title                                                EPA approval date                           Explanation
                                                                                                                  date

                                                       *                        *                       *                          *                       *                      *                   *

                                            Chapter 6—Air Quality Standards, Definitions, Sampling and Reference Methods, and Air Pollution Control Regulations for the State of
                                                                                                         Missouri


                                                       *                        *                       *                          *                       *                      *                   *

                                           10–6.110 .............       Reporting Emission Data,                    11/20/14       1/15/16 [Insert Federal           Section (3)(A), Emissions Fees, has been
                                                                         Emission Fees, and Proc-                                    Register citation].               updated from $40 to $48 per ton of air
                                                                         ess Information.                                                                              pollution emitted annually, effective
                                                                                                                                                                       January 1, 2016.


                                                       *                        *                       *                          *                       *                      *                   *



                                           *       *       *        *       *                         Families (ACF), Department of Health                       FOR FURTHER INFORMATION CONTACT:
                                                                                                      and Human Services (HHS).                                  Rebecca Shwalb, Office of Family
                                           PART 70—STATE OPERATING PERMIT                                                                                        Assistance, 202–260–3305 (not a toll-
                                           PROGRAMS                                                   ACTION:   Final rule.
                                                                                                                                                                 free call). Deaf and hearing impaired
                                                                                                      SUMMARY:    This final rule makes                          individuals may call the Federal Dual
                                           ■ 3. The authority citation for part 70                                                                               Party Relay Service at 1–800–877–8339
                                           continues to read as follows:                              regulatory changes to the Temporary
                                                                                                      Assistance for Needy Families (TANF)                       between 8:00 a.m. and 7:00 p.m. Eastern
                                               Authority: 42 U.S.C. 7401 et seq.                                                                                 Time.
                                                                                                      regulations to require states, subject to
                                           ■ 4. Appendix A to part 70 is amended                      penalty, to maintain policies and                          SUPPLEMENTARY INFORMATION:
                                           by adding new paragraph (ee) under                         practices that prevent TANF funded                         Table of Contents
                                           Missouri to read as follows:                               assistance from being used in any
                                                                                                                                                                 I. Background
                                                                                                      electronic benefit transfer transaction in
                                           Appendix A to Part 70—Approval                                                                                        II. Notice of Proposed Rulemaking
                                                                                                      any liquor store; any casino, gambling                     III. Overview of Final Rule
                                           Status of State and Local Operating
                                                                                                      casino, or gaming establishment; or any                    IV. Statutory Authority
                                           Permits Programs
                                                                                                      retail establishment that provides adult-                  V. Section-by-Section Discussion of
                                           *       *       *        *       *                         oriented entertainment in which                                  Comments and Regulatory Provisions
                                                                                                      performers disrobe or perform in an                           Part 262—Accountability Provisions—
                                           Missouri
                                                                                                      unclothed state for entertainment. This                          General
                                           *       *       *        *       *                                                                                       Section 262.1 What penalties apply to
                                              (ee) The Missouri Department of Natural                 rule implements provisions of Section
                                                                                                                                                                       States?
                                           Resources submitted revisions to Missouri                  4004 of the Middle Class Tax Relief and                       Section 262.2 When do the TANF penalty
                                           rule 10 CSR 10–6.110, ‘‘Reporting Emission                 Job Creation Act of 2012.                                        provisions apply?
                                           Data, Emission Fees, and Process                           DATES:  Effective Date: Provisions of this                    Section 262.3 How will we determine if
                                           Information’’ on March 16, 2015. The state                                                                                  a State is subject to a penalty?
                                                                                                      final rule become effective January 15,
                                           effective date is November 20, 2014. This                                                                                Part 264—Other accountability provisions:
                                           revision is effective March 15, 2016.                      2016.                                                            Subpart A—What specific rules apply for
                                           *       *       *        *       *                            Compliance Date: For states, the                              other program penalties?
                                           [FR Doc. 2016–00191 Filed 1–14–16; 8:45 am]                District of Columbia, and territories                         Section 264.0 What definitions apply to
                                                                                                      (hereafter referred to as states), HHS will                      this part?
                                           BILLING CODE 6560–50–P                                                                                                   Section 264.60 What policies and
                                                                                                      determine compliance with provisions
                                                                                                                                                                       practices must a State implement to
                                                                                                      in this final rule through review and                            prevent assistance from being used in
                                           DEPARTMENT OF HEALTH AND                                   approval of reports that states submit                           electronic benefit transfer transaction in
                                           HUMAN SERVICES                                             annually. Initial reports describing the                         locations prohibited by the Social
                                                                                                      policies and practices states                                    Security Act?
                                           Administration for Children and                            implemented were due on February 22,                          Section 264.61 What happens if a State
                                                                                                      2014. All states submitted reports by                            fails to report or demonstrate it has
                                           Families                                                                                                                    implemented and maintained the
                                                                                                      this deadline. Hereafter, states will
                                                                                                                                                                       policies and practices required in
                                           45 CFR Parts 262, 264, and 265                             submit reports describing the policies                           § 264.60 of this subpart?
                                                                                                      and practices required by 45 CFR 264.60                       Part 265—Data Collection and Reporting
                                           RIN 0970—AC56                                              and Section 4004 of the Middle Class                             Requirements
                                                                                                      Tax Relief and Job Creation Act of 2012                       Section 265.9—What information must the
                                           Temporary Assistance for Needy
                                                                                                      in the Annual Report on TANF and                                 State file annually?
                                           Families (TANF) Program, State                                                                                        VI. Paperwork Reduction Act
                                                                                                      maintenance-of-effort (MOE) Programs
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                                           Reporting On Policies and Practices                                                                                   VII. Regulatory Flexibility Act
                                                                                                      in accordance with 45 CFR 265.9(b)(10).
                                           To Prevent Use of TANF Funds in                                                                                       VIII. Regulatory Impact Analysis
                                                                                                      As provided at 45 CFR 265.10, this
                                           Electronic Benefit Transfer                                                                                           IX. Unfunded Mandates Reform Act of 1995
                                                                                                      report is due by November 14 of each                       X. Congressional Review
                                           Transactions in Specified Locations
                                                                                                      fiscal year, which is the same time as                     XI. Executive Order 13132
                                           AGENCY: Office of Family Assistance                        the fourth quarter TANF data report, as                    XII. Treasury and General Government
                                           (OFA), Administration for Children and                     provided in 45 CFR 265.4.                                        Appropriations Act of 1999



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                                                              Federal Register / Vol. 81, No. 10 / Friday, January 15, 2016 / Rules and Regulations                                          2093

                                           I. Background                                           a recipient does not have access to or                 opportunity to access assistance with no
                                              Authorized by title IV–A of the Social               qualify for a checking account. Most                   fee or charges; are provided information
                                           Security Act, TANF is a block grant that                states load the amount of assistance on                on applicable fees and surcharges that
                                           provides states, territories, and tribes                EBT cards or EPCs, both of which allow                 apply to electronic fund transactions
                                           federal funds to design and operate a                   recipients to use a debit-like card to                 involving the assistance; and that such
                                           program to accomplish the purposes of                   access their benefits through automated                information is made publicly available.
                                           TANF. The purposes are to: (1) Assist                   teller machines (ATMs) and point-of-                   This rule does not regulate the state
                                           needy families so that children can be                  sale (POS) devices. EPCs differ from                   plan provisions at Section 4004(c) of
                                           cared for in their own homes or in the                  government EBT cards in that they are                  Public Law 112–96, but it incorporates
                                           homes of relatives; (2) reduce the                      network-branded (e.g., Visa or                         the statutory state plan language under
                                           dependency of needy parents by                          MasterCard) prepaid cards that                         the Middle Class Job Creation and Tax
                                           promoting job preparation, work, and                    recipients may use virtually anywhere                  Relief Act of 2012. Following
                                                                                                   the brand’s logo is displayed. EBT cards               publication of the final rule, HHS plans
                                           marriage; (3) prevent out-of-wedlock
                                                                                                   may be used in fewer locations, as                     to issue additional guidance regarding
                                           pregnancies; and (4) encourage the
                                                                                                   retailers and ATMs must be authorized                  the adequate access provision.
                                           formation and maintenance of two-
                                                                                                   to accept EBT cards.
                                           parent families. In addition to federal                    Among its provisions, the Middle                    II. Notice of Proposed Rulemaking
                                           TANF block grant funds, each state                      Class Tax Relief and Job Creation Act of                  HHS published a notice of proposed
                                           must spend a certain minimum amount                     2012, Public Law (Pub. L.) 112–96,                     rulemaking (NPRM) (79 FR 7127) on
                                           of non-federal funds to help eligible                   requires states to maintain policies and               February 6, 2014, to regulate the TANF
                                           families in ways that further a TANF                    practices to prevent TANF assistance                   provisions in Section 4004(a) and (b) of
                                           purpose. This is referred to as                         from being used in any EBT transaction                 Public Law 112–96. The proposed rule
                                           maintenance-of-effort (MOE).                            (as defined at 42 U.S.C.                               added new penalties for failure to report
                                              In general, federal TANF and state                   608(a)(12)(B)(iii)) in any liquor store;               or adequately demonstrate
                                           MOE funds may be expended on                            any casino, gambling casino, or                        implementation of the requirements
                                           benefits and services targeted to needy                 gambling establishment; or any retail                  outlined in Public Law 112–96, defined
                                           families, and activities that aim to                    establishment which provides adult-                    terms relevant to the new requirements,
                                           prevent and reduce out-of-wedlock                       oriented entertainment in which                        specified when the penalty takes effect,
                                           pregnancies or encourage the formation                  performers disrobe or perform in an                    and identified how HHS will determine
                                           and maintenance of two-parent families,                 unclothed state for entertainment.                     whether a state warrants a penalty. It
                                           as well as administrative expenses. In                     The legislation at Section 4004(b) also             also provided details regarding what
                                           particular, federal TANF and state MOE                  imposes a new reporting requirement as                 types of policies and practices HHS
                                           funds may be expended on ‘‘assistance,’’                well as a new penalty. Each state is                   would accept as complying with the
                                           defined at 45 CFR 260.31(a)(1) as                       required to report annually to the                     statutory requirements. In addition to
                                           including cash payments, vouchers, and                  Department of Health and Human                         general comments, the NPRM sought
                                           other forms of benefits designed to meet                Services (HHS) on its implementation of                input from commenters regarding two
                                           a family’s ongoing basic needs (i.e.,                   policies and practices related to                      specific issues: TANF assistance
                                           food, clothing, shelter, utilities,                     restricting recipients from using their                deposited directly in recipients’ bank
                                           household goods, personal care items,                   TANF assistance in EBT transactions at                 accounts and accessed with a personal
                                           and general incidental expenses).                       the prohibited locations. HHS will                     debit card, and internet transactions.
                                           Assistance also includes supportive                     reduce a state’s block grant by not more                  HHS received a total of 28 comments,
                                           services such as transportation and                     than five percent of the state family                  including comments from six states,
                                           child care provided to families who are                 assistance grant in fiscal year (FY) 2014              seven membership and research/
                                           not employed (see 45 CFR 260.31(a)(3)).                 and annually thereafter if the state fails             advocacy organizations, and three EBT
                                           TANF funds also can be used for a wide                  to comply with this reporting                          industry organizations. The remaining
                                           range of benefits and services that do                  requirement or if, based on the                        commenters were members of the
                                           not fall within the definition of                       information that the state reports, HHS                public. We include a detailed summary
                                           assistance; such expenditures are                       finds that the state has not implemented               of comments as well as HHS’s responses
                                           considered ‘‘non-assistance.’’ This rule                and maintained the required policies                   to comments in Section V of this final
                                           pertains only to assistance expenditures.               and practices. The statute provides the                rule. Public comments on the proposed
                                              Based on the most recent information                 Secretary of HHS the authority to reduce               rule are available for review on
                                           provided to us by states, there are                     the amount of the penalty based on the                 www.regulations.gov.
                                           currently four means that states use to                 degree of noncompliance of the state.
                                           provide assistance payments to eligible                    Finally, states are required under                  III. Overview of Final Rule
                                           low-income families with children:                      Section 4004(c) of Public Law 112–96 to                   The final rule amends the TANF
                                           Paper checks, Electronic Funds                          include in their state TANF plans a                    program regulations in the following
                                           Transfers (EFT), Electronic Benefit                     statement outlining how they intend to                 three ways: (1) It adds a requirement to
                                           Transfer (EBT) cards, and Electronic                    implement policies and procedures to                   implement policies and practices to
                                           Payment Cards (EPC). Most states have                   prevent access to assistance through                   prevent TANF assistance from being
                                           replaced paper checks with one or more                  EFTs at casinos, liquor stores, and                    used in any electronic benefit transfer
                                           of the other three delivery methods in                  establishments providing adult-oriented                transaction in any: liquor store; any
                                           order to provide benefits in a timelier                 entertainment. The state plan also must                casino, gambling casino or gaming
                                           manner, reduce theft and fraud, and                     include an explanation of how the state                establishment; and any retail
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                                           eliminate the need for recipients to pay                will ensure that (1) recipients of the                 establishment which provides adult-
                                           check-cashing fees. Some states                         assistance have adequate access to their               oriented entertainment in which
                                           automatically transfer assistance                       cash assistance, and (2) recipients of                 performers disrobe or perform in an
                                           payments directly into a recipient’s own                assistance have access to using or                     unclothed state for entertainment, (2) it
                                           private bank account through EFT.                       withdrawing assistance with minimal                    adds a requirement to report on policies
                                           However, this option is not available if                fees or charges, including an                          and practices in an annual report, and


