April 15, 2011

Calfresh_logo.jpg Program Guide Letter #558



Changes in the Treatment of Federal Tax Credits and Refunds and Clarification of Elderly/Disabled Separate Household Status



All County Letters 11-13; 11-05; 88-03

All County Information Notices I-79-03 and I-79-03E



The purpose of this letter is to:

·  Provide instructions to staff regarding the changes in the way federal tax credits and refunds will be treated in the CalFresh Program as a result of the passage of H.R. 4853, the Tax Relief Bill;

·  Clarify the separate household status determination for elderly/disabled members; and

·   Update budgeting information.




H.R. 4853 amended the Internal Revenue Code of 1986 temporarily extending and modifying numerous tax relief measures.  Two sections of this bill impact the CalFresh Program:

·  Section 728 simplifies and standardizes rules regarding how tax credits and refunds (Earned Income Tax Credit, Child Tax Credit, Making Work Pay Credit, and federal tax refunds of excess withholdings) are treated in determining eligibility for public programs.

·  Section 103 extends the 2009 American Recovery and Reinvestment Act (ARRA) enhancements to the Earned Income Tax Credit and Child Tax Credit that were set to expire after tax year 2010.


Current Regulations

Earned Income Tax Credit (EITC)

Sections 63-203.13, 204.4 and 63-225.4 currently require that EITC payments be excluded as income and resources for 12 months, only if the CalFresh household was participating in CalFresh at the time of receipt.

Making Work Pay Credit (MWPC)

Per ARRA (Public Law 111-5, Section 1001(c)), MWPC payments are exempt from consideration as income or resources for the month of receipt and the following two months.  Beyond the exemption period, saved funds are counted as resources.

Federal Income Tax Refund payments

CalFresh Program Guide Section 63-202.4 instructed staff to treat income tax refunds as non-recurring lump-sum payments.  Non-recurring lump-sum payments are counted as resources in the month received.

Modified Categorical Eligibility (MCE)

Effective February 1, 2011, all Non-assistance CalFresh (NACF) households are considered modified categorically eligible (MCE) to CalFresh after receiving the “Family Planning – PUB 275” brochure.  The Human Services Specialist (HSS) will not verify or evaluate resources to determine eligibility to CalFresh.


Regulation Changes

Effective December 17, 2010, the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (H.R. 4853) exempts:

·  All EITC payments as income and resources for 12 calendar months, for CalFresh applicants and recipients.

·  MWPC payments as income and resources for 12 calendar months, regardless of whether the household had been participating in CalFresh at the time of receipt.

·  Federal income tax refunds from resource consideration for CalFresh applicants and recipients for 12 calendar months starting with the month of receipt of the payment.

The provision expires for tax refunds or credits received after December 31, 2012.


HSS Action

No impact.  Under MCE regulations, as of February 1, 2011, the HSS does not evaluate or verify resources to determine CalFresh eligibility. 

The law is not retroactive.  Therefore HSSs are not required to seek out and review denied or discontinued cases to reassess prior eligibility determinations.

However, the HSS will re-evaluate eligibility when coming across a case that has been denied or discontinued after December 17, 2010, on the basis of the household having assets above the resource limits due to tax refunds.  In addition, the HSS will not establish an overissuance as of December 17, 2010 for excess resources, unless the HSS has properly disregarded the tax refund or credit.

Elderly/Disabled Separate Household Status Determination

CalFresh Program Guide Section 1104 is being expanded to clarify the use of the 165% Federal Poverty Level (FPL) gross income limit test to determine if an elderly/disabled household member unable to purchase and/or prepare meals separately due to a disability , may qualify as a separate household.


CalFresh Program Guide: Revisions and Updates

The following CalFresh Program Guide sections have been revised and/or updated:







Separate Household Status

·      Re-worded section relating to elderly/disabled separate household status determination, and

·      Added links to Sections 63-1103.2, 63-1104.3, 63-1101.4 and 63-254.4.


Table of Contents

·  Added a table of contents for chapter 63-1100, renamed Section 63-1102 and

·  Updated Section 63-1104.


