[Federal Register: November 22, 2002 (Volume 67, Number 226)]
[Proposed Rules]
[Page 70376-70388]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr22no02-28]
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LEGAL SERVICES CORPORATION
45 CFR Part 1611
Financial Eligibility
AGENCY: Legal Services Corporation.
ACTION: Notice of proposed rulemaking.
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SUMMARY: The Legal Services Corporation (``LSC'' or ``Corporation'')
proposes to amend its regulations relating to financial eligibility for
LSC-funded legal services. The proposed revisions are intended to
reorganize the regulation to make it easier to read and follow;
simplify and streamline the requirements of the rule to ease
administrative burdens faced by LSC grantees in implementing the
regulaiton and to aid LSC in enforcement of the regulation; and to
clarify the focus of the regulation on the financial eligibility of
applicants for LSC-funded legal services.
DATES: Comments must be submitted on or before December 23, 2002.
ADDRESSES: Comments must be submitted in writing and may be sent by
regular mail, or may be transmitted by fax or email to: Mattie C.
Condray, Senior Assistant General Counsel, Office of Legal Affairs,
Legal Services Corporation, 750 First St., NE., 11th Floor, Washington,
DC 20002-4250; (202) 336-8952 (fax); mcondray@lsc.gov (e-mail).
FOR FURTHER INFORMATION CONTACT: Mattie C. Condray, Senior Assistant
General Counsel, Office of Legal Affairs, Legal Services Corporation,
750 First St., NE., 11th Floor, Washington, DC 20002-4250; (202) 336-7
(phone); (202) 336-8952 (fax); mcondray@lsc.gov (e-mail).
SUPPLEMENTARY INFORMATION: Section 1007(a) of the Legal Services
Corporation Act requires LSC to establish guidelines, including setting
maximum income levels, for the determination of applicants' financial
eligibility for LSC-funded legal assistance. Part 1611 implements this
provision, setting forth the requirements relating to determination and
documentation of client financial eligibility.
The current version of 1611 was adopted in 1983. In 1995, LSC
published a proposed revision to part 1611 which represented a major
overhaul of the regulation (60 FR 3798, January 15, 1995). The product
of significant discussions and negotiation among LSC staff and
representatives of the field, the proposed rule reflected an attempt to
clarify and simplify the rule without changing most of the underlying
policies and concepts of the rule. Following publication of the NPRM,
however, no further action on the proposed revisions to part 1611 was
taken. Many outstanding issues prompting the 1995 rulemaking remain
extant and there are additional issues which have arisen since then. In
addition, there are statutory changes which need to be incorporated
into the regulation. In light of the above, the LSC Board of Directors
identified 45 CFR part 1611, Eligibility, as an appropriate subject for
rulemaking on January 27, 2001. On June 30, 2001, the LSC President and
the Chair of the Operations and Regulations Committee of the Board of
Directors made a determination to proceed with a Negotiated Rulemaking
to consider amendments to part 1611. In accordance with the LSC
Rulemaking Protocol, LSC published a notice in the Federal Register
formally soliciting suggestions for appointment to the Negotiated
Rulemaking Working Group from the regulated community, its clients,
advocates, the organized bar and other interested parties (66 FR 46976,
September 10, 2001).
After receiving submissions of interest, a Working Group was
appointed. The members of the Working Group are: Legal Services
Corporation, Washington, DC (represented by Mattie C. Condray, Senior
Assistant General Counsel, Office of Legal Affairs; John Eidleman,
Acting Vice President for Compliance and Administration; Anh Tu,
Program Counsel, Office of Program Performance; and Danilo Cardona,
Director, Office of Compliance and Enforcement); Legal Services
Corporation, Office of Inspector General, Washington, DC (represented
by Laurie Tarantowicz, Assistant Inspector General and Legal Counsel);
Center for Law and Social Policy, Washington, DC (represented by Linda
Perle, Senior Attorney--Legal Services); National Legal Aid and
Defenders Association, Washington, DC (represented by Jon Asher, Member
NLADA Regulations Committee and Executive Director of Colorado Legal
Services); Legal Aid of North Carolina, Raleigh, NC (represented by
George Hausen, Executive Director); Northwest Justice Project, Seattle,
WA (represented by Deborah Perluss, Director of Advocacy/General
Counsel); Blue Ridge Legal Services, Inc., Harrisonburg, VA
(represented by John Whitfield, Executive Director); West Texas Legal
Services, Fort Worth, TX (represented by Vernon Lewis, Deputy
Director); Land of Lincoln Legal Assistance Foundation, Inc., Alton, IL
(represented by Joseph Bartylak, Executive Director); Atlanta Legal Aid
Society, Atlanta, GA (represented by Steven Gottlieb, Executive
Director); and the American Bar Association's Standing Committee on
Legal Aid and Indigents and Defendants (represented by Phyllis Holmen,
Member SCLAID and Executive Director, Georgia Legal Services Program).
The Working Group held three meetings: January 7-8, 2002; February
11-12, 2002; and April 11-12, 2002. All three meetings were noticed in
the Federal Register and were open to public observation. The Working
Group conducted its work under the guidance of a professional
facilitator. The facilitator, although selected by and under contract
to LSC pursuant to LSC's Rulemaking Protocol, did not represent LSC on
the Working Group and served
[[Page 70377]]
as a neutral with the continuing support of the Working Group.
The Working Group developed a Draft NPRM which was considered by
the Operations and Regulations Committee of the Board of Directors at
its meeting on November 8, 2002. The Committee suggested two major
revisions to the Draft NPRM (discussed below) and this NPRM (as
revised) was approved for publication by the Board of Directors at its
meeting on November 9, 2002. Except as noted, all of the specific
proposed revisions contained herein represent the consensus opinion of
the Working Group.
While specific revisions are discussed in greater detail in the
Section-by-Section analysis, below, it should be noted that the
proposed revisions reflect several overall goals of the Working Group:
reorganization of the regulation to make it easier to read and follow;
simplification and streamlining of the requirements of the rule to ease
administrative burdens faced by LSC grantees in implementing the
regulation and to aid LSC in enforcement of the regulation; and
clarification of the focus of the regulation on the financial
eligibility of applicants for LSC-funded legal services. In particular,
LSC is proposing to significantly reorganize and simplify the sections
of the rule which set forth the various requirements relating to
establishment of recipient annual income and asset ceilings, authorized
exceptions and determinations of eligibility. These changes are
intended to improve the clarity of the regulation and include
substantive changes to make intake simpler and less burdensome and
basic financial eligibility determinations easier for recipients to
make. LSC is also proposing to move the existing provisions on group
representation, with some amendment, to a separate section of the
regulation.