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                                           2094               Federal Register / Vol. 81, No. 10 / Friday, January 15, 2016 / Rules and Regulations

                                           (3) it adds a penalty for failure to report             performers disrobe or perform in an                    maintained the required policies and
                                           on implementation and maintenance of                    unclothed state for entertainment,’’ the               practices in each fiscal year following
                                           these policies and practices. In response               language, ‘‘such an establishment that                 FY 2014. One commenter suggested that
                                           to comments on the proposed rule, we                    prohibits the entrance of minors under                 the statute does not provide authority
                                           have made changes in the final rule                     the age specified by state law.’’                      for annual reporting, maintaining that
                                           where appropriate to address policy and                 Commenters noted that local                            the statute obligates HHS to impose a
                                           other concerns raised by commenters, as                 ordinances, rather than state law, apply               penalty only if a state fails to submit one
                                           well as to incorporate suggested                        to such establishments, and can vary                   required report; that state would be
                                           clarifications and improvements. In this                considerably from jurisdiction to                      subject to a penalty for FY 2014 (for its
                                           section, we provide an overview of the                  jurisdiction. Since we are no longer                   failure to report by February 22, 2014)
                                           final rule and generally describe major                 expanding upon the statutory definition,               and each fiscal year until it submits a
                                           changes in response to comments. A                      we have deleted the definition of ‘‘retail             report. We disagree with this
                                           more detailed summary of comments in                    establishment which provides adult-                    interpretation and do not believe that it
                                           each area and reason for changes is                     oriented entertainment in which                        comports with the statute.
                                           included in the section-by-section                      performers disrobe or perform in an                       In response to suggestions for ways to
                                           discussion of comments later in this                    unclothed state for entertainment’’ from               ease the reporting burden, we have
                                           final rule.                                             § 264.0. Rather, we encourage states to                incorporated this reporting requirement
                                              (1) When incorporating the                           exercise the flexibility provided by the               in the Annual Report on TANF and
                                           requirement at 45 CFR 264.60 to                         statute to build on the required                       MOE Programs under 45 CFR
                                           implement policies and practices to                     restrictions with respect to these                     265.9(b)(10), rather than requiring the
                                           prevent TANF assistance from being                      establishments, consistent with state                  submission of a separate EBT report.
                                           used in any electronic benefit transfer                 and local policies. Furthermore, in                    Accordingly, we are amending the
                                           transaction in any liquor store; any                    response to comments suggesting we                     regulation at 45 CFR 265.9(b).
                                           casino, gambling casino or gaming                       quantify the term ‘‘primarily’’ in the                    We continue to require that the
                                           establishment; and any retail                           definitions for ‘‘casino, gambling casino,             reports address specific areas that will
                                           establishment which provides adult-                     or gaming establishment’’ and ‘‘liquor                 allow us to determine whether states
                                           oriented entertainment in which                         store,’’ we will defer to states’                      have implemented policies and
                                           performers disrobe or perform in an                     reasonable interpretation of the law.                  practices that comply with the statutory
                                           unclothed state for entertainment, we                   Additionally, we interpret Congress’s                  requirements. The NPRM identified
                                           mirror the statutory language at Section                use of ‘‘liquor’’ to refer to alcoholic                these areas as follows: Identifying
                                           4004(a) of Public Law 112–96. The                       beverages broadly, rather than a narrow                locations; methods to prevent use of
                                           preambles to the NPRM and the final                     definition that excludes alcoholic                     TANF assistance via EBT transactions in
                                           rule provide details on the types of                    beverages such as beer and wine.                       restricted locations; monitoring; and
                                           policies and practices HHS would                           We are clarifying that the broad                    enforcement of compliance. With this
                                           accept as complying with the statutory                  definition of ‘‘electronic benefit transfer            final rule, we are providing clearer
                                           requirements, and identify those that do                transaction’’ includes transactions using              descriptions of the type of information
                                           not. In doing so, we identify that                      or accessing TANF funds in private                     we are requesting. For example, we have
                                           different approaches may be acceptable                  bank accounts because those funds may                  amended the request for information on
                                           depending on the method of delivery                     be accessed by a TANF recipient in a                   ‘‘monitoring,’’ to ‘‘ongoing monitoring
                                           (EBT, EPC, or direct deposit). We also                  manner that the statutory definition                   to ensure policies are being carried out
                                           correct an error we made in the NPRM                    specifies, i.e., through use of a credit or            as intended,’’ and instead of
                                           suggesting that bank identification                     debit card, ATM, point-of-sale terminal,               ‘‘enforcement of compliance,’’ this
                                           number (BIN) blocking was a potential                   or an online system for the withdrawal                 component should read ‘‘responding to
                                           approach to preventing TANF assistance                  of funds or the processing of a payment.               findings of non-compliance or program
                                           from being used in POS terminals in the                 We subsequently discuss, see the                       ineffectiveness.’’ This way, we do not
                                           specified locations. Finally, we reiterate              discussion of § 264.60, examples of                    imply that specific practices, such as
                                           that states have a responsibility to                    policies and practices that HHS                        monitoring of transaction reports, are
                                           develop appropriate policies for                        considers acceptable with regard to                    required. At the same time, we would
                                           preventing TANF cash assistance                         personal accounts and debit cards. We                  like reports to describe how states will
                                           administered by state programs from                     reiterate that the language used                       review and evaluate the policies and
                                           being used at any of the three types of                 demonstrates that Congress intended to                 practices implemented, and correct for
                                           businesses, including those located on                  apply the requirements in Public Law                   non-compliance and ineffectiveness. In
                                           tribal land. In general, we have provided               112–96 to EPCs. At the same time, we                   sum, in 45 CFR 265.9(b)(10), the four
                                           flexibility in meeting the statutory and                agree with all commenters that Congress                areas we are requiring states to address
                                           regulatory requirements so that states                  did not intend to apply the                            in their reports are: (1) Procedures for
                                           may develop cost-effective                              requirements to internet transactions,                 preventing the use of TANF assistance
                                           implementation strategies that fit within               pointing to language in the statute such               via electronic benefit transfer
                                           the existing structures of state                        as ‘‘establishment,’’ ‘‘store,’’ ‘‘located in          transactions in any liquor store; any
                                           operations.                                             a place,’’ and ‘‘transactions in.’’                    casino, gambling casino, or gaming
                                              We also have added the relevant                         (2) In order to add the requirement to              establishment; and any retail
                                           accompanying definitions to the TANF                    report on relevant policies and practices              establishment which provides adult-
                                           regulations at 45 CFR 264.0. Regarding                  to the TANF regulations, we are                        oriented entertainment in which
                                           the definitions of the three types of                   amending 45 CFR parts 262, 264, and                    performers disrobe or perform in an
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                                           establishments, we have made some                       265. The regulations at 45 CFR 262.3                   unclothed state for entertainment; (2)
                                           changes to those we proposed in the                     and 264.61 tie the reporting requirement               how the state identifies the locations
                                           NPRM. For example, we are striking                      to the penalty specified at 45 CFR                     specified in the statute; (3) procedures
                                           from our definition of ‘‘retail                         262.1(a)(16). We reiterate that we are                 for ongoing monitoring to ensure
                                           establishment which provides adult-                     requiring an annual EBT report in order                policies are being carried out as
                                           oriented entertainment in which                         to determine whether states have                       intended; and (4) how the state


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                                                              Federal Register / Vol. 81, No. 10 / Friday, January 15, 2016 / Rules and Regulations                                           2095

                                           responds to findings of non-compliance                  V. Section-by-Section Discussion of                    a penalty likewise will be applied for
                                           or program ineffectiveness. Finally, we                 Comments and Regulatory Provisions                     FY 2014 and each succeeding fiscal year
                                           have reduced the burden hour estimate                                                                          if the state does not demonstrate that it
                                                                                                   Part 262—Accountability Provisions—
                                           described in the Paperwork Reduction                                                                           has implemented and maintained such
                                                                                                   General
                                           Act section of this final rule, as initial                                                                     policies and practices. Note that if a
                                           reports have been submitted and                            The final rule in part 262 adds new                 state fails to submit a report for a fiscal
                                                                                                   penalties for failure to report or                     year and, when it ultimately submits a
                                           subsequent reports should not be as
                                                                                                   adequately implement the new                           report, also fails to demonstrate its
                                           time-consuming.
                                                                                                   requirements outlined in Public Law                    implementation of policies and
                                              (3) We are amending 45 CFR 262.1                     112–96, specifies when a penalty takes                 practices, the combined penalty will not
                                           and 264.61 to add the penalty for failure               effect, and identifies the reporting form              exceed five percent of its adjusted
                                           to report or demonstrate                                that HHS will use to determine whether                 SFAG. Conforming changes have been
                                           implementation and maintenance of                       a state warrants a penalty.                            made at § 262.1(c)(2) to add reference to
                                           these policies and practices. At 45 CFR                 Section 262.1 What penalties apply to                  the penalties in paragraphs (a)(16)(i) and
                                           262.62, we specify that this penalty will               States?                                                (ii).
                                           be imposed for FY 2014 and each                                                                                   Comment: A few commenters
                                           succeeding fiscal year in which a state                    Sec. 4004(b) of Public Law 112–96 at                remarked on the penalty calculation,
                                           fails to submit a report that                           Sec. 409(a)(16) of the Social Security                 suggesting that the rule mirror the
                                                                                                   Act (the Act) creates a new TANF                       statute’s allowance for the Secretary to
                                           demonstrates it has implemented and
                                                                                                   penalty. As provided in the statute, the               reduce penalties based on the degree of
                                           maintained the relevant policies and
                                                                                                   penalty will be imposed if a state fails               noncompliance and clarify that states
                                           practices. Even though one commenter                    to report to HHS its implementation of
                                           suggested that this approach exceeds                                                                           are not responsible for fraudulent
                                                                                                   the policies and practices to prevent                  activity by any individual receiving
                                           our statutory authority, we maintain                    assistance provided under the state                    TANF assistance in an attempt to
                                           that the statute allows HHS to impose a                 program funded under this part from                    circumvent the policies and practices
                                           penalty in ‘‘each succeeding fiscal year                being used in any electronic benefit                   required by section 608(a)(12). Further,
                                           in which the State does not demonstrate                 transfer transaction in: (i) Any liquor                commenters were concerned that the
                                           that such State has implemented and                     store; (ii) any casino, gambling casino,               proposed rule does not adequately
                                           maintained such policies and                            or gaming establishment; or (iii) any                  explain how the ‘‘degree of
                                           practices.’’ Furthermore, in response to                retail establishment which provides                    noncompliance’’ will be determined or
                                           commenters’ recommendations, we                         adult-oriented entertainment in which                  how it would be translated into the
                                           have added language to the regulation                   performers disrobe or perform in an                    penalty amount.
                                           related to reducing the penalty based on                unclothed state for entertainment.                        Response: While we included
                                           the degree of noncompliance. We also                    Furthermore, HHS may impose a                          language related to reducing the penalty
                                           clarify in the regulations that states are              penalty if it determines, based on the                 based on the degree of noncompliance
                                           not held responsible for individuals’                   information provided in a state report,                and clarifying that states are not held
                                           fraudulent activities, as provided by the               that the state has not demonstrated that               responsible for individuals’ fraudulent
                                           statute.                                                it has implemented and maintained                      activities in the preamble of the NPRM,
                                                                                                   such policies and practices. This                      we agree that this language should also
                                           IV. Statutory Authority                                 penalty may be imposed for FY 2014                     be added to the regulation. We have
                                                                                                   and each succeeding fiscal year in                     added language in §§ 262.1(a)(16) and
                                              This final rule is being issued under                which a state does not demonstrate that                264.61 to address the statutory
                                           the authority granted to the Secretary of               it has implemented and maintained                      provisions. At the same time, we note
                                           Health and Human Services (HHS) by                      such policies and practices. If HHS                    that while states are not held
                                           the Middle Class Tax Relief and Job                     determines that the state should be                    responsible for an individual’s
                                           Creation Act of 2012 (Pub. L. 112–96),                  subject to a penalty, it will reduce the               fraudulent activities, reoccurring
                                           Section 408 of the Social Security Act                  state family assistance grant in the                   fraudulent activity could be an
                                           (42 U.S.C. 608), Section 409 of the                     succeeding fiscal year by five percent, or             indication of deficiencies in a state’s
                                           Social Security Act (42 U.S.C. 609), and                a lesser amount based on the degree of                 policies and practices and should be
                                           Section 1102 of the Social Security Act                 noncompliance. States should note that                 addressed.
                                           (42 U.S.C. 1302), which authorizes the                  the regulations at 45 CFR 262.4 through                   When determining ‘‘degree of
                                           Secretary to make and publish such                      262.7, concerning the processes for                    noncompliance’’ with respect to reports
                                           rules and regulations, not inconsistent                 appealing a penalty, presenting a                      submitted after the deadline, the
                                           with the Act, as may be necessary to the                reasonable cause justification, and                    Secretary may take into account factors
                                           efficient administration of functions                   submitting a corrective compliance                     such as the length of time a report was
                                           under the Act.                                          plan, apply to the new penalty added to                late and any extenuating circumstances
                                                                                                   45 CFR 262.1.                                          that may have caused late reporting.
                                              The statute at 42 U.S.C. 617 limits the                 Accordingly, this final rule adds                   When determining ‘‘degree of
                                           authority of the federal government to                  paragraph (i) to § 262.1(a)(16) to provide             noncompliance’’ with respect to
                                           regulate state conduct or enforce the                   that a penalty of not more than five                   inadequate policies and practices, the
                                           TANF provisions of the Social Security                  percent of the adjusted State Family                   Secretary may consider the steps taken
                                           Act, except as expressly provided. We                   Assistance Grant (SFAG) will be applied                to develop policies to comply with the
                                           have interpreted this provision to allow                for failure to report annually as part of              requirements (even if not fully
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                                           us to regulate where Congress has                       the Annual Report on TANF and MOE                      implemented), whether there are
                                           charged HHS with enforcing certain                      Programs under 45 CFR 265.9(b)(10), on                 procedures related to identifying some
                                           TANF provisions by assessing penalties.                 the state’s implementation of policies                 or all of the types of locations specified
                                           Because the legislation includes a TANF                 and practices related to these prohibited              in the statute, whether procedures take
                                           penalty, HHS has the authority to                       EBT transactions. The final rule also                  into account transactions at both ATMs
                                           regulate in this instance.                              adds paragraph (a)(16)(ii) to provide that             and POS terminals, and whether the


