CALFRESH

63-502 - Income Definition, Exclusions and Deductions

Purpose

(   ) To release a new policy

(   ) To release a new form

(   ) To convert existing policy to new writing style only – No concept changes

(  X ) Revision of existing policy and/or form(s).

What changed? 

This release provides revisions to the allowable Excess Medical Expense deductions, clarification on the verification requirements, and results for mid-period changes. Additionally, this release provides guidance on how to treat one-time-only medical expenses or expenses that are billed less than monthly.  This release also provides a revision to the Standard Deduction for Federal Fiscal Year 2019-2020.

This release will further discuss the following in detail:

·         Income

·         Income Exclusions

·         Income Deductions

·         Income for Excluded Household (HH) Members

·         Income and Expenses for Non-HH Members

·         HHs with Boarders

Note:  Unearned and Self-Employment income will be discussed in a separate document.  Changes are shown highlighted in grey throughout the document.

Policy

Income is defined as all money received, regardless of the source.  CalFresh policy further categorizes the income received under different types and treats each type differently.  Furthermore, each income type has different sub-categories that are also treated and counted differently when determining CalFresh eligibility.  Certain types of income are excluded from being counted as income.  Excluded incomes are types of income that are not counted as gross income before applying the ‘gross income test’ and prior to computing the ‘net income test.’  CalFresh policy allows for specific types of deductions, such as medical or dependent care expenses.  These deductions are used in determining eligibility for the CalFresh Program.

Background

N/A

Definitions

Requirements

CalFresh HHs must meet income limits set by the United States Department of Agriculture-Food Nutrition Service (USDA-FNS) for their HH size and other policy requirements to receive CalFresh benefits.

EARNED INCOME

A standard income disregard of 20% is applied to countable gross earned income.  The 20% income disregard is not applied to the income that was not reported by the HH and was later discovered through different reviews.

AmeriCorps Payments

In 1994, Congress created the National Service Trust Act and transferred the Volunteers in Service to America (VISTA) Program to the Corporation for National and Community Service.  Three programs were created:

·         AmeriCorps State/National Program;

·         AmeriCorps National Civilian Community Corps; and

·         AmeriCorps VISTA (formerly known as VISTA).

The table below provides instructions on how to treat income from all three
AmeriCorps Programs:

INCOME EXCLUSIONS

Income exclusions must be disregarded when determining both CalFresh eligibility and benefit amount.  As exclusions, these types of income are deducted from the gross income, before applying the ‘gross income test’ and prior to computing the ‘net income test.’  Income exclusions are calculated monthly and are; therefore, not factored. The following is a list of excluded income for the CalFresh Program:

Legally Obligated Child Support Payments

CalFresh HHs can claim a child support expense if the child support payment is made to non-HH member(s) and is not voluntary.

Legally obligated (court-ordered) child support is treated as an income exclusion, rather than a deduction.  When this option is utilized, the 20% earned income deduction will be applied prior to the child support exclusion.  Documentary evidence must be used as the primary source of verification.

INCOME DEDUCTIONS

The amount for the most commonly used deductions frequently changes due to increases or decreases in the Cost-Of-Living-Adjustment (COLA).  These changes are implemented and released by the USDA-FNS and take effect every year on October first.  The California Department of Social Services (CDSS) releases annually its list with the maximum allowable deductions.  CalFresh policy also allows for other, more specific types of deductions such as medical or dependent care expenses.  Allowable deductions are factored (unlike income exclusions).  In other words, the frequency in which the HH pays a deduction is the frequency used in determining eligibility to CalFresh (i.e., If a HH reports a weekly dependent care expense, then we will use the weekly frequency when determining eligibility).

Allowable deductions are:

Standard Deduction

Excess Shelter Deduction

Homeless Standard Shelter Allowance

Standard Utility Allowance

Limited Utility Allowance

Telephone Utility Allowance

Earned Income Deduction

Dependent Care Deduction

Excess Medical Expenses Deduction

Shared Living Expense Deduction/Treatments of Expenses Shared with Others

Standard Deduction

The standard deduction is allowed for each HH per month in an amount that is established under the yearly COLA released by the USDA-FNS.  For more information on yearly COLA, refer to 63-504.39 CalFresh COLA.