LSC also proposes to eliminate the retainer agreement requirement
currently found at Sec. 1611.8 of the regulation. The retainer
agreement requirement was the subject of significant discussion in the
Working Group. Representatives of the field agreed with the LSC
representatives that a retainer agreement may be appropriate under
certain circumstances, but argued that this regulatory requirement is
not required by statute, is not justified under applicable rules of
professional responsibility, may be unnecessarily burdensome in some
instances and is not related to financial eligibility determinations.
They contended that, barring a statutory mandate, decisions about the
use of retainer agreements, like those involving many other matters
relating to the best manner of providing high quality legal assistance,
should be determined by a recipient's Board, management and staff, with
guidance from the Corporation. They urged LSC to delete this
requirement. The LSC representatives, however, were of the opinion that
the existing provision in the regulations requiring the execution of
retainer agreements is professionally desirable, authorized in
accordance with LSC's mandate under section 1007(a)(1) of the Act to
assure the maintenance of the highest quality of service and
professional standards, and appropriate to assure that there are no
misunderstandings as to what services are to be rendered to a
particular client. Retainer agreements protect the attorney and
recipient in cases of an unfounded malpractice claim and protect the
client if the attorney and the recipient should fail to provide legal
assistance measuring up to professional standards. In the end, the
Working Group was unable to reach consensus on this issue and the Draft
NPRM retained a provision generally requiring the execution of retainer
agreements, along with proposing requirements for client service
notices and PAI referral notices in lieu of retainer agreements under
certain circumstances.
In its deliberations on the Draft NPRM, the Operations and
Regulations Committee determined that while it agreed that retainer
agreements are professionally desirable, it did not find it necessary,
either by statute or policy, for LSC to continue to impose such a
requirement on recipients. The Committee recommended that the entire
proposed Sec. 1611.7 in the Draft NPRM, entitled Retainer Agreements,
Client Service Notices and Referral Notices, be stricken from the draft
prior to publication. In approving the recommendation of the Committee,
the Board directed that this action be taken and any conforming
amendments necessary be made prior to publication of the NPRM for
comment. This NPRM reflects this direction. LSC specifically invites
comment on this issue.
One other general issue merits discussion. Section 509(h) of the FY
1996 LSC appropriations act, Pub. L. 104-134, provides that, among
other records, eligibility records ``shall be made available to any
auditor or monitor of the recipient * * * except for such records
subject to the attorney-client privilege.'' This provision has been
retained in each subsequent appropriations measure and continues to be
in force. The Office of the Inspector General has been interested in
having this language expressly incorporated into part 1611.
The Working Group took up the issue and discussed the fact that
there is some measure of disagreement about the scope and extent of the
access authority granted to the OIG by the statute. Mindful of this
disagreement, the Working Group determined that an appropriate approach
would be simply to propose language that tracked very closely that of
the statute and the Working Group was close to reaching consensus on
what would have been proposed Sec. 1611.10, Access to Records. The
Working Group acknowledged that such an approach would not settle all
of the questions about the meaning of the access provisions, but agreed
that it was the best way to incorporate the statutory requirements
without causing undue delay in completing its work on this proposed
rule. Simultaneously, however, in the course of a similar discussion
taking place in a separate negotiated rulemaking on LSC's alien
eligibility regulations, 45 CFR part 1626, it became apparent that the
1626 Working Group would not be able to agree to such an approach, with
several participants favoring either leaving an access provision out of
the regulation or drafting a provision that reflects a more thorough
discussion and interpretation of 509(h).
This situation created a problem for LSC because LSC is not willing
either to adopt two differing regulations implementing the same
statutory provision, or to have an access to records provision relating
to 1611 eligibility records but not an access to records provision
relating to 1626 eligibility records when both regulations are in the
process of revision. Either of these situations would invite
unnecessary implementation problems for LSC, the OIG and recipients.
Moreover, upon reflection LSC has determined that, as 509(h) covers
significantly more than eligibility records, conducting a full
discussion of the meaning of 509(h) in the context of either 1611 or
1626, which deal only with eligibility issues, is not appropriate. The
OIG's authority under the statute is not affected by a decision not to
incorporate express access to records provisions in either 1611 or
1626. Consequently, LSC does not propose to include regulatory language
implementing 509(h) with respect to records covered by this part.
Similarly, LSC does not propose to add language regarding 509(h) access
to the retainer agreement, client service notice and referral notice
provisions of proposed Sec. 1611.7.
Although the field representatives to the Working Group concur in
this decision, the OIG dissents. As noted
[[Page 70378]]
above, the OIG has been interested in incorporating the 509(h)
authority in the regulations for some time. The OIG disagrees with
LSC's position that conducting a full discussion of the meaning of
509(h) in the context of either 1611 or 1626 is inappropriate. Rather,
the OIG is of the opinion that since one of the goals of this
rulemaking (and the 1626 rulemaking) is to clarify the requirements
applicable to recipients relating to eligibility records and since
access to eligibility records is provided by 509(h), the 1611 and 1626
negotiated rulemakings provide an opportunity to clarify the statutory
authority. Failing a full discussion of 509(h) in the current
regulatory context, the OIG believes that including an access provision
which closely trackes the statutory language would make clear that the
documentation and records recipients are required to maintain under
parts 1611 and 1626 are eligibility records to which LSC has access
under 509(h).