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                                           2096               Federal Register / Vol. 81, No. 10 / Friday, January 15, 2016 / Rules and Regulations

                                           state provides information for some or                  State does not demonstrate that such                   Part 264—Other Accountability
                                           all of the components required in the                   State has implemented and maintained                   Provisions
                                           annual report (described later in this                  such policies and practices.’’ Through                 Subpart A—What specific rules apply
                                           preamble).                                              these reports, we must assess whether
                                              Comment: One individual commented                                                                           for other program penalties?
                                                                                                   states are implementing and
                                           that imposing a penalty will be                         maintaining EBT policies and practices                   The final part 264 explains in further
                                           counterproductive because financial                                                                            detail what HHS expects of states when
                                                                                                   to determine whether or not we should
                                           sanctions may inhibit a state’s ability to                                                                     implementing the new requirements of
                                                                                                   impose a penalty.
                                           implement EBT policies and practices,                                                                          Public Law 112–96 by specifying the
                                           suggesting we increase the compliant                    Section 262.3 How will we determine                    policies and practices required,
                                           states’ block grants, provided that they                if a State is subject to a penalty?                    providing relevant definitions, and
                                           consult and provide technical assistance                                                                       addressing consequences if a state fails
                                           to non-compliant states.                                   This final rule amends § 262.3 by                   to meet the requirement.
                                              Response: The statute requires a                     adding a new paragraph (g) to specify
                                                                                                                                                          Section 264.0 What definitions apply
                                           penalty for failure to meet the                         that in order to determine if a state is
                                                                                                                                                          to this part?
                                           requirements of the statute; however,                   subject to a penalty under 45 CFR
                                           before we impose a financial penalty,                   262(a)(16)(i) and (ii), HHS will use the                  In order to clarify the types of
                                           states may request reasonable cause or                  submission of the initial report that was              locations where states are required to
                                           submit a corrective compliance plan in                  due by February 22, 2014, and                          prohibit the use of TANF assistance via
                                           response to a penalty, as provided at                   beginning in FY 2015, the Annual                       electronic benefit transfer transactions
                                           sections 409(b) and (c) of the Social                                                                          and to ensure that the policies and
                                                                                                   Report on TANF and MOE Programs
                                           Security Act. We do not have the                                                                               practices are applied consistently
                                                                                                   under 45 CFR 265.9(b)(10). We are
                                           authority to increase compliant states’                                                                        between states, we are amending
                                                                                                   amending the Annual Report on TANF                     § 264.0(b) to define the terms included
                                           block grants.                                           and MOE Programs under 45 CFR                          in Section 4004 of Public Law 112–96.
                                           Section 262.2 When do the TANF                          265.9(b) in order to include reporting for             The following is a discussion of the
                                           penalty provisions apply?                               electronic benefit transfer transaction                definitions of the terms in alphabetical
                                             The final rule amends § 262.2 to add                  policies and practices. The Annual                     order.
                                           new paragraph (e) indicating that the                   Report on TANF and MOE Programs at                        Casino, Gambling Casino, or Gaming
                                           penalty for failure to report on how the                45 CFR 265.9(b) is due at the same time                Establishment: As we mentioned in the
                                           state is implementing and maintaining                   as the fourth quarter TANF data report,                NPRM, the statute provides exclusions
                                           policies and practices to prevent                       within 45 days following the end of the                to the phrase ‘‘casino, gambling casino,
                                           assistance from being used in electronic                fourth quarter. Note that this reporting               or gaming establishment,’’ but does not
                                           benefit transfer transactions in specified              requirement is distinct from the                       provide a further definition. One such
                                           locations will be imposed for FY 2014                   provisions of Public Law 112–96 related                exclusion refers to establishments that
                                           and each succeeding fiscal year in                      to additional state plan requirements                  offer casino, gambling, or gaming
                                           which the state does not demonstrate it                 (see Sec. 4004(c)).                                    activities incidental to the principal
                                           has implemented and maintained the                                                                             purpose of the business. With this
                                                                                                      Comment: We received a number of                    exclusion in mind, we proposed to
                                           policies and practices in accordance
                                                                                                   comments raising concerns about a                      interpret the statutory reference to
                                           with 45 CFR 264.60.
                                             Comment: One state commented that                     separate annual electronic benefit                     ‘‘casino, gambling casino, or gaming
                                           the statute does not require an annual                  transfer transaction report requirement.               establishment’’ to mean an
                                           reporting requirement. Rather, the                      They argued this requirement places an                 establishment with a primary purpose of
                                           commenter argued the statute required                   undue reporting burden on states and                   accommodating the wagering of money.
                                           HHS to impose a penalty on an annual                    contradicts the intent of the statute. One             Based on the statutory definition
                                           basis on states that had not submitted a                commenter believed that because the                    provided, this does not include a
                                           report by February 22, 2014, and each                   statute requires states to describe their              grocery store which also offers, or is
                                           subsequent year it had still not                        EBT policies and practices in the state                located within the same building or
                                           submitted a report. In other words, if a                plan, they will already be providing                   complex as a, casino, gambling, or
                                           state submitted its initial report that                 consistent reports on implementation,                  gaming activities, or any other
                                           describes the policies it implemented                   and should not be required to submit an                establishments where such activities are
                                           and how it will maintain them, it had                   additional report. A number of states                  incidental to the principal purpose of
                                           met the requirements of the law and can                 recommended we use the state plan or                   the business. We are not making any
                                           no longer be subject to a penalty. On the               the Annual Report on TANF and MOE                      changes to this proposed definition in
                                           other hand, a state that did not submit                 programs as the reporting mechanism.                   this final rule.
                                           the initial report by February 22, 2014,                                                                          Comment: Generally, commenters
                                                                                                      Response: We agree that the Annual                  agreed with our definition, but also
                                           would be subject to a penalty for FY
                                           2014, as well as each fiscal year until it              Report is an effective reporting                       provided suggestions to address specific
                                           submits a report.                                       mechanism and will ease the reporting                  concerns. For example, one state and
                                             Response: We do not agree with this                   burden on states. As described below,                  one advocacy organization stated the
                                           interpretation and do not believe that                  with this final rule, we are amending                  definition does not address co-joined
                                           the statutory requirements, particularly                § 265.9(b) of the TANF regulations to                  businesses such as a hotel, grocery store,
                                           the requirement that states demonstrate                 add to the annual report a section for                 or restaurant connected to or within the
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                                           that they are implementing and                          states to describe their policies and                  casino. In order to clarify the definition
                                           maintaining the relevant policies and                   practices related to electronic benefit                and ensure that it could not be
                                           practices, can be met through a one-time                transfer transactions.                                 interpreted broadly, one commenter
                                           report. The statute provides that HHS                                                                          recommended that we add language that
                                           shall impose a penalty in ‘‘each                                                                               prohibits the entrance of minors under
                                           succeeding fiscal year in which the                                                                            the age specified by state law, similar to


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                                                              Federal Register / Vol. 81, No. 10 / Friday, January 15, 2016 / Rules and Regulations                                            2097

                                           that in the proposed definition of                      personal debit cards, supporting their                 TANF goals of promoting work and self-
                                           ‘‘Retail establishment which provides                   recommendations with information                       sufficiency, and that HHS should be
                                           adult-oriented entertainment in which                   pertaining to the following: (1)                       encouraging states to provide benefits
                                           performers disrobe or perform in an                     Infeasibility, (2) negative consequences               through direct deposit, not discouraging
                                           unclothed state for entertainment.’’                    that would result from applying the                    it.
                                              Response: We disagree that language                  requirements to personal debit cards,                      Finally, a number of commenters
                                           that related to prohibiting the entrance                and (3) Congressional intent.                          maintained that Congress did not intend
                                           of minors under the age specified by                       Although one commenter                              to include transactions with personal
                                           state law is necessary, and we do not                   acknowledged that it may be                            debit cards within the definition of
                                           believe it solves the problem the                       theoretically possible for a deposit                   ‘‘electronic benefit transfer transaction’’
                                           commenters identified. The law                          account to consist of a sub-account for                in Public Law 112–96, and that only
                                           addresses co-joined businesses by                       TANF funds and a subaccount for all                    accounts established by a government
                                           excluding from the definition a grocery                 other funds, all agreed that                           agency were intended to fall within
                                           store which also offers, or is located                  implementing such a requirement                        Congress’s definition of EBT systems.
                                           within the same building or complex as                  would be practically infeasible. If                        Ultimately, all commenters
                                           a casino, gambling, or gaming activities.               implemented, the banks would face                      recommended that the restrictions not
                                           We defer to a state’s reasonable                        requirements to identify customers who                 extend to TANF funds deposited into
                                           interpretation of the statute, to                       receive cash benefits, determine the                   private bank accounts. One advocacy
                                           determine what other types of                           dollars in a checking or savings account               group recommended that if, in the
                                           establishments that the statute excludes                that are ‘‘TANF’’ dollars versus wages or              future, there is sufficient evidence that
                                           from the definition of ‘‘casino, gambling               other income from the state, such as                   TANF assistance recipients’ use of bank
                                           casino, or gaming establishment,’’                      child support. Requiring the entire                    accounts to purchase prohibited goods
                                           including co-joined businesses.                         United States banking system to develop                and services threatens the integrity of
                                              Comment: One state is concerned                      the appropriate capabilities (TANF                     the TANF program, any new expansion
                                           with the phrase, ‘‘an establishment with                funds recipients could have deposit                    of the current restrictions should be
                                           a primary purpose of accommodating                      accounts at any of the nearly 7,000                    added only within the context of a full
                                           the wagering of money.’’ The regulatory                 banks and thousands more credit unions                 TANF reauthorization.
                                           definition does not quantify what                       in the U.S.) would result in an                            Response: HHS considered all of the
                                           ‘‘primarily’’ means. Because this is one                extraordinary burden and high costs.                   comments received. The broad statutory
                                           area where regulations could provide                    While one commenter stated that the                    definition of ‘‘electronic benefit transfer
                                           consistency between states, it                          banks would need to develop the ability                transaction,’’ applies to TANF funds
                                           recommends establishing criteria states                 to monitor where funds are used, as                    deposited in private bank accounts
                                           can apply in making this determination.                 there is no current mechanism for a                    because the funds can be accessed using
                                              Response: We defer to states’                        state to monitor the use of such funds,                a credit or debit card, ATM, point-of-
                                           reasonable interpretations on this part of              another stated that current bank                       sale terminal, or an online system for
                                           the definition. States may have different               infrastructure could not support                       the withdrawal of funds or the
                                           approaches of determining whether a                     identification of individual retailers.                processing of a payment. However, HHS
                                           business satisfies this standard, and we                Commenters emphasized that the                         recognizes that TANF recipients may
                                           do not find it necessary to draw a line,                capacity and infrastructure to apply the               have private bank accounts that include
                                           or to impose uniformity here, while we                  requirements to personal bank accounts/                TANF funds as well as income from
                                           provide flexibility in other areas.                     debit cards simply do not exist at this                other sources, including earnings from
                                              Electronic Benefit Transfer                          point, and the costs that would need to                employment, refundable tax credits for
                                           Transactions: The final rule will                       be devoted to this effort would not                    working families, and child support.
                                           incorporate the statutory definition of                 outweigh the benefit.                                  Because there is currently no feasible
                                           ‘‘electronic benefit transfer transaction,’’               A few commenters maintained that                    way to distinguish TANF funds from
                                           which is ‘‘the use of a credit or debit                 because states could not actually                      other sources in a private bank account,
                                           card service at an automated teller                     implement procedures in order to                       states are responsible for implementing
                                           machine, point-of-sales terminal, or                    comply with this requirement, they                     policies and practices that apply to
                                           access to an online system for the                      would have to discontinue the option of                transactions using or accessing TANF
                                           withdrawal of funds or the processing of                direct deposit. One commenter                          funds directly deposited in private bank
                                           a payment for merchandise or service.’’                 maintained that even if states provided                accounts, only in cases where TANF is
                                              Comment: Our NPRM noted the broad                    the option of direct deposit, the                      the sole source of funds in those
                                           nature of this language and that                        difficulties with applying the statutory               accounts. Further, given the current
                                           questions had been raised about                         requirement to TANF assistance in                      state of technology, we have concluded
                                           whether it includes TANF assistance                     personal bank accounts would provide                   that there is no feasible enforcement
                                           deposited directly by a state into a                    disincentives for banks to work with                   mechanism for funds in private bank
                                           recipient’s bank account (i.e., via EFT)                TANF customers. Commenters argued                      accounts, and therefore the state may
                                           and accessed with a personal debit card.                these would be unfortunate                             meet the requirements of this regulation
                                           We requested comments related to                        consequences of this legislation because               by providing notice to recipients that
                                           whether states and banks have, or                       there are many benefits of being                       they cannot access TANF funds from
                                           reasonably could have, the capacity to                  ‘‘banked’’ (e.g., the ability to avoid                 private bank accounts at a prohibited
                                           apply the EBT transaction restrictions to               unnecessary fees for accessing benefits                location.
                                           assistance funds deposited in private                   and paying bills, promoting savings and                    Comment: One state maintained that
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                                           bank accounts and to monitor whether                    financial management, permitting TANF                  the definition of ‘‘electronic benefit
                                           recipients use such funds in a                          recipients to build a credit history, etc.).           transfer transaction’’ should not include
                                           prohibited manner. We received many                     Commenters emphasized that                             EPCs, which the state described as
                                           comments responding to this request, all                diminishing the ability of TANF                        ‘‘non-government issued, payee owned,
                                           of which were in agreement that the                     recipients to establish and maintain                   pre-paid debit card loaded via
                                           requirements should not be applied to                   bank accounts conflicts with the broader               ‘electronic funds transfer.’’’ The