Definition of Elderly and Disabled for CalFresh

Changed chapter name “Elderly/Disabled (E/D) Household Members” to: “Definition of Elderly and Disabled for CalFresh”


Determination of Separate Household Status for Elderly/Disabled Household Members

·      Changed chapter name “Separate Household Status Determination for Elderly/Disabled (E/D) Households” to: “Determination of Separate Household Status for Elderly/Disabled Household Members” and

·      Added table of contents.


Definition of Separate Household Status for Elderly/Disabled

·      Moved the 165 FPL monthly gross income chart to Section 1104.3.

·      Added regulation to determine separate household status for elderly/disabled household members as explained in Section 63-103.3.


165 % of FPL Gross Income Test

·      Deleted example from this section, and

·      Added clarification that the 165% FPL gross income limit test is not an eligibility determination, but a test to determine if an elderly/disabled household member can be a separate household from the other household members even if eating together.


New Section:

165% of FPL Gross Income Chart

Added the 165% FPL monthly gross income limit table to this section.


New section:

Examples of Determination of Elderly/Disabled Separate Household Status

Added three examples of elderly/disabled separate household status determination.


Earned Income Credit (EITC)

Added the following information:  Effective December 17, 2010 and through December 31, 2012, EITC payments will be excluded as income and resources for 12 calendar months, for CalFresh applicants and recipients.


Earned Income Credit (EITC)


New section:

Reception and Placement Income/VOLAGs Funds

Added a new section with information on how to treat Reception and Placement (R&P) income/VOLAGs funds.

ACIN I-79-03


Military Pay

·      Changed section name from “Military Personnel Receiving Cash Allowances” to: “Military Pay;”

·      Added information regarding military pay periods, pay schedule and how to treat and count in CalFresh.

Policy Change

Deleted the information that if a special allowance showing in the “Entitlement” section of the LES is also listed in the “Deduction” section, only the amount of the “Entitlement” exceeding the “Deduction” of the same allowance is counted as earned income.

ACL 88-03, ACIN I-79-03E, FNS Policy Memos 81-01 and 81-05


Basic Allowance for Housing (BAH)

Changed section name from “Basic Allowance for Housing (BAH) as a “Discretionary Allotment” to: “Basic Allowance for Housing (BAH).”

Policy Change

CDSS has clarified that BAH is considered legally obligated and otherwise payable to a military individual.  Therefore, the BAH is considered earned income to CalFresh.

ACIN I-79-03E


Calculating Net Monthly Income for Quarterly Reporting (QR) Households

Expanded Steps/Action table to detail all steps required to manually determine net monthly income for QR households.


Calculating Net Monthly Income of Households That Include an Elderly or Disabled Member

·      Expanded Steps/Action table to detail all the steps required to manually determine net monthly income for households that include an elderly/disabled member, and

·      Added example of net income determination of a household that includes an elderly/disabled member.


Determining Eligibility and Benefits of Households That Include an Elderly or Disabled Member

Added link to chapter 63-1104, Determination of Separate Household Status for Elderly/Disabled Household Members.


CDSS Forms and Notices Matrix (Other State/Federal Forms)

·      Added the updated version (2/11) of the CalFresh Budget Computation DFA 285B and QR 285B forms, and

·      Deleted DFA 285D, Food Stamp Budget Worksheet (Special Medical/Shelter Deduction) form from the list as this form has been incorporated into the DFA 285B and QR 285B. 


Desk Aid, Guides and Reminders

Modified “The US Military Pay Stub” desk aid to reflect that BAH will be counted as income in CalFresh in all circumstances.


Changes to the CalFresh Program Guide are noted with highlighted text.


Automation Impact

No impact.


Forms Impact

No impact.



No impact


Other Programs Impact

CalWORKs will be issuing provisions about R&P income and federal tax credits in a separate program material in the near future.

Medi-Cal:  No impact.


Operational Impact

No impact.


Quality Assurance (QA) Impact

QA will cite the appropriate error when the instructions in the Program Guide are not followed or are followed incorrectly.


Manager Approval




SYLVIA MELENA, Assistant Deputy Director

Self-Sufficiency Programs

Strategic Planning & Operational Support