Moreover, the OIG is of the opinion that even if a consensus could
not be reached during the negotiated rulemaking process, LSC
nonetheless should include an access provision in the rule. Negotiated
rulemaking has at its ultimate goal the resolution of differences of
all issues by consensus. Yet, the negotiated rulemaking process
anticipates that consenses may not be achieved on all issues, and in
such cases, LSC, as the entity responsible for implementing the law,
promulgates the rule it deems appropriate. The OIG believes this is
especially warranted in the case of access, where the anticipated lack
of ability to reach consensus highlights the very problem the
rulemaking should address and resolve. The OIG notes that the
discussions among the Working Group members make clear that there are
differences in interpretation regarding the access to which LSC is
authorized. The OIG further notes that those differences have resulted
in problems and delays when access to grantee information is sought,
causing the unnecessary expenditure of time and resources for all
involved. The OIG believes that attempting to avoid the problem by not
including an access provision in the rule resolves nothing.
LSC acknowledges that not including an access provision in Sec.
1611 does not resolve the issues relating to the meaning and scope of
the 509(h) access provision. Indeed, as noted above, LSC has determined
that, as section 509(h) covers a range of records beyond financial
eligibility records, it is not appropriate for LSC to use this
rulemaking to explore and resolve these contentious and important
issues.
Title of Part 1611
LSC proposes to change the title of part 1611 from ``Eligibility''
to ``Financial Eligibility.'' This proposed change is intended, first,
to make clear that with respect to individuals seeking LSC-funded legal
assistance, the standards of this part deal only with the financial
eligibility of such persons. LSC believes this change will help clarify
that a finding of financial eligibility under part 1611 does not create
an entitlement to service. Rather, financial eligibility is merely a
threshold question and the issue of whether any otherwise eligible
applicant will be provided with legal assistance is a matter for the
program to determine with reference to its priorities and resources. In
addition, this part does not address eligibility based on citizenship
or alienage status; those eligibility requirements are set forth in
part 1626 of LSC's regulations, Restrictions on Legal Assistance to
Aliens.
Section-by-Section Analysis
Section 1611.1 Purpose
LSC is proposing to revise this section to make clear that the
standards of this part concern only the financial eligibility of
persons seeking LSC-funded legal assistance and that a finding of
financial eligibility under part 1611 does not create an entitlement to
service. In addition, LSC proposes to remove the language in the
current regulation referring to giving preferences to ``those least
able to obtain legal assistance.'' Although the original LSC Act
contained language indicating that programs should provide preferences
in service to the poorest among applicants, that language was deleted
when the Act was reauthorized in 1977 and has remained out of the
legislation ever since. Thus, as there is no statutory basis for a
preference for those least able to afford assistance and because LSC
believes that the regulation should focus on financial eligibility
determinations without reference to issues relating to service
determinations, this language should be removed from the regulation.
Finally, LSC proposes to add language specifying that this part also
sets forth financial standards for groups seeking legal assistance
supported by LSC funds.
Section 1611.2; Definitions
LSC proposes to add definitions for several terms and to amend the
definitions for each of the existing terms currently defined in the
regulation. LSC believes that the new definitions and the amended
definitions will help to make the regulation more easily
comprehensible.
Section 1611.2(a) Applicable Rules of Professional Responsibility
LSC proposes to add a definition of the term ``applicable rules of
professional responsibility'' as that term appears in proposed Sec.
1611.7, Change in Financial Eligibility Status. This definition is
intended to make clear that the references in the regulation refer to
the rules of ethics and professional responsibility applicable to
attorneys in the jursidiction where the recipient either provides legal
services or maintains its records.
Section 1611.2(b) Applicant
Consistent with the intention throughout to keep the focus of the
regulation on the standards and criteria for determining the financial
eligibility of persons seeking legal assistance supported with LSC
funds, LSC proposes to use the term ``applicant'' throughout the
regulation to emphasize the distinction between applicants, clients,
and persons seeking or receiving assistance supported by other than LSC
funds. Accordingly, LSC proposes to add a definition of applicant
providing that an applicant is an individual seeking legal assistance
supported with LSC funds. Groups, corporations and associations would
be specifically excluded from this definition, as the eligibility of
groups would be addressed wholly within proposed Sec. 1611.8.
Programs currently may provide legal assistance without regard to a
person's financial eligibility under part 1611 when the assistance is
supported wholly by non-LSC funds. LSC does not propose to change this
(in fact, LSC proposes to restate this principle in proposed Sec.
1611.4(a)) and believes that the use of the term applicant as proposed
herein will help to clarify the application of the rule.
Section 1611.2(c) Assets
LSC proposes to add a definition of the term assets to the
regulation. The proposed definition, ``cash or other resources that are
readily convertible to cash, which are currently and actually available
to the applicant,'' is intended to provide some guidance to programs as
to what is meant by the term assets, yet provide considerable latitude
to programs in developing a description of assets that addresses local
concerns and conditions. The key concepts intended in this definition
are (1) ready convertibility to cash; and (2) availability of the
resource to the applicant.
[[Page 70379]]
Although the term is not defined in the regulation, current Sec.
1611.6(c) states that ``assets considered shall include all liquid and
non-liquid assets. * * *'' The intent of this requirement is that
programs are supposed to consider all assets upon which the applicant
could draw in obtaining private legal assistance. While there was no
intent to change the underlying requirement, in discussing the issues
of assets and asset ceilings in the Working Group it became apparent
that the terms ``liquid'' and ``non-liquid'' were obscuring the
understanding of the regulation. To some, the term ``non-liquid''
implied something not readily convertible to cash, while to others the
term implied an asset that was simply something other than cash,
without regard to the ease of convertibility of the asset. Thus, the
Working Group decided that the terms ``liquid'' and ``non-liquid''
should be eliminated and that the regulation should focus instead on
the ready convertibility of the asset to cash.
The other key concept in the definition of asset is the
availability of the resource to the applicant. Although the current
regulation notes that the recipient's asset guidelines ``shall take
into account impediments to an individual's access to assets of the
family unit or household,'' the Working Group was of the opinion that
this principle could be more clearly articulated. LSC believes that the
proposed language accomplishes that purpose.
Section 1611.2(d) Governmental Program for Low Income Individuals or
Families
LSC proposes to change the term that is used in the regulation from
``governmental program for the poor'' to ``governmental program for low
income individuals and families.'' This change is not intended to
create any substantive change in the current definition, but merely
reflect preferred nomenclature.