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                                           2098               Federal Register / Vol. 81, No. 10 / Friday, January 15, 2016 / Rules and Regulations

                                           commenter maintained that only                          primarily intoxicating liquor. Such term               including this term in the list of
                                           accounts established by a government                    does not include a grocery store which                 definitions at 45 CFR 264.0 of the final
                                           agency were intended to fall within                     sells both intoxicating liquor and                     regulation.
                                           Congress’s definition of EBT systems.                   groceries including staple foods (within                  Comment: Seven commenters
                                               Response: HHS disagrees with the                    the meaning of section 3(r) of the Food                commented on the proposed definition
                                           state’s reading of the statute, given the               and Nutrition Act of 2008 (7 U.S.C.                    of ‘‘retail establishment which provides
                                           definition of ‘‘electronic benefit transfer             2012(r))).’’                                           adult-oriented entertainment in which
                                           transaction’’ is so broad, as discussed                    Comment: Five commenters                            performers disrobe or perform in an
                                           above.                                                  commented on the definition of ‘‘liquor                unclothed state for entertainment.’’
                                               Comment: We received many                           store,’’ with most supporting the                      Only one commenter believed that it
                                           comments regarding whether or not                       approach of mirroring the definition in                accurately described the types of
                                           internet transactions should be included                the statute. We also received a few                    locations where Congress intended to
                                           in the definition of ‘‘electronic benefits              recommendations for clarifying the                     restrict access, and provided states with
                                           transfer transaction.’’ All commenters                  definition. For example, one state                     sufficient clarity to implement these
                                           agreed that the regulations should not                  highlighted the fact that the regulatory               provisions. All other commenters
                                           extend to internet transactions,                        definition does not quantify what                      expressed concern about the statement
                                           particularly at this time. A few                        ‘‘primarily’’ means, and that this is one              we proposed to add to the statutory
                                           commenters noted that language in the                   area where regulations could provide                   definition. They believed the proposed
                                           statute, such as ‘‘establishment,’’                     consistency between states by                          regulation expands the scope of
                                           ‘‘store,’’ ‘‘located in a place,’’ and                  establishing certain criteria states can               prohibited establishments as it might be
                                           ‘‘transaction in,’’ suggests that the intent            apply in making this determination.                    read to include book stores or
                                           of Congress was to prevent TANF                            Response: Regarding the                             establishments that serve liquor by the
                                           benefits from being used at certain                     recommendation to quantify what                        drink, and maintained that the statutory
                                           physical locations. One commenter                       ‘‘primarily’’ means, just as in the                    wording is clear and should be retained.
                                           stated that the term ‘‘online system’’ in               definition of ‘‘casino, gambling casino,               Some comments also noted that not all
                                           the definition of ‘‘electronic benefit                  or gaming establishment,’’ we defer to
                                                                                                                                                          states have a state law establishing
                                           transfer transaction’’ is vague because                 states’ reasonable interpretations on this
                                                                                                                                                          entrance restrictions based on age with
                                           one may interpret it as payments made                   part of the definition. States may have
                                                                                                                                                          respect to places that provide
                                           in near real time, such as the use of                   different ways of determining whether a
                                                                                                                                                          entertainment where performers disrobe
                                           debit cards for purchases at a merchant                 business satisfies this standard, and we
                                                                                                                                                          or perform in an unclothed state. In
                                           location, or as the purchase of goods                   do not find it necessary to draw a line,
                                                                                                                                                          many states, local ordinances rather
                                           and services over the internet. The                     or to impose uniformity here, while we
                                                                                                                                                          than state law apply to such
                                           commenter argued most consumers                         provide flexibility in other areas.
                                                                                                      Comment: A few commenters pointed                   establishments, and can vary
                                           understand ‘‘online system’’ to include
                                                                                                   out that ‘‘liquor’’ has a very specific                considerably from jurisdiction to
                                           purchases of goods and services via the
                                           internet, but suggests that we clarify this             definition that sets it apart from other               jurisdiction.
                                           in the regulation. Another commenter                    types of alcoholic beverages such as                      Response: While we disagree that the
                                           argued that Congress intended to create                 beer and wine. The commenters                          addition of ‘‘such an establishment that
                                           an enforceable approach by limiting                     maintained that since the term ‘‘liquor’’              prohibits the entrance of minors under
                                           transactions to physical locations. While               is used instead of ‘‘alcohol,’’ places that            the age specified by state law’’ expands
                                           this comment did not object on                          sell beer and wine only do not fall                    the scope of prohibited establishments,
                                           principal to regulating internet                        under this definition. They                            we understand it can be problematic
                                           transactions, it, along with responses                  recommended that states should be                      given the variation among states
                                           from other commentators, explained                      given the flexibility to implement the                 regarding whether state laws or local
                                           that the logistics of applying this                     definition in a way that best suits their              ordinances apply to these types of
                                           restriction to internet transactions                    state and local laws and population.                   establishments. We are therefore
                                           would be unfeasible. Some comments                         Response: We disagree and continue                  removing this language and encourage
                                           suggested that the restrictions should                  to interpret Congress’s use of ‘‘liquor’’ to           states to exercise the flexibility provided
                                           apply if and when states can feasibly                   refer to alcohol broadly, including beer               by the statute to build on the required
                                           monitor such transactions and/or when                   and wine, so that the term ‘‘liquor store’’            restrictions, with respect to any of these
                                           data shows that online TANF assistance                  is inclusive of locations that serve                   types of establishments, consistent with
                                           spending on prohibited goods and                        primarily alcoholic beverages.                         state and local policies. The term ‘‘retail
                                           services becomes a major problem.                          Retail Establishment which Provides                 establishment which provides adult-
                                               Response: We agree the terms                        Adult-Oriented Entertainment in which                  oriented entertainment in which
                                           ‘‘establishment,’’ ‘‘store,’’ ‘‘located in a            Performers Disrobe or Perform in an                    performers disrobe or perform in an
                                           place,’’ and ‘‘transaction in’’ point to                Unclothed State for Entertainment: In                  unclothed state for entertainment’’ itself
                                           Congress’s intent to apply the                          the NPRM we proposed to clarify the                    is descriptive and specific, so we have
                                           requirements only to physical locations                 intended locations to which restrictions               decided it is not necessary to add a
                                           and not internet transactions. Therefore,               apply, by adding ‘‘such an                             definition at § 264.0.
                                           the regulations do not apply to web-                    establishment that prohibits the                          Comment: One commenter noted that
                                           based transactions. If the technology                   entrance of minors under the age                       we interpreted the statutory definition
                                           allows, a state has the flexibility to                  specified by state law’’ to the statutory              as applying beyond live entertainment,
                                           restrict internet transactions with EBT                 definition. However, after considering                 specifically to theaters and cinemas
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                                           cards, but federal law does not require                 the comments received and for the                      where state law prohibits entrance to
                                           it.                                                     reasons discussed in the response                      minors under the age specified by state
                                               Liquor Store: The final rule will                   below, we have decided against adding                  law. This commenter recommended that
                                           incorporate the statutory definition of                 this language to the statutory definition.             the restriction be limited to
                                           ‘‘liquor store,’’ which is ‘‘any retail                 Since we are no longer expanding upon                  establishments that provide live
                                           establishment which sells exclusively or                the statutory definition, we are not                   entertainment.


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                                                              Federal Register / Vol. 81, No. 10 / Friday, January 15, 2016 / Rules and Regulations                                           2099

                                             Response: We disagree that the statute                for implementing the restrictions in the               statutory requirements. However, with
                                           applies only to establishments that                     law should be shaped by the goals of                   the publication of this final rule, we
                                           provide live adult entertainment. We                    TANF, and that we should avoid overly-                 clarify that notification approaches are
                                           see no reason to exclude stores and                     broad interpretations of the law that                  only sufficient in situations where
                                           theaters that exclusively or primarily                  would undercut rather than further the                 further action is not feasible, such as in
                                           sell or feature adult-oriented videos and               Congressional intent to bolster public                 the case of TANF funds accessed from
                                           movies.                                                 confidence in TANF’s program integrity.                private bank accounts or TANF funds
                                                                                                   Another suggested that the proposed                    used in other states. Where possible, we
                                           Section 264.60 What policies and
                                                                                                   rule needs to be more stringent.                       expect states to implement procedures
                                           practices must a State implement to                        Response: We believe that, given the                that enforce policies, and take corrective
                                           prevent assistance from being used in                   various types of systems states use to                 actions when instances of non-
                                           electronic benefit transfer transaction in              deliver TANF assistance, it is important               compliance or ineffectiveness are
                                           locations prohibited by the Social                      to provide states flexibility to                       identified.
                                           Security Act?                                           implement policy and practices that                       Comment: One state pointed out that
                                              This final rule adds § 264.60 under                  comply with these statutory and                        § 264.60 leaves out the key words ‘‘as
                                           subpart A, which requires states to                     regulatory requirements. Our intention                 necessary’’ following the phrase, ‘‘states
                                           implement policies and practices to                     is to inform states of their options while             are required to implement policies and
                                           prevent assistance (defined at                          ensuring they fulfill the provisions of                practices.’’ Another state suggested
                                           § 260.31(a)) provided with federal TANF                 the law. These options include:                        replacing the word ‘‘use’’ with ‘‘access’’
                                           or state TANF MOE funds from being                      Requiring that third-party processor                   in the proposed § 264.60 heading and
                                           used in any electronic benefit transfer                 agreements include language related to                 elsewhere in the narrative to carry a
                                           transaction in any: (a) Liquor store; (b)               the TANF prohibitions; requiring                       clearer meaning.
                                           casino, gambling casino or gaming                       retailers to meet certain eligibility                     Response: We agree that the words
                                           establishment; or (c) retail establishment              criteria in order to accept EBT cards or               ‘‘as necessary’’ should be added to the
                                           which provides adult-oriented                           EPCs; reviewing and revising state                     regulation in order to be consistent with
                                           entertainment in which performers                       licensing requirements for casinos,                    the statute. Regarding the proposed
                                           disrobe or perform in an unclothed state                liquor stores, and adult entertainment                 language change from ‘‘use’’ to ‘‘access,’’
                                           for entertainment. The NPRM often used                  venues to include conditions for license               the statute itself refers to ‘‘use in
                                           the phrase ‘‘policies and procedures’’ in               issuance related to restricting TANF                   electronic benefit transfer transaction.’’
                                           the discussion of this section. The final               benefit use; amending or creating new                  We think the best approach is to track
                                           rule revises the language, instead                      educational materials for cardholders                  the statutory language as much as
                                           referring to ‘‘policies and practices,’’ in             and retailers; pre-screening retailers                 possible. Therefore, we maintain the
                                           order to mirror the statutory language.                 prior to authorizing them to accept EBT                current text.
                                           As we proposed in the NPRM, HHS will                    cards; engaging EBT vendors to                            Comment: A few commenters
                                           accept any reasonable approaches that                   determine possible procedures for                      expressed concern with approaches that
                                           further these goals and comply with the                 identifying electronic benefit transfer                focus on penalizing individuals rather
                                           statutory and regulatory requirements.                  transactions with TANF assistance at                   than preventing transactions in the first
                                           States’ policies and practices must                     prohibited locations; requiring                        place, as they do not further public
                                           prohibit the use of TANF funds at the                   cardholders to agree in writing not to                 support for the program and place too
                                           specified locations, while ensuring                     use TANF assistance at prohibited                      much of the burden for compliance on
                                           reasonable access to cash assistance, as                locations as a condition of receipt;                   recipients. Yet another commenter
                                           directed by Congress.                                   engaging relevant business owners, for                 stated that we should not encourage
                                              Comment: We received several                         example through the appropriate state                  states to have vendors post public signs
                                           comments from states supporting our                     licensing agencies, and instructing                    because they unfairly stigmatize and
                                           statements in the NPRM that states                      retailers to refuse EBT cards or EPCs at               shame public benefits recipients. These
                                           would have ‘‘flexibility in determining                 their locations; requiring that relevant               commenters suggested that we indicate
                                           appropriate policies and practices’’ and                business owners or ATM owners post a                   to states that if a non-systemic approach
                                           that we would accept ‘‘any reasonable                   notification that EBT cards or EPCs may                to preventing TANF EBT use at
                                           approaches’’ states use to implement the                not be used for purchases or cash                      prohibited locations (e.g., centralized
                                           transaction restrictions. For example,                  withdrawal at prohibited locations.                    electronic blocking of prohibited
                                           one commenter commented that we                         While states may impose sanctions,                     transactions) is not reasonably effective,
                                           should not use our authority within this                assign a protective payee, or impose a                 then compliance actions will require a
                                           law to restrict state flexibility without a             conciliation process for individuals                   more systemic approach to prevention.
                                           compelling reason, and that we should                   found in violation, the statute does not               They also argued that we should stress
                                           make reasonable choices that help                       require that states do so.                             that prevention rather than severity of
                                           promote employment and economic                            In their initial reports, a few states              penalties furthers the goal of the
                                           self-sufficiency (to the extent that the                described procedures that involve                      legislation.
                                           ambiguity in the statutory language                     informing recipients and/or owners of                     Response: We appreciate this
                                           allows). Additionally, a few commenters                 the restricted businesses of the rules                 suggestion, and while we encourage
                                           argued that as technology evolves                       (e.g., via letter, flyer, or brochure;                 comprehensive policies and practices
                                           rapidly, regulations should allow room                  posting information on TANF and                        that involve more than one method of
                                           for approaches that have not been                       regulatory agencies’ Web sites;                        preventing TANF EBT use at prohibited
                                           developed at this time. On the other                    displaying posters that detail the EBT                 locations (e.g., notices to merchants
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                                           hand, a few commenters stated that we                   restrictions in relevant establishments                coupled with monitoring of transaction
                                           should ‘‘provide more of a standard so                  or local welfare offices), without taking              records), we do not prescribe one
                                           that there is more consistency in the                   additional actions that aim to ensure the              specific approach or set of approaches.
                                           calculation and then the                                relevant parties are complying with the                The intent of the law is to prevent
                                           implementation of the penalties.’’ One                  policy. Absent final rules, ACF accepted               transactions in the designated locations,
                                           advised that an over-arching framework                  such approaches as complying with the                  and there is good reason to believe that