Excess Shelter Deduction

This is a monthly deduction in excess of 50% of the HHs income after all other applicable deductions have been allowed.  The excess shelter deduction must not exceed the current maximum, unless the HH contains a member who is elderly or disabled.  CalFresh policy defines shelter costs as the continuing costs for the shelter occupied by the CalFresh HH such as:

·         Rent;

·         Mortgage or other continuing costs leading to ownership of the shelter, such as loan repayments for the purchase of a mobile home, including interests on such payments;

·         Property taxes, State and local assessments, and insurance on the structure itself, but not separate costs for insuring furniture or personal belongings;

·         The cost of heating and cooking fuel, cooling and electricity, water, sewerage, garbage and trash collection fees, the basic service and rental fee for one telephone, including tax on the basic fee, and fees charged by the utility provider for initial installation and utility.  One-time deposits must not be included as shelter costs;

·         Shelter costs for the home if temporarily not occupied by the HH because of employment or training away from home, illness, or abandonment caused by a natural disaster or casualty loss.  This is allowed only if the HH intends to return to the home, and the home is not being leased or rented during the absence of the HH;

·         Costs for the repair of the home which was substantially damaged or destroyed due to a natural disaster such as fire or flood.  Shelter costs must not include costs for repair of the home that have been or will be reimbursed by private or public relief agencies, insurance companies, or from any other source;

·         Home Association Fees (HOAs), parking space fees for mobile homes; or

·         Any portion of the allowable shelter expense paid by a non-HH member is not counted for the CalFresh HH.

To be eligible to obtain the Excess Shelter Deduction, the HH must only indicate that they incur shelter expenses, type of expense, and the amount on the CalFresh application, recertification, or SAR 7 report.  

Homeless Standard Shelter Allowance (HSSA)

This deduction is available to homeless HHs that are not receiving free shelter.  Homeless HHs which incur, or reasonably expect to incur, shelter costs during a month, are eligible to the HSSA deduction without providing verification of the shelter costs.  Higher shelter costs may be used if verification is provided.  Homeless HHs which do not incur shelter costs during the month are not eligible for HSSA deduction.

Standard Utility Allowance (SUA)

HHs that incur heating or cooling costs separate and apart from their rent or mortgage payments are entitled to the SUA.  The SUA is also to be given to HHs receiving energy assistance payments made under the LIHEAA of 1981.  HHs receiving energy assistance under a different program may be eligible for SUA only if they continue to incur
out-of-pocket heating or cooling expenses in addition to the energy assistance.

The SUA is not to be pro-rated

If a CalFresh HH’s utility expenses exceed the SUA, the actual utility expense cannot be allowed when determining the CalFresh benefit allotment.

Note: HHs who are using the HSSA are not entitled to the SUA, because a utility component is already included in the homeless shelter deduction.

Limited Utility Allowance (LUA)

This allowance is given to HHs that do not incur heating or cooling costs but pay at least two other separate types of utilities.  Allowable utilities include telephone, water, sewerage, and garbage or trash collection.  The LUA must not be pro-rated when the CalFresh HH lives with an excluded/ineligible HH member(s), or when the HH shares utilities included in the LUA with another HH.

Telephone Utility Allowance (TUA)

This allowance is given to HHs that are not eligible for either SUA or LUA but incur a telephone cost only.  This will be used only in instances where the HH has a house telephone, or in its absence, an equivalent form of communication, such as a cellular phone.  The TUA must not be prorated when the CalFresh HH lives with an excluded/ineligible HH member(s) or when the HH shares the phone expense with another HH.

Earned Income Deduction

This is 20% of the HHs gross earned income.  Earnings that are already excluded are not to be included in the gross earned income for purposes of computing the earned income deduction.  This deduction is not credited in instances in which the county discovers that a HH failed to report its earned income.

Dependent Care Deduction

The dependent care deduction is the actual cost for the care of a child under age 18 or an incapacitated person of any age in need of care.

Note:  For this provision only, incapacitation refers to any permanent or temporary condition that prevents an individual from participating fully in normal activities including, but not limited to, work or school without supervision and that requires the care of another person to ensure the health and safety of the individual, or a condition that makes a lack of supervision risky to the health and safety of that individual.

There is no cap on the deduction for dependent care expenses.  Dependent care expense is only allowed if the service is provided by someone outside the CalFresh HH and the HH makes an out-of-pocket payment for the service.  This expense must not include any amount that is covered by a subsidy.

The deduction must be allowed only in the month the expense is billed or otherwise becomes due, regardless of when the HH intends to pay the expense.  The dependent care cost will be allowed as a deduction when it is necessary for the HH to do any of the following:

·      Accept or continue employment;

·      Comply with CalFresh Employment Training (CFET) Program requirements or an equivalent effort to seek employment by those not subject to CFET;

·      To actively seek employment; or

·      Attend training or pursue education which is preparatory to employment.

The costs of care provided by a relative may be claimed as deduction so long as the relative providing the care is not part of the same CalFresh HH as the child or incapacitated adult receiving the care.  The dependent care deduction cannot be allowed if another CalFresh HH member or excluded HH member provides the care.

The dependent care deduction may be anticipated:

·      Based on the most recent month’s out-of-pocket expense, unless the HH is reasonably certain a change will occur.

Allowable Dependent Care costs

The following is a list of allowable dependent care costs:

·         The costs of care given by an individual outside of the CalFresh HH, provider, or care facility;

·         Transportation costs to and from the care facility; and

·         Activity, such as looking for a job or other fees associated with the care provided to the dependent.