Section 1611.2(e) Governmental Program for Persons With Disabilities
LSC is proposing to add a definition of the term ``governmental
program for persons with disabilties.'' LSC proposes to include in the
authorized exceptions to the annual income ceilings an exception
relating to applicants seeking to obtain or maintain govermental
benefits for persons with disabilties. Accordingly, it is appropriate
to include a proposed definition for this term. The proposed
definition, ``any Federal, State or local program that provides
benefits of any kind to persons whose eligibility is determined on the
basis of mental and/or physical disability,'' is intended to be similar
in structure and application to the definition of the term
``governmental program for low income individuals and families.''
Section 1611.2(f) Income
LSC proposes to revise the current definition of income to refer to
the total cash receipts of a ``household,'' instead of a ``family
unit'' and to make clear that programs have the discretion to define
the term household in any reasonable manner. Currently, the definition
of income refers to ``family unit,'' while the phrase ``household or
family unit'' appears in the section on asset ceilings. It appears that
there is no difference intended by the use of different terms in these
sections and LSC believes that it is appropriate to simplify the
regulation to use the same single term in each place, without creating
a substantive change in the meaning of either term. LSC proposes to use
``household'' instead of ``family unit'' because it is a simpler, more
accessible term.
As noted above, LSC does not intend the use of the term
``household'' to have a different meaning from the current term
``family unit.'' Under current guidance from the LSC Office of Legal
Affairs, recipients have considerable latitude in defining the term
``family unit''. Specificially, OLA External Opinion No. EX-2000-011
states:
Neither the LSC Act nor the LSC regulations define ``family
unit'' for client eligibility purposes. The Corporation will defer
to recipient determinations on this issue, within reason. Recipients
may consider living arrangements, familial relationships, legal
responsibility, financial responsibility or family unit definitions
used by government benefits agencies, amongst other factors, in
making such decisions.
LSC intends that this standard would also apply to definitions of
``household'' and the proposed definition would make this clear.
Field representatives on the Working Group also suggested deleting
the words ``before taxes'' from the definition of income. Such a change
is desirable, they contend, because automatically deducted taxes are
not available for an applicant's use and the failure to take current
taxes into account in determining income has an adverse impact on the
working poor. While it is undoubtedly true that automatically deducted
taxes are not available to an applicant, LSC does not believe that the
definition of income is the appropriate place in the regulation to deal
with this problem. Taking the phrase ``before taxes'' out of the
definition of income would effectively change the meaning of income
from gross income to net income. The term income has meant gross income
since the original adoption of the eligibility regulation in 1976. See
41 FR 51604, at 51606, November 23, 1976. The maximum income guidelines
are based on gross income, as are the underlying DHHS Federal Poverty
Guidelines amounts. Changing the definition of income effectively from
gross to net would introduce two different uses of the term income into
the regulations. LSC believes that this action would cause greater
confusion. Moreover, LSC believes that the practical problem (that
taxes, indeed, represent funds unavailable to the applicant), is better
addressed by considering taxes a fixed debt or obligation which can be
considered by the recipient in making financial eligibility
determinations. LSC invites comment on this issue. This matter is
presented in greater detail in the discussion of proposed Sec. 1611.5,
below.
In addition, LSC proposes to move the information on what is
encompassed by the term ``total cash receipts'' into the definition of
income. LSC believes that having this information in the definition of
income, rather than in a separate definition will make the regulation
easier to use, particularly as the term ``total cash reciepts'' is used
only in the definition of income. In incorporating the language on
``total cash reciepts,'' LSC proposes to take the current defintion of
the term without any substantive amendment, but reorganized to make it
easier to understand. Specifically, LSC proposes to separate the
definition into two sentences, one of which sets forth the list of
things which are included in total cash receipts and one which sets
forth those things which are specifically excluded from the definition
of total cash receipts. It is worth noting that the sentence on items
included is not intended to be exhaustive, while the sentence on items
to be excluded is intended to be exhaustive.
Finally, LSC wishes to take this opportunity to restate in this
preamble some guidance on the treatment of Indian trust fund monies in
making income determinations. Several provisions of Federal law
regulate whether or not income or interests in Indian trusts are
taxable or should be considered as resources or income for federal
benefits. Under the terms of those laws, LSC has determined that
recipients may disregard up to $2000 per year of funds received by
individual Native Americans that are derived from income or interests
in Indian trusts from being considered income for the purpose of
determining financial eligibility of Native American applicants for
service, and that such
[[Page 70380]]
funds or interests of individual Native Americans in trust or
restricted lands should not be considered as a resource for the purpose
of LSC eligibility. See LSC Office of Legal Affairs External Opinion
99-17, August 27, 1999.
As noted in External Opinion 99-17, the exclusion applies only to
funds and other interests held in trust by the federal government and
investment income accrued therefrom. The following have been found to
qualify for the exclusion from income in determining eligibility for
various government benefits: income from the sale of timber from land
held in trust; income derived from farming and ranching operations on
reservation land held in trust by the federal government; income
derived from rentals, royalties, and sales proceeds from natural
resources of land held in trust; sales proceeds from crops grown on
land held in trust; and use of land held in trust for grazing purposes.
On the other hand, per capita distributions of revenues from gaming
activity on tribal trust property are not protected because such funds
are not held in trust by the federal government. Thus, such
distributions are considered to be income for purposes determining LSC
financial eligibility.
Total Cash Receipts
LSC proposes to delete the definition of ``total cash reciepts,''
currently at Sec. 1611.2(h), as a separately defined term in the
regulation. Rather, LSC proposes to reorganize the information
contained in the definition and move it directly into the definition of
``income.'' As noted above, the only place the term ``total cash
reciepts'' is used is in the defintion of ``income'' and LSC believes
that having a separate definition for ``total cash reciepts'' is
cumbersome and unnecessary.
Section 1611.3 Financial Eligibility Policies
LSC proposes to create a new Sec. 1611.3, Financial Eligibility
Policies, based on requirements currently found in Sec. Sec.