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                                           2100               Federal Register / Vol. 81, No. 10 / Friday, January 15, 2016 / Rules and Regulations

                                           prevention cannot be achieved by                        differences between EBT and EPC when                   displays merchant category codes, the
                                           placing the entire burden on the                        discussing the options for complying                   cardholder count that completed a
                                           individual. At the same time, given the                 with the requirements, in particular                   transaction at each type of business, the
                                           broad discretion that states have under                 with respect to the four components of                 number of transactions completed, the
                                           TANF, we do not believe that there is                   reports. Specifically, HHS should                      percent of the total transactions by
                                           a basis for us to require any specific                  acknowledge that EPC and EBT cards                     merchant category code, and the
                                           approach so long as a state’s approach                  are subject to different federal laws and              transaction amount by merchant
                                           is reasonable.                                          regulations, as well as industry and                   category code. This information allows
                                              We do encourage states to                            network standards depending on the                     the state to monitor card and transaction
                                           periodically evaluate the effectiveness                 type of card, then discuss options and                 activity.
                                           of their policies and practices, and                    any unique limitations or issues for                      Comment: One state commented that
                                           adapt or revise them as necessary. In                   policies and procedures related to each                states that have commingled funds in
                                           doing so, they maintain the flexibility                 type of card within each component.                    EBT accounts, such as child support
                                           afforded by the regulation to implement                    Response: We understand the unique                  funds, should not be required to restrict
                                           either systemic or non-systemic                         challenges associated with EPCs, and                   access to non-TANF programs. One state
                                           approaches. We have suggested a                         we have been mindful of limitations as                 suggested that regulations should allow
                                           number of options for how states may                    we have reviewed state reports. For                    flexibility in this area and allow states
                                           structure policies. We require states to                example, we are aware that banking and                 to define policies and practices that
                                           describe how they plan to correct for                                                                          restrict TANF but allow access for the
                                                                                                   privacy laws prevent states from
                                           non-compliance and ineffectiveness in                                                                          other cash program benefits comingled
                                                                                                   receiving transaction information that
                                           the annual report.                                                                                             with the TANF funds in the EBT
                                                                                                   would allow them to track the places
                                              Comment: Two commenters stated                                                                              accounts.
                                           that bank identification number (BIN)                   where individuals redeem their benefits                   Response: We agree that states have
                                           blocking at the point of sale cannot be                 (with very limited exceptions). The                    flexibility to define policies and
                                           done systematically as of now, though                   Privacy Act of 1974 (at 5 U.S.C. 552a)                 practices that restrict TANF but allow
                                           they do point out it is possible at ATMs.               protects individuals’ information                      access to the other cash program
                                           One of these commenters also suggested                  maintained by federal agencies and the                 benefits that may be on a benefit card.
                                           that we require that a TANF agency or                   federal Right to Financial Privacy Act                 We emphasize that the statutory
                                           its EBT vendor notify relevant                          (at 12 U.S.C. 3401) protects personal                  restriction here solely applies to TANF
                                           merchants that they must contact the                    and financial information of bank                      assistance, not to child support funds or
                                           third party processor (that routes                      customers from disclosure to                           to other family benefits or resources
                                           electronic transactions through the                     governmental agencies by banks and                     other than TANF assistance.
                                           commercial debit and credit networks)                   their agents. We are mindful of the                       Comment: A few commenters
                                           with which they have a processing                       limitations and will take them into                    expressed concern that certain terms in
                                           agreement and request that the third                    consideration as we review state reports.              the NPRM indicated we would not
                                           party processor disable or remove EBT                   States that use EPCs described in their                support state flexibility, namely
                                           access from their (the relevant                         initial reports policies and practices                 ‘‘consistently applied,’’ ‘‘required to
                                           merchant’s) account. Further, the                       including: Blocking certain merchant                   block,’’ and ‘‘adequately implement.’’
                                           commenter suggested that we require                     category classification codes so as to                 The commenters suggested that using
                                           merchants to have their processors send                 prohibit the usage of the cards in                     such terms may lead states to feel
                                           the merchant category code in the                       businesses meeting the definition                      compelled to adopt specific suggestions.
                                           authorization message when an EBT                       within the law; conducting outreach to                 A few commenters requested that we
                                           card is swiped at the point of sale, and                businesses to educate impacted vendors                 not include a specific list of four
                                           the TANF agency or its EBT vendor                       and retailors on the prohibition;                      required reporting components (which
                                           could then make a decision to approve                   ensuring recipients are aware of the                   are identifying locations; methods to
                                           or decline the transaction based on the                 prohibition by informing applicants and                prevent use of TANF assistance via EBT
                                           merchant category code. Yet another                     re-applicants through notification; and                transactions in restricted locations;
                                           commenter suggested that it would be                    assigning a protective payee to cases                  monitoring; and enforcement of
                                           easiest for states to require that all                  where it comes to the attention of the                 compliance) in regulations, as doing so
                                           existing ATMs be reprogrammed and                       county eligibility worker or the TANF                  limits flexibility.
                                           merchants would then have to apply to                   program administrator that an adult                       Response: It was not our intention to
                                           determine if they could be authorized to                member of the household has                            limit state flexibility or be overly
                                           use EBT funds.                                          demonstrated inappropriate use of                      prescriptive, but rather to ensure that
                                              Response: We apologize for our error                 funds. Regarding monitoring                            we receive complete reports describing
                                           in stating that a state may systematically              procedures, in its initial EBT transaction             the procedures states have chosen to
                                           prevent transactions via BIN blocking at                report submitted by the February 22,                   implement to comply with the statutory
                                           the point of sale. Additionally, we                     2014 deadline, one state described a                   requirements. We maintain that for
                                           appreciate these commenters’                            process for sending an electronic file to              states to demonstrate that they are
                                           suggestions for ways states may comply                  IRS approximately once a month for all                 implementing the required policies and
                                           with the statute, but note that, as we                  new and current recipients in order to                 practices, their implementation
                                           explained above, we do not prescribe                    identify any gambling winnings claimed                 strategies must address all four
                                           any one approach for states to                          on tax returns; this information is used               components identified. At the same
                                           implement. Again, states may develop                    as a lead to determine possible fraud.                 time, states have flexibility within each
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                                           approaches that are cost effective and fit              Another state’s EBT transaction report                 category with respect to the specific
                                           within the existing structure of state                  explained that the state TANF program                  policies and practices they choose to
                                           operations, yet at the same time meet                   receives a monthly Program Market                      implement. For further information on
                                           the requirements of the law.                            Segment Report from the financial                      this topic, see the discussion related to
                                              Comment: One state recommended                       institution that issues the state’s EPCs.              § 265.9 below, which explains our
                                           that we identify and address the                        The Program Market Segment Report                      actions in relation to this issue. As


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                                                              Federal Register / Vol. 81, No. 10 / Friday, January 15, 2016 / Rules and Regulations                                           2101