The Internal Revenue Services (IRS) standard mileage rate must be used to determine transportation expenses.  This is calculated by multiplying the number of round-trip miles by the federal mileage reimbursement rate (current reimbursement rates can be found at www.irs.gov). 

Excess Medical Expenses Deduction

The excess medical expense is the portion of medical expense in excess of $35 per HH, per month (excluding special diets) incurred by any HH member who is 60 years of age or older or disabled (as defined in MPP Section 63-102[e]).  Spouses or other persons receiving benefits as a dependent of the disability recipient are not eligible to receive this deduction. 

Effective October 1, 2017, HHs that contain at least one elderly or disabled member with verified medical expenses between $35.01and $155 will be granted a Standard Medical Deduction (SMD) of $120.  HHs with medical expenses above $155 per month may verify and claim the actual expenses.

HHs entitled to Expedited Service are allowed a medical expenses deduction if they list medical expense amounts even if verification of those expenses is postponed.  The verification must be provided prior to the second month’s issuance, or prior to the third month of participation when the HH applied after the 15^th of the month.

SMD Verification Requirements

·         SMD is a monthly deduction.  Only verified recurring medical expenses or
one-time expenses (that can be averaged over 12 months) totaling $35.01 or more qualify for the SMD.

·         When initially claimed, HHs must verify that they incur more than $35.01 a month in allowable expenses.  Failure to verify medical expenses is not a basis for denying or discontinuing a CalFresh application or case. 

·         Fluctuating medical expenses may be allowed as deductions if regularly recurring, reasonably anticipated, and verified.  HHs may elect to have fluctuating expenses averaged or have them deducted in the months that are billed or otherwise become due.  If a recurring payment does not fluctuate, it would not be averaged.

·         HHs may elect to have expenses that are billed less often than monthly averaged forward over the interval between scheduled billings.  If a bill is averaged over the interval between billings, the expense can be allowed even if the bill was not received in the certification period.  If there is no regularly scheduled billing interval, the expense may be averaged forward over the period the expense is intended to cover. 

·         HHs may also elect to have one-time only expenses averaged forward over the entire certification period in which they are billed.  HHs reporting one-time only medical expenses during the certification period may elect to have a one-time deduction or to have the expense averaged out over the remainder of the certification period.  Averaging begins the month the reported change becomes effective.  When a HH elects to average a one-time medical expense, the HH medical expense is averaged over the remaining months of the certification period, and $35 is deducted from the average each month.

·         In the case of a HH certified for 24 months that reports a one-time medical expense incurred during the first 12 months of the certification period, eligibility staff must give the HH the option of deducting the expense for one month, averaging the expense over the remainder of the first 12 months of the certification period, or averaging the expense over the remaining months in the certification period.  One-time expenses after the 12^th month of the certification period will be deducted in one month or averaged over the remaining months in the certification period, at the HH’s option.

·         Medical expenses carried forward from past billing periods are not deductible, even if they are included with the most recent billing and actually paid by the HH. 

Mid-Period Changes

·         If a HH voluntarily reports and verifies an increase in medical expenses
mid-period, the new deduction amount must be determined for remaining months in the certification period.

o   HHs may voluntarily report and verify medical expenses mid-period between $35.01 and $155, which would make them eligible for the SMD; or

o   HHs may voluntarily report and verify medical expenses mid-period in excess of $155, which would make them eligible for the actual deduction, minus $35.00.

·         If the voluntary report results in increased benefits, a supplement will not be issued for the month in which the increased expense was reported. Once verification has been submitted, benefits will be increased for the remaining months in the certification period.

Allowable Medical Expenses

The table below provides a list of the allowable medical expenses:

HHs cannot utilize the medical deduction for costs of prescribed medical marijuana or any other substances that are considered illegal under federal law.

Ineligible Medical Expenses

Certain expenses do not qualify as medical expenses under CalFresh policy.  The table below provides a list of expenses that are not allowable medical expenses:

Shared Living Expense Deductions/Treatment of Expenses shared with others

Shared living expenses include allowable shelter, utility and/or dependent care expenses, which the CalFresh eligible HH member’s shares with:

·         An excluded/ineligible HH member; or

·         Another HH which may not be participating in the CalFresh Program.

Shared Expenses and Excluded HH Members

When a CalFresh HH includes eligible/aided members and excluded members, there must be a distinction made to identify which members contribute to the expenses of the home.  Contributors are those HH members who share the residence and the expense of that residence by paying or obligating money from their separate income or resources.  The treatment of the expenses made by excluded HH members is strictly based on the reason for exclusion as follows:

Shared Expenses and Separate HHs

The CalFresh HH may live with a separate HH which may or may not participate in the CalFresh Program.  If shelter and/or utility expenses are shared by these HHs, the expenses will be allowed for each HH.  If the CalFresh eligible HH is eligible for a utility allowance, it will receive the full allowance and there will be no proration among the HHs.  The utility expenses will be allowed to each of the CalFresh eligible HH(s) if they both contribute.  The actual amount paid by each HH will be allowed for the actual shelter cost.