1611.5(a), 1611.3(a)-(c) and 1611.6. The new Sec. 1611.3 would address
in one section recipients' responsibilities for adopting and
implementing financial eligibility policies. Under the proposed new
section, the current requirement that recipients' governing bodies have
to adopt policies for determining financial eligibility would be
retained. LSC proposes, however, to change the current requirement for
annual review of these policies and instead require recipients'
governing bodies to conduct triennial reviews of policies. The Working
Group agreed that an annual review was unnecessary and has tended to
result in rather pro forma reviews of policies. In contrast, a
triennial review requirement would be sufficient to ensure that
financial eligibility policies remain relevant and would encourage a
more thorough and thoughtful review when such review is undertaken. The
section would also add an express requirement that recipients would be
required to adopt implementing procedures. While this is already
implicit in the current regulation, LSC believes it would be better for
this requirement to be expressly stated. Such implementing procedures
could be adopted either by a recipient's governing body or by the
recipient's management.
Proposed Sec. 1611.3 would also contain certain minimum
requirements for the content of recipient's financial eligibility
policies. Specifically, LSC proposes that the recipient's financial
eligibility policy must:
[sbull] Specify that only applicants for service determined to be
financially eligible under the policy may be further considered for
LSC-funded service;
[sbull] Establish annual income ceilings of no more than 125% of
the current Department of Health and Human Services Federal Poverty
Guidelines amounts;
[sbull] Establish asset ceilings; and
[sbull] Specify that, notwithstanding any other provisions of the
regulation or the recipient's financial eligibility policies, in
assessing the financial eligibility of an individual known to be a
victim of domestic violence, the recipient shall consider only the
income and assets of the individual applicant and shall not consider
any jointly held assets.
In establishing income and asset ceilings, the recipient would have to
consider the cost of living in the locality; the number of clients who
can be served by the resources of recipient; the potentially eligible
population at various ceilings; and the availability of other sources
of legal assistance. With respect to jointly held assets of domestic
violence victims, this requirement applies when the applicant has made
the recipient aware that he or she is a victim of domestic violence.
In addition, LSC proposes to permit recipients to adopt financial
eligibility policies which provide for authorized exceptions to the
annual income ceiling pursuant to proposed Sec. 1611.5 and for waiver
of the asset ceiling under unusual circumstances and when approved by
the Executive Director or his/her designee. Finally, LSC proposes to
permit recipients to adopt financial eligibility policies which permit
financial eligibility to be established by reference to an applicant's
receipt of benefits from a governmental program for low-income
individuals or families consistent with proposed Sec. 1611.4(b).
These proposed provisions are, with two exceptions, based directly
on current requirements with a few substantive changes. First among the
changes, recipients would no longer be required to routinely submit
their asset ceilings to LSC. This requirement appears to serve little
or no purpose, as compliance with this requirement has been spotty and
LSC has taken no action to obtain the information from programs which
have not automatically submitted it. Moreover, the information
collected is not being put to any routine use. In addition, LSC has not
had a parallel requirement for the submission of income ceilings. The
Working Group determined that this requirement could be eliminated
without any adverse effect on program compliance with or Corporation
enforcement of the regulation.
Another substantive change is that recipients would be permitted to
provide in their financial eligibility policies for the exclusion of
(in addition to a primary residence, as provided for in the existing
regulation) vehicles, assets used in producing income and other assets
excluded from attachment under State or Federal law from the
calculation of assets. In identifying other assets excluded from
attachment under State or Federal law, LSC has in mind assets that are
excluded from bankruptcy proceedings or other assets that may not be
attached for the satisfaction of a debt, etc.
There was discussion within the Working Group about the appropriate
scope of this provision. Field representatives suggested that the list
of exclusions should be illustrative, and not exhaustive, allowing
programs greater discretion in developing asset ceilings. LSC
representatives, however, prefered to retain the approach in the
current regulation in which the list of excludable assets is set forth
in toto, to emphasize the policy that most assets are to be considered
and to maintain a basic level of consistency nationally with respect to
this issue. However, the LSC representatives agreed that the regulation
could afford recipients some additional flexibility in developing asset
ceilings, consistent with the policy articulated above. The Working
Group believes that the proposed language meets those objectives,
particularly in light of the proposed amendment to the asset ceiling
waiver standard discussed below. LSC invites comment on whether
[[Page 70381]]
the list should be illustrative or exhaustive. LSC also invites comment
on whether additional specific assets should be included in the list of
excludable assets and, if so, what items might be appropriate.
LSC is also proposing to change the asset ceiling waiver standard
slightly. The current regulation permits waiver in ``unusual or
extremely meritorious situations;'' the proposed rule would permit
waiver in ``unusual circumstances.'' The Working Group determined that
the current language is unnecessarily stringent and that it is unclear
what the difference is intended to be between ``unusual'' and
``extremely meritorious.'' It was suggested in the Working Group that
the standard should be ``where appropriate.'' LSC, however, felt that
the regulation should continue to reflect the policy that waivers of
the asset ceilings should only be granted sparingly and not as a matter
of course. The Working Group agreed that the revised language
accomplishes this goal, while providing some additional appropriate
discretion to programs. In addition, where the current rule requires
all waiver decisions to be made by the Executive Director, LSC proposes
to permit those decisions to be made by the executive director or his/
her designee. LSC believes it is important that a person in significant
authority be involved in making asset ceiling waiver decisions, but
recognizes that, especially as more programs consolidate and serve
larger areas, it is important for programs to have the discretion to
delegate certain authority to regional or branch office directors to
increase administrative efficiency.
The first totally new element is the proposed language regarding
victims of domestic violence. This proposal stems from LSC's FY 1998
appropriations law. Specifically, section 506 of that act provides:
In establishing the income or assets of an individual who is a
victim of domestic violence, under section 1007(a)(2) of the Legal
Services Corporation Act (42 U.S.C. 2996f(a)(2)), to determine if
the individual is eligible for legal assistance, a recipient
described in such section shall consider only the assets and income
of the individual and shall not include any jointly held assets.
Although this law has been in effect since 1997, it has never been
formally incorporated into part 1611. LSC notes that this provision of
law applies regardless of whether it appears in the regulation.
However, incorporating this language into the regulation is
appropriate, particularly in light of the goal of this rulemaking to
clarify the requirements relating to financial eligibility
determinations.
Finally, the proposal to permit recipients to adopt financial
eligibility policies which permit financial eligibility to be
established by reference to an applicant's receipt of benefits from a
governmental program for low-income individuals or families consistent
with proposed Sec. 1611.4(b) is also new. This proposal is discussed
in greater detail below.