                                           stated there, we are revising the text of               the sale of alcoholic beverages, legalized             that the regulations do not provide any
                                           the four components, but not                            games of chance, sexually oriented                     exceptions or guidelines about how
                                           eliminating the requirement.                            materials, coin-operated amusement                     states may ensure access to cash
                                              Comment: We received a few                           machines, etc.                                         assistance. Further, they highlighted
                                           comments responding to suggestions                         Comment: We received one comment                    that the statute’s requirement to ensure
                                           presented in the NPRM for how states                    in relation to preventing access to TANF               access to cash assistance and minimal
                                           can identify locations specified in the                 cash assistance by state programs at any               fees may benefit recipients, as the yearly
                                           law. In particular, one state seems to                  type of business specified in the law                  amount of surcharges associated with
                                           believe that we proposed requiring                      that is located on tribal land. This                   cash assistance withdrawals is
                                           states to maintain a list of the                        commenter believed we inappropriately                  extraordinarily high. To minimize fees,
                                           establishments subject to the                           overstepped tribal authority because we                they suggested that states allow a certain
                                           restrictions, and for state TANF agencies               ‘‘extended’’ the requirements to tribal                number of free withdrawals per month
                                           to provide a separate and additional                    programs.                                              or eliminate withdrawal surcharges.
                                           notification to impacted merchants. The                    Response: We reiterate that we are not              One commenter suggested that the
                                           state recommended that we allow states                  extending the requirements to tribal                   regulations should require states to
                                           to comply with the requirements of                      TANF programs. We agree that Congress                  allow TANF recipients to choose
                                           Public Law 112–96 by requiring the                      did not apply these requirements to                    between benefits via direct deposit or an
                                           appropriate state licensing agency to                   TANF assistance administered by a                      EBT card. It also suggested that the
                                           notify the entities that license                        tribal TANF program. However, states                   regulations should specify the ways in
                                           businesses that are subject to the                      do have a responsibility to develop                    which states may implement
                                           prohibitions, through broader public                    appropriate policies for preventing                    guaranteed, surcharge free transactions
                                           notice of the requirements for such                     TANF cash assistance administered by                   (e.g., free ATM balance inquiries and
                                           locations to restrict access, by                        state programs from being used at any                  surcharge subsidies), and HHS should
                                           conducting periodic targeted reviews of                 of the three types of businesses,                      provide technical assistance to states
                                           EBT transactions, by following up on                    including those located on tribal land,                about promising practices for
                                           suspect locations, and by establishing                  to the extent practicable. As we stated                guaranteeing access.
                                           appropriate penalties for the venues                    in the NPRM, we encourage states to                       Response: We believe it is critical that
                                           violating the restrictions. Additionally,               work with tribes to try to prevent state               states take steps to ensure access to cash
                                           one commenter warned against relying                    TANF assistance from being used at the                 assistance and minimize, or eliminate,
                                           on internet searches, and suggested that                prohibited locations on sovereign tribal               fees for families who are working
                                           states attempt to work through national                 land. We would consider it sufficient for              toward self-sufficiency. We strongly
                                           associations of these businesses and                    states to provide notice to recipients                 encourage states to develop strategies to
                                           their state affiliates.                                 that the prohibition of use extends to                 ensure adequate access to benefits, such
                                              Response: We did not intend to imply                 tribal lands.                                          as guaranteeing a minimum number of
                                           that we are requiring a particular                         Comment: We received two comments                   free cash withdrawals per month or
                                           method for identifying locations subject                related to whether a state should be                   providing new options for cash
                                           to the requirements. Similarly, we do                   responsible for restricting use of its                 assistance withdrawal in isolated areas.
                                           not require states to maintain a list of                TANF assistance in another state. Both                 We will continue to work with states on
                                           affected businesses. We want states to                  maintained that it would be too                        an individual basis regarding these
                                           describe their processes for how they                   challenging and costly for states to                   strategies.
                                           identify locations subject to these                     attempt to block transactions in                          Finally, we want to reiterate that
                                           requirements in their reports. However,                 businesses located in other states and                 while one of the new state plan
                                           because the method or combination of                    recommended that we not require states                 requirements at Sec. 4004(c) of Public
                                           methods states use for identifying                      to restrict transactions at locations                  Law 112–96 conveys a clear emphasis
                                           locations depends on the policies and                   outside their borders. At the same time,               that states ensure adequate access to
                                           practices they implement, states should                 Illinois pointed out that this would not               cash assistance for recipients, this
                                           have flexibility in deciding how best to                prevent states from reviewing and                      language does not provide states the
                                           do so. For example, if a state’s policy                 following up on cardholders’ out-of-                   option to avoid imposing a restriction at
                                           involves monitoring transaction reports,                state spending of TANF benefits in the                 an ATM or POS terminal located in any
                                           ‘‘identifying locations’’ could mean                    three restricted types of businesses.                  of the three types of specified
                                           developing criteria for being able to                      Response: We did not include a                      businesses in order to ensure adequate
                                           recognize on the transaction reports that               discussion of this issue in the preamble               access. Rather, it conveys a
                                           a transaction occurred at one of the                    of the NPRM, and think it is important                 responsibility for states to take
                                           three types of locations (e.g., what                    to provide clarity in the final rule. States           corrective actions to increase locations
                                           words or data elements do reviewers                     are responsible for restricting                        where TANF recipients may access their
                                           look for?). A state that blocks access at               transactions using state-provided                      cash assistance if they find that there are
                                           certain locations should describe its                   assistance at prohibited locations                     an insufficient number of access points
                                           procedures for determining which                        whether or not the transaction occurs                  in a geographic area.
                                           locations should be blocked. Other ways                 within the state. We recognize the
                                           states may identify locations subject to                infeasibility of restricting transactions in           Section 264.61 What happens if a state
                                           the TANF statutory requirements                         other states; and, therefore, the agency               fails to report or demonstrate it has
                                           include working with entities that                      would consider providing a notice to                   implemented and maintained the
                                           license businesses or national                          recipients to be sufficient                            policies and practices required in
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                                           associations of these businesses and                    implementation of a policy or practice                 § 264.60 of this subpart?
                                           their state affiliates, using merchant                  with respect to out-of-state transactions.                We are adding a § 264.61 to address
                                           category codes, or having states apply                     Comment: We received a few                          the penalty associated with the new
                                           for an authorization to accept a state’s                comments regarding access and fees,                    requirements. Under paragraph (a), HHS
                                           benefit card based on the percentage of                 raising concerns about protections for                 will impose a penalty of not more than
                                           their gross revenue that is derived from                those living in isolated areas and noted               five percent of a state’s adjusted SFAG


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                                           2102               Federal Register / Vol. 81, No. 10 / Friday, January 15, 2016 / Rules and Regulations

                                           for failure to submit annually a report                 Part 265—Data Collection and                           this requirement would be labor
                                           demonstrating the state’s                               Reporting Requirements                                 intensive, cost prohibitive, and contrary
                                           implementation of policies and                                                                                 to the philosophy of state flexibility in
                                                                                                   Section 265.9—What information must
                                           practices to prevent EBT use in the                                                                            a block grant program. Some argued that
                                                                                                   the state file annually?
                                           locations specified in Public Law 112–                                                                         states should have the flexibility to
                                           96. Under paragraph (b), HHS will                          In response to comments expressing                  develop policies and practices best
                                                                                                   concern over the burden of having a                    suited to them, which might not match
                                           impose a penalty of not more than five
                                                                                                   separate annual report due on February                 the four stated areas. One state argued
                                           percent of a state’s adjusted SFAG each
                                                                                                   22 of each fiscal year, we are amending                that requiring that reports address these
                                           fiscal year succeeding FY 2014 in which                 § 265.9, by adding paragraph (b)(10) to
                                           the state does not demonstrate it has                                                                          four areas exceeded statutory authority
                                                                                                   state that in accordance with §§ 264.60                and suggested that the four specific
                                           implemented and maintained the                          and 264.61, a report of policies and                   areas serve as suggestions for state
                                           required policies and practices. Note                   practices to prevent assistance (defined               policy rather than requirements. This
                                           that we have revised the phrasing we                    at § 260.31(a)) provided with federal                  commenter further suggested that we
                                           used in the NPRM for the title of this                  TANF or state TANF MOE funds from                      could require states to report on all four
                                           section in order to clarify that the                    being used in any electronic benefit                   specified components, but allow states
                                           penalty will be imposed for a state’s                   transfer transaction in any liquor store;              to determine whether to establish
                                           failure to demonstrate in the report its                any casino, gambling casino, or gaming                 policies in these areas or not. If a state
                                           implementation and maintenance of                       establishment; and any retail                          chose not to, it would assert that in the
                                           policies and practices, rather than a                   establishment which provides adult-                    report. One commenter characterized
                                           failure to implement and maintain the                   oriented entertainment in which                        these four specific components as
                                           policies and practices.                                 performers disrobe or perform in an                    requirements beyond those in the
                                                                                                   unclothed state for entertainment. In an               statute, and that they should not be
                                              In order to meet this requirement,
                                                                                                   effort to receive reports that demonstrate             made mandatory.
                                           states’ reports must fully explain the                  whether states have implemented and                       Response: We disagree with the
                                           policies and practices that are being                   maintained the required policies and                   suggestion that requiring this reporting
                                           implemented and maintained. Note that                   practices, we are revising the Annual                  exceeds statutory authority, as the
                                           if a state submits a late report and once               Report on TANF and MOE Programs                        statute provides us the authority to
                                           submitted, also fails to demonstrate its                under 45 CFR 265.9(b). In doing so, we                 reduce a state’s block grant if the
                                           implementation of policies and                          will require states to complete four                   ‘‘Secretary determines, based on the
                                           practices, the combined penalty will not                sections, specifying: (1) Procedures for               information provided in State reports,
                                           exceed five percent of its adjusted                     preventing the use of TANF assistance                  that any State has not implemented and
                                           SFAG. Any deficiencies that arise with                  via electronic benefit transfer                        maintained such policies and
                                           respect to a state’s reporting of its EBT               transactions in any liquor store; any                  practices.’’ We are requiring the four
                                           policies and practices in the Annual                    casino, gambling casino, or gaming                     areas in the reports, but are changing the
                                           Report (i.e., for failure to submit a                   establishment; and any retail                          descriptions of the third and fourth to
                                           complete or timely report) will not                     establishment which provides adult-                    be clearer about what these terms mean.
                                           trigger a separate penalty under 45 CFR                 oriented entertainment in which                        Instead of ‘‘monitoring,’’ the third
                                           262.1(a)(3) or 265.8.                                   performers disrobe or perform in an                    component should read ‘‘ongoing
                                                                                                   unclothed state for entertainment; (2)                 monitoring to ensure policies are being
                                              All penalties will be imposed in                     how the state identifies the locations                 carried out as intended;’’ and instead of
                                           accordance with 45 CFR part 262, which                  specified in the statute; (3) procedures               ‘‘enforcement of compliance,’’ the
                                           provides states with procedures for                     for ongoing monitoring to ensure                       fourth component should read ‘‘plans to
                                           appealing a penalty, and submitting a                   policies are being carried out as                      respond to findings of non-compliance
                                           reasonable cause justification or                       intended; and (4) how the state plans to               and/or program ineffectiveness.’’ This
                                           corrective compliance plan.                             respond to findings of non-compliance                  way, we do not imply that specific
                                              Furthermore, Sec. 409(a)(16)(C) of the               or program ineffectiveness. We believe                 practices, such as monitoring of
                                           Act, as amended by Sec. 4004(b) of                      that for states to demonstrate that they               transaction reports, are required. At the
                                           Public Law 112–96 provides HHS the                      are implementing the required policies                 same time, reports must describe how
                                           discretion to reduce the penalty amount                 and practices, their implementation                    states will review and evaluate the
                                           based on the degree of noncompliance                    strategies must address all four                       policies and practices implemented, and
                                           of the state. Sec. 409(a)(16)(C) of the                 components identified. At the same                     correct any particular aspects that are
                                                                                                   time, states have flexibility within each              not leading to the intended results.
                                           Act, as amended by Sec. 4004(b) of
                                                                                                   category with respect to the specific                     Comment: Two commenters argued
                                           Public Law 112–96, also specifies that
                                                                                                   policies and practices they choose to                  that states should be required to publish
                                           ‘‘Fraudulent activity by any individual                 implement.                                             their annual reports online, in order to
                                           in an attempt to circumvent the policies                   Comment: We received several                        make this information publicly
                                           and practices required by Sec.                          comments responding to the expectation                 available. Commenters also argued that
                                           408(a)(12) shall not trigger a state                    that states establish and report annually              we should encourage information
                                           penalty under subparagraph (A);’’ as                    on policies and practices in four specific             sharing among states by establishing
                                           such, HHS will not base any penalty on                  areas identified in the NPRM, namely:                  venues for the exchange of information
                                           such information. We have added                         (1) Identifying locations; (2) preventing              about program costs and successes.
                                           paragraphs (c) and (d) in this section of               the use of TANF assistance via EBT                        Response: We are not requiring states
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                                           the regulation, incorporating these two                 transactions; (3) monitoring; and (4)                  to publish their annual TANF and MOE
                                           provisions of the statute.                              enforcement of compliance. While two                   reports online, but encourage states to
                                              Please see discussion after 45 CFR                   commenters agreed with our proposed                    do so. States also have many existing
                                           262.1 for comments and responses                        framework and believed it would                        means to share information with each
                                           related to these penalty provisions.                    support the integrity of the program,                  other, and we support states continuing
                                                                                                   other commenters argued that following                 to do so. ACF’s Office of Family


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                                                              Federal Register / Vol. 81, No. 10 / Friday, January 15, 2016 / Rules and Regulations                                                2103

                                           Assistance will explore the feasibility of               proposed rule. The information                         before the next information collection is
                                           posting these reports on their Web site.                 collection requirements, as described                  due. The annual report is due at the
                                           VI. Paperwork Reduction Act                              below, are identical to those contained                same time as the fourth quarter TANF
                                                                                                    in the proposed rule (OMB control                      data report, or within 45 days following
                                             This rule establishes new information                  number 0970–0437). However, now that                   the end of the fourth quarter.
                                           collection requirements in §§ 262.3(g)                   the initial reporting due February 22,
                                           and 265.9(b)(10) of the TANF                                                                                      As required by the Paperwork
                                                                                                    2014, has passed, we have reduced the                  Reduction Act of 1995, codified at 44
                                           regulations. This collection is subject to
                                                                                                    burden hour estimate by half. We also                  U.S.C. 3507, ACF will submit a copy of
                                           review by the Office of Management and
                                           Budget (OMB) under the Paperwork                         note that we will incorporate this                     these sections to the Office of
                                           Reduction Act of 1995 (the PRA) (44                      reporting requirement into the Annual                  Management and Budget (OMB) for
                                           U.S.C. 3501–3520). We did not receive                    Report on TANF and MOE Programs                        review and they will not be effective
                                           any public comments on the specific                      under 45 CFR 265.9(b), and will obtain                 until they have been approved and
                                           burden hour estimate identified in the                   OMB approval for a standard form                       assigned a clearance number.