Expenses from Intentional Program Violators (IPV), Ineligible Fleeing Felons or Probation/Parole Violators, or Workfare/Work Sanctioned Individuals:

If the CalFresh HH shares deductible expenses with the above-mentioned excluded members, the entire allowable standard, medical, dependent care, and excess shelter deductions will apply to the remaining CalFresh HH members.  The allowable deduction is not prorated.

Expenses from Ineligible Non-Citizens and/or Social Security Number (SSN) Disqualified Individuals:

When the above-mentioned excluded members pay part or all the deductible expenses, the expenses (except for the utility allowances) will be prorated among all CalFresh HH members, and only the eligible member’s share will be counted as the deduction.

To be considered a contributor, the ineligible non-citizen or SSN disqualified individual must be using his/her income or resources to make this contribution.  Any of these members who have income must be included in the proration of the expenses:

Expenses from Supplemental Security Income (SSI) Recipients and/or Ineligible Students

Ineligible Students

If the CalFresh HH shares eligible expenses with members who are excluded as ineligible students, the amounts contributed by those HH members must be deducted from the allowable expense.  Only the remaining dollar amount will be allowed as the CalFresh HHs deduction.

SSI Recipients

Effective June 1, 2019, SSI recipients are no longer considered excluded HH members and their contributions to expenses are treated as those of any other eligible included HH member.  However, staff is to note that SSI recipients on existing CalFresh cases (prior to June 1, 2019) will continue to be excluded until the SSI recipient is added to the CalFresh HH at the HH’s next SAR 7, RC, HH’s composition change request or the HH’s voluntary request to add the SSI recipient.

Staff must follow the guidelines below to determine the contributions from the excluded HH members:

INCOME FROM EXCLUDED HH MEMBERS

Excluded HH members are excluded in determining the CalFresh HH size, eligibility, and benefit level, but their income is counted for purposes of CalFresh eligibility determination.  In certain situations, the income is partially counted, while other situations mandate for counting the entire portion of the excluded HH member’s income. 

Policy mandates the income from the following CalFresh excluded populations will be counted in its entirety:

1.    Disqualified due to IPV;

2.    Non-compliance with work requirements/sanctioned individuals for failure to comply with CalFresh Work Requirements;

3.    Ineligible Fleeing Felon; or

4.    Ineligible Probation/Parole Violator.

A pro-rata share (or only a portion) of the income from the following CalFresh excluded populations will be counted as income to the remaining CalFresh HH members:

1.    Ineligible Non-Citizen;

2.    SSN disqualified; and

3.    Able-Bodied Adults Without Dependents non-compliance sanctioned.

How this income pro-ration applies to the expenses from these excluded HH members:

·         The earned income deduction will apply to the pro-rated income earned by such excluded members and then attributed to the HH.

Income from Ineligible students will not be considered available to the CalFresh HH:

INCOME AND EXPENSES FROM NON-HH MEMBERS

The income and resources of non-HH members will not be considered available to the CalFresh HH.  Any cash payments from the non-HH members to the HH will be considered unearned income. 

When the earned income of one or more HH members and the earned income of a non-HH member are combined, the income of the HH member will be determined as follows:

Any expenses shared with a non-HH member will be treated as follows:

·         If the eligible HH member(s) lives with and shares allowable shelter, utilities and/or dependent care expenses with a non-HH member, the contribution from the non-HH member will be deducted from the appropriate expense(s) and the net amount is the HHs allowable deduction.

·         When the contribution cannot be differentiated (pooled income), the eligible HHs deduction amount will be determined under the normal standards.

INCOME FROM HHs WITH BOARDERS

Individuals paying a reasonable amount for room and board are to be excluded from the HH when determining the HHs eligibility and benefit level.  The treatment of income from boarders depends on the actual circumstances and are best described by the table below:

Payments received from the boarder, except a foster care boarder, will be treated as self-employment.  Please refer to the separate release for self-employment for a more detailed description of this income’s treatment under CalFresh Program.

Verification Documents

Documentary evidence is used as the primary source of verification.  Documentary evidence consists of a written confirmation of the HH’s income and/or expenses.  Acceptable verification is not limited to any single type of document and may be obtained through the HH or other sources, such as a collateral contact.  The HH has primary responsibility for providing verification to support statements on the application and to resolve any questionable information.  HHs may supply verification in person, through the mail, through an electronic portal, or through an Authorized Representative.

Eligibility staff may refer to AR 5475, dated May 2, 2016.