Section 1611.4 Financial Eligibility for Legal Assistance
This proposed section would set forth the basic requirement that
recipients may provide legal assistance supported with LSC funds only
to those individuals whom the recipient has determined are financially
eligible for such assistance pursuant to their program's policies,
consistent with this part. This section also proposes to contain a
statement that nothing in part 1611 prohibits a recipient from
providing legal assistance to an individual without regard to that
individual's income and assets if the legal assistance is supported
wholly by funds from a source other than LSC (regardless of whether LSC
funds were used as a match to obtain such other funds, as is the case
with Title III or VOCA grant funds) and the assistance is otherwise
permissible under applicable law and regulation. This proposed section
would further provide that a recipient may find an applicant to be
financially eligible if the applicant's assets are at or below the
recipient's applicable asset ceiling level (or the ceiling has been
properly waived) and the applicant's income is at or below the
recipient's applicable income ceiling, or if one or more of the
authorized exceptions to the ceiling applies. These provisions are
based on existing provisions found in Sec. Sec. 1611.3, 1611.4 and
1611.6. As revised, the new provisions do not represent a substantive
change, but LSC believes having the basic statements as to who may be
found to be financially eligible for assistance in one section makes
the regulation much clearer. In addition, where the existing regulation
uses a construction that speaks to when a recipient may provide legal
assistance, the proposed new language emphasizes the point that the
requirements speak only to determinations of financial eligibility and
not to decisions regarding whether or not to actually provide legal
assistance.
LSC also proposes to incorporate into this section two significant
substantive changes to the regulation. First, LSC proposes to include a
requirement that, in making financial eligibility determinations, a
recipient shall make reasonable inquiry regarding sources of the
applicant's income, income prospects and assets and shall record income
and asset information in the manner specified for determining
eligibility in proposed Sec. 1611.6. This requirement would replace
the process currently required by Sec. 1611.5, whereby a recipient is
effectively required to conduct a lengthy and often cumbersome inquiry
as to the applicant's income, assets and income prospects, including
inquiry into a detailed list of factors relating to an applicant's
specific financial situation and ability to afford private counsel. The
Working Group discussed this issue at length and representatives of the
field noted that conducting such a detailed inquiry in most cases is a
task which is often difficult to accomplish efficiently at the point of
intake, especially as much of intake is performed by volunteers,
interns or receptionists. Rather, many recipients, in practice, conduct
a somewhat abbreviated version of the otherwise required process,
inquiring into current income, assets, income prospects and probing for
additional information on the basis of the responses provided, based
upon the requirements of the regulation and their knowledge of the
applicant base and local circumstances. This approach, the field
representatives noted, is less prone to error and assists in fostering
an appropriate attorney-client relationship with individuals accepted
as clients. As LSC is not finding widespread instances of service being
provided to financially ineligible persons, it was agreed that that the
process required by the existing regulation is unduly complicated and
that the simplified requirement proposed would be adequate to ensure
that recipients are making sufficient inquiry into applicants'
financial situations to determine financial eligibility status under
the regulation while being less adminstratively burdensome for
recipients and more conducive to the development of the attorney-client
relationship. LSC also believes that adoption of the proposed
streamlined eligibility determination process will aid the Corporation
in conducting compliance reviews.
The other major change is that, consistent with proposed Sec.
1611.3 as discussed above, if adopted, the regulation would permit
recipients to determine an applicant to be financially eligible because
the applicant's income is derived solely from a governmental program
for low-income individuals or families, provided that the recipient's
[[Page 70382]]
governing body has determined that the income standards of the
governmental program are at or below 125% of the Federal Poverty Level
amounts. For many recipients, a significant proportion of applicants
rely on governmental benefits for low-income individuals and families
as their sole source of income. In order to qualify for these benefits,
such persons have already been screened and determined to be
financially eligible for those benefits by the agency providing the
benefits through an eligibility determination process that is stricter
than the one required under LSC regulations. In Working Group
discussions, many representatives of the field noted that if they could
rely on the determinations made by these agencies without having to
otherwise make an independent inquiry into financial eligibility, it
would substantially ease the administrative workload involved in making
eligibility determinations.
The Working Group also noted that current LSC practice permits
recipients to determine that an applicant's assets are within the
recipient's asset ceiling level without additional review if the
applicant is receiving govermental benefits for low-income individuals
and families, eligibility for which includes an asset test. Key to this
practice is that the recipient's governing body has to take some
identifiable action to recognize the asset test of the governmental
benefit program being relied upon. This ensures that the eligibility
standards of the other program have been carefully considered and are
incorporated into the overall eligibility policies adopted and
regularly reviewed by the governing body. As this practice has proved
efficient and effective, it was determined that a parallel process
could also be adopted for income screening and that these practices
should be expressly included in the regulations. It is important to
note that this provision would only apply to applicants whose sole
income is derived from such benefits. Applicants who also have income
derived from other sources would be subject to an independent inquiry
and assessment of financial eligibility.
Section 1611.5 Authorized Exceptions to the Annual Income Ceiling
This proposed section provides for authorized exceptions to the
annual income ceiling. The proposed language, like the current language
of Sec. Sec. 1611.4 and 1611.5, on which it is based, is permissive. A
recipient would be free to include some, none, or all of the authorized
exceptions discussed below in its financial eligibility policies. Thus,
to the extent a recipient would choose to avail itself of the authority
provided in this proposed section, a recipient would be permitted to
determine an applicant to be financially eligible for assistance,
notwithstanding that the applicant's income is in excess of the
recipient's applicable income ceiling. In making such determinations,
however, the recipient would have to detemine that the applicant's
assets were at or below the recipient's applicable asset ceiling (or
the ceiling would have had to have been waived). This requirement is
consistent with the current regulation, but would be affirmatively
stated for clarity.
Under the proposed section, there would be two situations in which
an applicant's income could exceed the recipient's income ceiling
without an absolute upper limit: (1) Where the applicant is seeking to
maintain governmental benefits for low-income individuals and families;
and (2) where the executive director (or his/her designee) determines,
on the basis of documentation received by the recipient, that the
applicant's income is primarily committed to medical or nursing home
expenses and, in considering only that portion of the applicant's
income which is not so committed, the applicant would otherwise be
financially eligible.