                                                                                                                                                                              Average
                                                                                                                                        Number of           Yearly          burden per         Total
                                                                                 Requirement                                           respondents        submittals        respondent     burden hours
                                                                                                                                                                              (hours)

                                           Annual reporting on policies and practices to prevent TANF assistance from
                                             being used in electronic benefit transfer transactions in liquor stores; casi-
                                             nos, gambling casinos, or gaming establishments; or any retail establish-
                                             ment which provides adult-oriented entertainment in which performers
                                             disrobe or perform in an unclothed state for entertainment ........................             54                1               20              1,080



                                             We estimate the costs of                               VIII. Regulatory Impact Analysis                       to exempt themselves from the
                                           implementing these requirements will                        Executive Orders 12866 and 13563                    regulatory requirements. They suggested
                                           be approximately $54,000 annually. We                                                                           increasing state flexibility in
                                                                                                    direct agencies to assess all costs and
                                           calculated this estimate by multiplying                                                                         implementing the regulation by
                                                                                                    benefits of available regulatory
                                           1,080 hours by $50 (average cost per                                                                            removing the four components that
                                                                                                    alternatives and, if regulation is
                                           hour).                                                                                                          states must include in their
                                                                                                    necessary, to select regulatory
                                           VII. Regulatory Flexibility Act                          approaches that maximize net benefits                  implementation report listed in the
                                                                                                    (including potential economic,                         proposed provision at 45 CFR 262.3(g).
                                              The Secretary certifies under 5 U.S.C.
                                           605(b), as enacted by the Regulatory                     environmental, public health and safety                   We understand that this regulation
                                           Flexibility Act (Pub. L. 96–354), that                   effects, distributive impacts and equity).             will impose new costs on states. In
                                           this final regulation will not result in a               Executive Order 13563 emphasizes the                   response to this issue, we have provided
                                           significant impact on a substantial                      importance of quantifying both costs                   flexibility in meeting the regulatory
                                           number of small entities. We note that                   and benefits, of reducing costs, of                    requirements so that states may develop
                                           any impact on businesses emanates                        harmonizing rules, and of promoting                    cost-effective implementation strategies
                                           from statutory mandate and the policies                  flexibility. This rule meets the criteria              that fit within the existing structure of
                                           that states adopt in implementing the                    for a significant regulatory action under              state operations. In general, the costs
                                           statutory requirement.                                   E.O. 12866 and has been reviewed by                    associated with implementation, and
                                              In order to address potential concerns                OMB. For the reasons set forth below,                  the parties that bear these costs, largely
                                           of the types of establishments specified                 ACF does not believe the impact of this                depend on the policies and practices a
                                           in the statute, as well as state EBT                     regulatory action would be                             state chooses to in enact order to
                                           vendors, HHS has drafted the regulation                  economically significant and that the                  comply with the statutory requirements.
                                           in a manner that minimizes the impact                    annual cost would fall below the $100                     Nevertheless, regardless of the
                                           on businesses, including small                           million threshold.                                     approach a state may take when
                                           businesses, by providing states                             Costs. We received a few comments                   implementing policies in order to
                                           flexibility when implementing policies                   regarding the costs associated with the                comply with the statute and regulations,
                                           and practices that comply with the new                   implementation of the regulation.                      there will be, at a minimum,
                                           requirements. In particular, states have                 Individual commentators raised general                 administrative costs for the state agency
                                           the flexibility to implement approaches                  concerns about the regulation’s cost/                  responsible for administering the TANF
                                           that do not place significant burden or                  benefit ratio and the impact on TANF                   benefits. We recognize that states will
                                           impose large costs on their EBT                          spending. A few commenters expressed                   spend funds on the following types of
                                           vendors, small businesses, or any                        concern that states will reallocate TANF               costs to implement the changes in order
                                           particular party. Therefore, any costs                   money from direct services to resources                to complete the annual progress report
                                           resulting from policies under which                      for implementing this regulation.                      to ACF:
                                           states require action by small entities,                    Commenters also noted that the
                                                                                                                                                             D Costs to identify the prohibited locations;
                                           including small businesses, are the                      regulation’s benefits do not outweigh its                D Costs to modify existing tracking of
                                           result of choices states make when                       costs, as implementation costs are so
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                                                                                                                                                           recipient use of electronic benefits and/or
                                           implementing the statutory                               large and the percentage of TANF cash                  electronic banking;
                                           requirements.                                            assistance recipients using EBT cards on                 D Costs to monitor recipient use of
                                              The direct primary impact of this final               prohibited transactions is so small. One               electronic benefit transfers;
                                           regulation is on state governments. State                of these commenters noted that some                      D Costs to investigate and follow up on
                                           governments are not considered small                     states have considered ending EBT                      violations of electronic benefit transfers;
                                           entities under the Act.                                  programs and reinstating paper checks                    D Cost to process and respond to appeals.



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                                           2104               Federal Register / Vol. 81, No. 10 / Friday, January 15, 2016 / Rules and Regulations

                                             With regard to the reporting                          budgetary impact statement before                      concluded that this final rule does not
                                           requirement, based on our estimate                      promulgating a rule that includes any                  have a negative impact on family well-
                                           described under the Paperwork                           federal mandate that may result in the                 being, but rather that it will have
                                           Reduction Act section of this preamble,                 expenditure by state, tribal, and local                positive benefits. The statutory
                                           the total costs for all states to comply                governments, in the aggregate, or by the               requirements and regulations promote
                                           with this requirement would fall well                   private sector, of $100 million or more                the goal of financial responsibility,
                                           below the $100 million threshold. We                    in any one year. HHS has determined                    helping to ensure that families are using
                                           will not remove the four components of                  that this rule will not result in the                  their TANF assistance for basic needs.
                                           the report, as commenters                               expenditure by state, local, and tribal                States also may incorporate within their
                                           recommended. We do agree that the                       governments, in the aggregate, or by the               policies and practices opportunities to
                                           language in the components should be                    private sector, of more than $100                      educate recipients on budgeting, and
                                           clarified (see discussion of regulation at              million in any one year.                               their state plans must include an
                                           § 265.9, above). It was not our intention                 For more detail regarding estimated                  explanation of how the state will ensure
                                           to limit state flexibility or be overly                 costs, see the section containing the                  that recipients have access to using or
                                           prescriptive. The report components we                  Regulatory Impact Analysis.                            withdrawing assistance with minimal
                                           have identified reflect general elements                X. Congressional Review                                fees.
                                           of all policies and practices that reflect
                                           full compliance with the statute, not                     This regulation is not a major rule as               List of Subjects in 45 CFR Parts 262,
                                           specific policies and practices. As                     defined in the Congressional Review                    264, and 265
                                           demonstrated by the initial reports                     Act or CRA (5 U.S.C. Chapter 8). The                      Administrative practice and
                                           states submitted in response to the                     CRA defines a major rule as one that has               procedures, Day care, Employment,
                                           statutory requirement, a majority of                    resulted or is likely to result in: (1) An             Grant programs-social programs, Loan
                                           states have implemented sufficient                      annual effect on the economy of $100                   programs-social programs, Manpower
                                           policies and practices that take into                   million or more; (2) a major increase in               training programs, Penalties, Public
                                           account each of these components.                       costs or prices for consumers,                         assistance programs, Reporting and
                                           Furthermore, by identifying these                       individual industries, federal, state, or              recordkeeping requirements, Vocational
                                           components in a standard form, we are                   local government agencies, or                          education.
                                           ensuring that states take a                             geographic regions; or (3) significant
                                                                                                   adverse effects on competition,                          Dated: January 11, 2016.
                                           comprehensive approach to composing
                                           their policies and practices, and that                  employment, investment, productivity,                  Mark H. Greenberg,
                                           ACF receives complete reports                           or innovation, or on the ability of                    Acting Assistant Secretary for Children, and
                                           describing the procedures states have                   United States-based enterprises to                     Families.
                                           chosen to implement.                                    compete with foreign-based enterprises                   Approved: January 11, 2016.
                                             Additionally, the statutory                           in domestic and export markets. HHS                    Sylvia M. Burwell,
                                           requirements and regulation provide                     has determined that this final rule does               Secretary.
                                           potential benefits that coincide with the               not meet any of these criteria. For more
                                           goal of financial responsibility. For                   detail regarding estimated costs, see the                For the reasons set forth in the
                                           example, the policies and practices that                section containing the Regulatory                      preamble, parts 262, 264, and 265 of 45
                                           states implement may result in                          Impact Analysis.                                       CFR are amended as follows:
                                           reductions in inappropriate
                                                                                                   XI. Executive Order 13132                              PART 262—ACCOUNTABILITY
                                           expenditures of government funds, and
                                                                                                      Executive Order 13132, Federalism,                  PROVISIONS-GENERAL
                                           emphasize to recipients that they should
                                           ensure assistance is spent only on basic                prohibits an agency from publishing any
                                                                                                                                                          ■ 1. The authority citation for 45 CFR
                                           needs. There may also be opportunities                  rule that has federalism implications if
                                                                                                                                                          part 262 is revised to read as follows:
                                           to educate recipients on financial                      the rule either imposes substantial
                                           management and on ways to minimize                      direct compliance costs on state and                     Authority: 31 U.S.C. 7501 et seq.; 42 U.S.C.
                                           access fees.                                            local governments and is not required                  606, 609, and 610; Sec. 7102, Pub. L. 109–
                                                                                                                                                          171, 120 Stat. 135; Sec. 4004, Pub. L. 112–
                                             Need for the Regulation: These                        by statute, or the rule preempts state
                                                                                                                                                          96, 126 Stat. 197.
                                           regulations incorporate statutory                       law, unless the agency meets the
                                           changes to the TANF program enacted                     consultation and funding requirements                  ■ 2. Amend § 262.1 by adding paragraph
                                           in the Middle Class Tax Relief and Job                  of section 6 of the Executive Order. This              (a)(16) and revising paragraph (c)(2) to
                                           Creation Act of 2012 (Pub. L. 112–96).                  final rule does not have federalism                    read as follows:
                                           This regulation is limited to the penalty               implications as defined in the Executive
                                                                                                                                                          § 262.1   What penalties apply to states?
                                           provisions of Section 4004 of Public                    Order. Consistent with Executive Order
                                           Law 112–96. Because states have a range                 13132, HHS specifically requested                        (a) * * *
                                           of systems for disbursement of                          comments from state and local                            (16)(i) A penalty of not more than five
                                           assistance, and a number of questions                   government officials in the proposed                   percent of the adjusted SFAG (in
                                           have arisen regarding the applicability                 rule regarding federalism implications;                accordance with § 264.61(a) of this
                                           and requirements of the statutory                       we did not receive any comments in                     chapter), for failure to report annually
                                           language, HHS has published this                        response to this specific solicitation.                on the state’s implementation and
                                           regulation in order to clarify for states                                                                      maintenance of policies and practices
                                                                                                   XII. Treasury and General Government                   required in § 264.60 of this chapter.
                                           the information they should submit in
                                                                                                   Appropriations Act of 1999                               (ii) A penalty of not more than five
                                           order to avoid a penalty.
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                                                                                                     Section 654 of the Treasury and                      percent of the adjusted SFAG (in
                                           IX. Unfunded Mandates Reform Act of                     General Government Appropriations                      accordance with § 264.61(b) of this
                                           1995                                                    Act of 1999 (Pub. L. 105–277) requires                 chapter), for FY 2014 and each
                                             Section 202 of the Unfunded                           federal agencies to determine whether a                succeeding fiscal year in which the state
                                           Mandates Reform Act of 1995 requires                    regulation may negatively impact family                does not demonstrate that it has
                                           that a covered agency prepare a                         well-being. The Department has                         implemented and maintained policies


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                                                              Federal Register / Vol. 81, No. 10 / Friday, January 15, 2016 / Rules and Regulations                                              2105