The first instance would be a new addition to the regulation.
Currently, an applicant seeking to obtain governmental benefits for low
income persons may be deemed financially eligible if the applicant's
income does not exceed 150% of the national eligibility level. The
existing regulation, however, does not specifically address applicants
seeking to maintain such benefits. Thus, under the current regulation,
an applicant whose income is over the income ceiling but under 150% of
the national eligibility level may be deemed financially eligible for
assistance in obtaining benefits, but not for assistance in maintaining
them. Thus, the applicant seeking assistance to maintain benefits would
have to be turned down, but that same applicant could then be found
financially eligible for assistance to re-obtain such benefits once the
benefits were lost. Accordingly, LSC proposes to address this problem
in the regulation. However, unlike the situation in obtaining the
benefits, in seeking to maintain benefits LSC considers an upper limit
on income unnecssary since in such cases the applicant's income will
necessarily be rather limited (for the applicant to have been eligible
in the first place for the benefits he or she is seeking to maintain).
The second instance is taken from Sec. 1611.5(b)(1)(B) of the
current regulation addressing instances in which the applicant's income
is primarily devoted to medical or nursing home expenses and does not
represent a substantive change in the current regulation. LSC does
propose to specify in the regulation, however, that in such cases the
recipient is still required to make a determination of financial
eligibility with regard to the applicant's remaining income. The
existing regulation could be read to permit an applicant with an income
of $300,000 to be deemed financially eligible if $250,000 of the income
is devoted to nursing home expenses, notwithstanding that the
applicant's remaining income is $50,000--substantially in excess of the
income ceiling. This situation is not intended, and, indeed, LSC has no
reason to believe recipients are serving such persons. However,
consistent with the overall goal of clarifying the regulation, LSC
believes that a requirement that an applicant must be otherwise
financially eligible considering only that portion of the applicant's
income which is not devoted to medical or nursing home expenses should
be clearly set forth in the regulation.
LSC also proposes to permit exceptions for certain situations in
which the applicant's income is in excess of the recipient's applicable
income ceiling, but does not exceed 200% of the applicable Federal
Poverty Guideline amount. At the outset, LSC notes that this section
also proposes to change the current upper income limit of 150% of the
national income guidelines amount, which is 150% of 125% of the Federal
Poverty Guideline amounts, or 187.5% of the Federal Poverty Guidelines
amounts. Under the proposed new regulation, the upper limit would
increase to 200% of the Federal Poverty Guidelines amounts. This change
is being proposed to further simplify the language of the regulation
and in recognition of the changing demographic of the legal services
client base, which now increasingly includes the working poor. The
Working Group discussed the fact that this action would slightly
increase the pool of potential applicants for service but was of the
opinion that this would not have a negative impact on the quantity or
quality of services delivered.
Turning to the exceptions, LSC proposes to retain the current
exception for individuals seeking to obtain governmental benefits for
low-income individuals and families. Second, LSC
[[Page 70383]]
proposes to add an exception for individuals seeking to obtain or
maintain governmental benefits for persons with mental and/or physical
disabilties. Many disability benefit programs provide only subsistance
support and those individuals should be treated the same way as those
seeking to obtain benefits available on the basis of financial need.
However, many persons with disabilties who are eligible for disability
benefits may not be particularly economically disadvantaged and should
not be eligible for legal assistance simply by virtue of the
eligibility for such disability benefits. Therefore, those applicants
must have incomes below 200% of the applicable poverty level in order
to be considered financially eligible for LSC-funded services.
Finally, the proposed regulation maintains the current authorized
exceptions found in the factors listed in Sec. 1611.5. Specifically,
the recipient may determine an applicant whose income is below 200% of
the applicable Federal Poverty Guidelines amount to be financially
eligible for legal assistance supported with LSC funds based on one or
more enumerated factors that affect the applicant's ability to afford
legal assistance. As in the current regulation, recipients would not be
required to apply these factors in a ``spend down'' fashion. That is,
although recipients would be permitted to do so, they would not be
required to determine that, after deducting the allowable expenses, the
applicant's income is below the applicable income ceiling before
determining the applicant to be financially eligible. The regulation
would also be amended to clarify that the factors apply to the
applicant and members of the applicant's household. The factors
proposed are identical to the ones in the current regulation, with the
following exceptions:
[sbull] The factor relating to medical expenses would be restated
to make clear that it refers only to unreimbused medical expenses, but
that medical insurance premiums are included;
[sbull] The factor relating to employment expenses would be
reorganized for clarity and would expressly include expenses related to
job training or educational activities in preparation for employment;
[sbull] The factor relating to expenses associated with age or
disability would no longer refer to resident members of the family as a
reference to the applicant or members of the applicant's household is
proposed to be incorporated elsewhere in this section of the
regulation;
[sbull] The factor relating to fixed debts and obligations would be
amended to read only ``fixed debts and obligations.''
With regard to ``fixed debts and obligations,'' the current
regulation provides little guidance as to what is meant by this term,
except to specifically include unpaid taxes from prior years. LSC
proposes to simply use the term ``fixed debts and obligations,'' while
providing guidance in the preamble as to what is encompassed by the
term. LSC believes that this approach will provide recipients with
flexibility in applying the rule, while providing for more guidance
than could easily be contained in regulatory text.
Prior guidance from the LSC Office of Legal Affairs has stated
that, ``in the absence of any regulatory definition or guidance as to
the meaning of ``fixed debts and obligations,'' the common meaning of
the term applies'' and that it encompasses debts fixed as to both time
and amount. See Letter of November 1, 1993 from J. Kelly Martin,
Assistant General Counsel to Stephen St. Hilaire, Executive Director,
Camden Regional Legal Services, Inc. Examples of such ``fixed debts and
obligations'' would include morgage payments, child support, alimony,
and business equipment loan payments. LSC intends that this term should
also include rent in addition to mortgage payments. Previous OLA
opinions have addressed mortgage payments but not rent and rent has,
heretofore, not been considered a fixed debt. LSC now sees no rational
distinction between the two for the purposes of this regulation and
therefore proposes to treat these expenses in a similar manner.