                                           and practices required in § 264.60 of                   which also offers, or is located within                succeeding fiscal year in which the state
                                           this chapter.                                           the same building or complex as, casino,               fails to demonstrate the state’s
                                              (iii) The penalty under paragraphs                   gambling, or gaming activities; or                     implementation of policies and
                                           (a)(16)(i) and (ii) of this section may be                (ii) Any other establishment that                    practices required in § 264.60. The
                                           reduced based on the degree of                          offers casino, gambling, or gaming                     penalty will be imposed in the
                                           noncompliance of the state.                             activities incidental to the principal                 succeeding fiscal year subject to
                                              (iv) Fraudulent activity by any                      purpose of the business.                               § 262.4(g) of this chapter.
                                           individual receiving TANF assistance in                 *      *    *    *      *                                 (c) A penalty applied under
                                           an attempt to circumvent the policies                     Electronic benefit transfer transaction              paragraphs (a) and (b) of this section
                                           and practices required by § 264.60 of                   means the use of a credit or debit card                may be reduced based on the degree of
                                           this chapter shall not trigger a state                  service, automated teller machine,                     noncompliance of the state.
                                           penalty under paragraphs (a)(16)(i) and                 point-of-sale terminal, or access to an                   (d) Fraudulent activity by any
                                           (ii) of this section.                                   online system for the withdrawal of                    individual in an attempt to circumvent
                                           *       *     *    *      *                             funds or the processing of a payment for               the policies and practices required by
                                              (c) * * *                                            merchandise or a service.                              § 264.60 shall not trigger a state penalty
                                              (2) We will take the penalties                       *      *    *    *      *                              under paragraphs (a) and (b) of this
                                           specified in paragraphs (a)(3) through                    Liquor store means any retail                        section.
                                           (6) and (8) through (16) of this section                establishment which sells exclusively or
                                           by reducing the SFAG payable for the                                                                           PART 265—DATA COLLECTION AND
                                                                                                   primarily intoxicating liquor. Such term
                                           fiscal year that immediately follows our                                                                       REPORTING REQUIREMENTS
                                                                                                   does not include a grocery store which
                                           final decision.                                         sells both intoxicating liquor and                     ■ 8. The authority citation for 45 CFR
                                           *       *     *    *      *                             groceries including staple foods (within               part 265 continues to read as follows:
                                           ■ 3. Amend § 262.2 by adding paragraph                  the meaning of Section 3(r) of the Food
                                           (e) to read as follows:                                 and Nutrition Act of 2008 (7 U.S.C.                      Authority: 42 U.S.C. 603, 605, 607, 609,
                                                                                                   2012(r))).                                             611, and 613; Pub. L. 109–171.
                                           § 262.2 When do the TANF penalty                                                                               ■ 9. Amend § 265.9 by adding
                                           provisions apply?                                       *      *    *    *      *
                                                                                                                                                          paragraphs (b)(10) and (11) to read as
                                                                                                   ■ 7. Add §§ 264.60 and 264.61 to
                                           *      *     *    *     *                                                                                      follows
                                              (e) In accordance with § 264.61(a) and               subpart A to read as follows:
                                           (b) of this chapter, the penalty specified                                                                     § 265.9 What information must a State file
                                                                                                   § 264.60 What policies and practices must              annually?
                                           in § 262.1(a)(16) will be imposed for FY                a state implement to prevent assistance use
                                           2014 and each succeeding fiscal year.                   in electronic benefit transfer transactions in         *       *    *    *     *
                                           ■ 4. Amend § 262.3 by adding paragraph                  locations prohibited by the Social Security               (b) * * *
                                           (g) as follows:                                         Act?                                                      (10) A comprehensive description of
                                                                                                      Pursuant to Section 408(a)(12) of the               the state’s policies and practices to
                                           § 262.3 How will we determine if a State is             Act, states are required to implement                  prevent assistance (defined at
                                           subject to a penalty?                                   policies and practices, as necessary, to               § 260.31(a) of this chapter) provided
                                           *     *    *      *    *                                prevent assistance (defined at                         with federal TANF or state TANF MOE
                                             (g) To determine if a State is subject                § 260.31(a) of this chapter) provided                  funds from being used in any electronic
                                           to a penalty under § 262.1(a)(16), we                   with federal TANF or state TANF MOE                    benefit transfer transaction in any:
                                           will use the information provided in                    funds from being used in any electronic                liquor store; casino, gambling casino or
                                           annual state reports at § 265.9(b)(10) of               benefit transfer transaction in any:                   gaming establishment; or retail
                                           this chapter, in accordance with Section                liquor store; casino, gambling casino or               establishment which provides adult-
                                           409(a)(16) of the Social Security Act.                  gaming establishment; or retail                        oriented entertainment in which
                                                                                                   establishment which provides adult-                    performers disrobe or perform in an
                                           PART 264—OTHER ACCOUNTABILITY                                                                                  unclothed state for entertainment.
                                                                                                   oriented entertainment in which
                                           PROVISIONS                                                                                                     Reports must address:
                                                                                                   performers disrobe or perform in an
                                                                                                   unclothed state for entertainment.                        (i) Procedures for preventing the use
                                           ■ 5. The authority citation for 45 CFR                                                                         of TANF assistance via electronic
                                           part 264 is revised to read as follows:                 § 264.61 What happens if a state fails to              benefit transfer transactions in any
                                             Authority: 31 U.S.C. 7501 et seq.; 42 U.S.C.          report or demonstrate it has implemented               liquor store; any casino, gambling
                                           608, 609, 654, 1302, 1308, and 1337.                    and maintained the policies and practices              casino, or gaming establishment; and
                                                                                                   required in § 264.60?                                  any retail establishment which provides
                                           ■  6. Amend § 264.0(b) by adding
                                           definitions for ‘‘Casino, gambling                         (a) Pursuant to Section 409(a)(16) of               adult-oriented entertainment in which
                                           casino, or gaming establishment’’;                      the Act and in accordance with 45 CFR                  performers disrobe or perform in an
                                           ‘‘Electronic benefit transfer transaction’’;            part 262, a penalty of not more than five              unclothed state for entertainment;
                                           and ‘‘Liquor store’’ in alphabetical order              percent of the adjusted SFAG will be                      (ii) How the state identifies the
                                           to read as follows:                                     imposed for failure to report by                       locations specified in the statute;
                                                                                                   February 22, 2014 and each succeeding                     (iii) Procedures for ongoing
                                           § 264.0   What definitions apply to this part?          fiscal year on the state’s implementation              monitoring to ensure policies are being
                                           *      *     *     *    *                               of policies and practices required in                  carried out as intended; and
                                              (b) * * *                                            § 264.60. The penalty will be imposed                     (iv) How the state responds to
                                              Casino, gambling casino, or gaming                   in the succeeding fiscal year, subject to              findings of non-compliance or program
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                                           establishment means an establishment                    § 262.4(g) of this chapter.                            ineffectiveness.
                                           with a primary purpose of                                  (b) Pursuant to Section 409(a)(16) of                  (11) The state’s TANF Plan must
                                           accommodating the wagering of money.                    the Act and in accordance with 45 CFR                  describe how the state will:
                                           It does not include:                                    part 262, a penalty of not more than five                 (i) Implement policies and procedures
                                              (i) A grocery store which sells                      percent of the adjusted SFAG will be                   as necessary to prevent access to
                                           groceries including staple foods and                    imposed for FY 2014 and each                           assistance provided under the State


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                                           2106               Federal Register / Vol. 81, No. 10 / Friday, January 15, 2016 / Rules and Regulations

                                           program funded under this part through                  Licensing Division, Public Safety and                  station power limits and antenna
                                           any electronic fund transaction in an                   Homeland Security Bureau, (202) 418–                   heights for telemetry stations. The
                                           automated teller machine or point-of-                   1428. For additional information                       Commission also decides that the only
                                           sale device located in a place described                concerning the information collection                  way to accommodate both telemetry and
                                           in section 408(a)(12) of the Act,                       requirements contained in this                         VRS on these frequencies is through
                                           including a plan to ensure that                         document, send an email to PRA@                        frequency coordination to both ensure
                                           recipients of the assistance have                       fcc.gov or contact Nicole Ongele, Office               geographic separation as well as
                                           adequate access to their cash assistance;               of Managing Director, Performance                      minimizing the risk of commingling
                                           and                                                     Evaluation and Records Management,                     voice and data operations. However,
                                             (ii) Ensure that recipients of                        202–418–2991, or by email to                           since no party provided the Commission
                                           assistance provided under the State                     Nicole.Ongele@fcc.gov.                                 with a specific coordination protocol, it
                                           program funded under this part have                     SUPPLEMENTARY INFORMATION: This is a                   directs the coordinator community to
                                           access to using or withdrawing                          summary of the Commission’s Report                     develop a consensus protocol for VRS
                                           assistance with minimal fees or charges,                and Order in PS Docket No. 13–229,                     coordination. The Commission also
                                           including an opportunity to access                      FCC 15–103, released on August 10,                     decides to only allow area-wide or state-
                                           assistance with no fee or charges, and                  2015 and Clarification Order in PS                     wide authorizations on a secondary
                                           are provided information on applicable                  Docket No. 13–229, FCC 15–165,                         basis. The Commission imposes loading
                                           fees and surcharges that apply to                       released on December 11, 2015. These                   requirements for licensees seeking to
                                           electronic fund transactions involving                  documents are available for download at                license mobile repeaters on these
                                           the assistance, and that such                           http://fjallfoss.fcc.gov/edocs_public/.                frequencies. The Commission allows
                                           information is made publicly available.                 The complete text of these documents                   VRS to operate with 5 watts ERP but
                                           *      *    *     *     *                               are also available for inspection and                  declines to increase the 2-watt power
                                           [FR Doc. 2016–00608 Filed 1–13–16; 8:45 am]             copying during normal business hours                   limit for telemetry and remote control
                                           BILLING CODE P                                          in the FCC Reference Information                       use. As a result of our decision to allow
                                                                                                   Center, Portals II, 445 12th Street SW.,               the licensing of VRS units on these
                                                                                                   Room CY–A257, Washington, DC 20554.                    frequencies, we dismiss as moot several
                                           FEDERAL COMMUNICATIONS                                  To request materials in accessible                     requests for waiver filed during the
                                           COMMISSION                                              formats for people with disabilities                   pendency of this rulemaking. On
                                                                                                   (Braille, large print, electronic files,               December 11, 2015, the Commission
                                           47 CFR Part 90                                          audio format), send an email to                        released a Clarification Order to ensure
                                                                                                   FCC504@fcc.gov or call the Consumer &                  that the Commission’s rules aligned
                                           [PS Docket No. 13–229, FCC 15–103]
                                                                                                   Governmental Affairs Bureau at 202–                    with the text of the August Report and
                                           Amendment of the Commission’s                           418–0530 (voice), 202–418–0432 (TTY).                  Order.
                                           Rules To Facilitate the Use of                             In 2013, the Commission’s Notice of                 Procedural Matters
                                           Vehicular Repeater Units                                Proposed Rulemaking (NPRM) sought
                                                                                                   comment on whether to make additional                  A. Final Regulatory Flexibility Analysis
                                           AGENCY:  Federal Communications                         spectrum available to support mobile                      The Final Regulatory Flexibility
                                           Commission.                                             repeater capability. The Commission                    Analysis required by section 604 of the
                                           ACTION: Final rule.                                     declined to seek comment on VRS                        Regulatory Flexibility Act, 5 U.S.C. 604,
                                                                                                   operations on nine channels in the 170–                is included in Appendix B of the Report
                                           SUMMARY:   This document implements                     172 MHz band, but proposed to allow                    and Order.
                                           certain changes to the rules governing                  mobile repeater use on six telemetry
                                           six remote control and telemetry                        channels in the 173 MHz band. In                       B. Paperwork Reduction Act of 1995
                                           channels in the VHF band. We will                       addition, the Commission sought                        Analysis
                                           allow the licensing and operation of                    comment on whether other spectrum                        This document contains new
                                           vehicular repeater systems (VRS) and                    bands or frequencies could also be used                information collection requirements
                                           other mobile repeaters on these                         for public safety mobile repeater                      subject to the Paperwork Reduction Act
                                           channels. In addition, we revise and                    operations; whether to allow Industrial/               of 1995 (PRA), Public Law 104–13. It
                                           update the technical rules for these                    Business use of mobile repeater stations               will be submitted to the Office of
                                           channels to allow greater use of VRS                    on these channels; whether to impose                   Management and Budget (OMB) for
                                           systems while providing protection for                  bandwidth restrictions on these                        review under 3507(d) of the PRA. OMB,
                                           incumbent telemetry users who rely on                   frequencies; whether frequency                         the general public, and other Federal
                                           these frequencies for control of critical               coordination could protect telemetry                   agencies will be invited to comment on
                                           infrastructure systems.                                 users from interference; whether to                    the new information collection
                                           DATES: Effective March 15, 2016, except                 allow wide-area mobile repeater                        requirements contained in this
                                           for the addition of § 90.175(b)(4),                     operations on these frequencies; and                   proceeding. In addition, we note that
                                           containing new or modified information                  whether to allow VRS units to exceed                   pursuant to the Small Business
                                           collection requirements that require                    the 2 watt power limit that applies to                 Paperwork Relief Act of 2002, Public
                                           approval by the Office of Management                    these channels.                                        Law 107–198, see 44 U.S.C. 3506(c)(4),
                                           and Budget under the Paperwork                             In the Report and Order the                         we previously sought specific comment
                                           Reduction Act of 1995, which will                       Commission decides to allow all users                  on how the Commission might further
                                           become effective after such approval, on                of these channels—including telemetry                  reduce the information collection
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                                           the effective date specified in a notice                licensees—to operate using 11.25 kHz                   burden for small business concerns with
                                           that the Commission publishes in the                    bandwidth. In addition, we will make                   fewer than 25 employees.
                                           Federal Register announcing such                        these six telemetry channels co-primary                  The actions taken in the Report and
                                           approval and effective date.                            with adjacent channel land mobile                      Order in PS Docket No. 13–229 have
                                           FOR FURTHER INFORMATION CONTACT:                        operations and remove the restrictions                 been analyzed with respect to the
                                           Roberto Mussenden, Policy and                           on omni-directional antennas, fixed                    Paperwork Reduction Act of 1995, Pub.


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Document Created: 2018-02-02 12:32:02
Document Modified: 2018-02-02 12:32:02
CategoryRegulatory Information
CollectionFederal Register
sudoc ClassAE 2.7:
GS 4.107:
AE 2.106:
PublisherOffice of the Federal Register, National Archives and Records Administration
SectionRules and Regulations
ActionFinal rule.
DatesEffective Date: Provisions of this final rule become effective January 15, 2016.
ContactRebecca Shwalb, Office of Family Assistance, 202-260-3305 (not a toll-free call). Deaf and hearing impaired individuals may call the Federal Dual Party Relay Service at 1-800-877-8339 between 8:00 a.m. and 7:00 p.m. Eastern Time.
FR Citation81 FR 2092 
RIN Number0970-AC56
CFR Citation45 CFR 262
45 CFR 264
45 CFR 265
CFR AssociatedAdministrative Practice and Procedures; Day Care; Employment; Grant Programs-Social Programs; Loan Programs-Social Programs; Manpower Training Programs; Penalties; Public Assistance Programs; Reporting and Recordkeeping Requirements and Vocational Education

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