With respect to taxes, prior to 1983, part 1611 included current
taxes along with past due unpaid taxes as a fixed debt. When the
regulation was changed in 1983, the reference to taxes was amended to
refer only to unpaid prior year taxes. This change was justified on the
basis that the Sec. 1611.5 factors were intended to account only for
``special circumstances'' affecting the ability to afford legal
assistance. See 48 FR 54201 at 54203 (November 30, 1983). However,
given that other types of expenses included in the list do not seem to
be particularly ``special'' (e.g., mortgage payments; child care
expenses), LSC no longer finds this explanation pursuasive. Rather, LSC
believes that the exclusion of current taxes, but not prior unpaid
taxes, from fixed debts and obligations has the effect of punishing
those persons who are in compliance with the law in favor of persons
who are delinquent in their legal responsibility to pay taxes.
Moreover, as noted above, the legal services client base is
increasingly comprises the working poor. Excluding current taxes from
fixed debts has a disproportionate effect on applicants who work,
versus applicants who do not work. Accordingly, LSC believes that
including current taxes in fixed debts is appropriate to address this
problem.
As noted above, the Working Group considered whether current taxes
should just be excluded from the meaning of the term income, rather
than including them as within the meaning of ``fixed debts and
obligations.'' Although representatives of the field preferred the
former approach, LSC representatives preferred the latter approach. The
Corporation has always considered income to be gross income and the
eligibility ceilings are based on a gross income standard. Similarly,
taxes, whether paid or unpaid, have always been considered within the
rubric of the fixed debts and obligations exception. By proposing to
include current taxes within the meaning of fixed debts and
obligations, LSC proposes to return to the prior usage of that term
from 1976 through 1983. However, as noted above, LSC invites comment on
this issue.
The term ``fixed debts and obligations,'' however, is not without
limit. It is not intended to include expenses, such as food costs,
utilities, credit card debt, etc. These types of debts are usually not
fixed as to time and amount. Moreover, these sorts of expenses are
typical living expenses which have not been, and are not intended to
be, included as factors to be considered in assessing the financial
eligibility of someone whose income exceeds the recipient's applicable
annual income ceiling.
The Working Group considered whether there were additional factors
which should be enumerated in this section and several members of the
Working Group proposed adding other factors, such as utilities, to the
list. Although the Working Group agreed in the end not to propose
adding any additional factors, LSC specifically invites comment on this
matter.
Section 1611.6 Manner of Determining Eligibility
LSC proposes several revisions to this section. First, LSC proposes
to delete the requirement in existing paragraph (a) of this section
that LSC eligibililty forms and procedures must be approved by the
Corporation. It has been LSC's experience that receiving the forms has
not enhanced its ability to conduct oversight of recipients. These
documents are readily available to LSC from recipients when needed.
This
[[Page 70384]]
requirement appears only to create unnecessary work for recipients and
LSC staff without serving any policy purpose.
LSC also proposes to add a provision to the regulation making clear
that a recipient agreeing to extend legal assistance to a client
referred from another recipient may rely upon the referring program's
determination of financial eligibility, provided that the referring
program provides and the receiving program retains a copy of the intake
form documenting the financial eligibility of the client. This is the
currently accepted practice, but is addressed nowhere in the existing
regulation. A similar provision was included in the 1995 NPRM.
Section 1611.7 Change in Financial Eligibility Status
LSC proposes to add language to this section to provide that if a
recipient later learns of information which indicates that a client is
not, in fact, financially eligible, the recipient must discontinue the
representation consistent with the applicable rules of professional
responsibility. This addition is being proposed because sometimes,
after an applicant has been accepted as a client, the recipient
discovers or the client discloses information that indicates that the
client was not, in fact, financially eligible for service. This
situation is not covered by the existing regulation because the client
may not have experienced a change in circumstance, but rather the
recipient has discovered new pertinent information about the client.
LSC notes that the proposed language, like the current regulation, is
not intended to require a recipient to make affirmative inquiry after
accepting an applicant as a client for information that would indicate
a change in circumstance or the presence of additional information
regarding the client's financial eligibility.
The proposed regulation would require that when a client is found
to be no longer financially eligible on the basis of later discovered
information, the recipient shall discontinue representation supported
with LSC funds, if discontinuing the representation is not inconsistent
with applicable rules of professional responsibility. This proposed
language is parallel to the current requirement regarding
discontinuation of representation upon a change in circumstance. LSC
wishes to note that, to the extent that discontinuation of
representation is not possible because of professional responsibility
reasons, a recipient may continue to provide representation supported
by LSC funds. This is currently the case and LSC intends to make no
change in the regulation on this point.
In addition, LSC proposes to change the name of this section from
``change in circumstances'' to ``change in financial eligibility
status'' to reflect the addition of the later discovered information
provision.
Section 1611.8 Representation of Groups
The subject of the eligibility of groups for legal assistance
supported with LSC funds was one of intense discussion among the
members of the Working Group. Prior to 1983, the regulation permitted
representation of groups that were either primarily composed of
eligible persons, or which had as their primary purpose the furtherance
of the interests of persons in the community unable to afford legal
assistance. In 1983, the regulation was amended to preclude the use of
LSC funds for the representation of groups unless they were composed
primarily of individuals financially eligible for service and to add a
requirement that any group seeking representation demonstrate that it
lacks the funds or the means to obtain the funds to retain private
counsel.
Representatives from the field proposed that LSC revise the
regulation to once again permit the representation of groups which,
although not primarily composed of eligible persons, have as a primary
function the delivery of services to, or furtherance of the interests
of, persons in the community unable to afford legal assistance.
Examples of such a group might be a food bank or a rural community
development corporation working to develop affordable housing in an
isolated community. Field representatives noted that in such cases,
there may not be local counsel willing to provide pro bono
representation and that the group might not otherwise be able to afford
private counsel. Further, the field representatives noted that
restricting recipients to representing with LSC funds only those groups
primarily composed of eligible individuals prevents them from providing
legal assistance in the most efficient manner possible as other groups
may be better able to accomplish results benefitting more members of
the eligible community than would representation of eligible
individuals or groups composed primarily of such individuals. Field
representatives also noted that the rule requires that the group would
have to provide information showing that it lacks and has no means of
obtaining the funds to retain private counsel, so that the rule would
not permit representation of well funded groups.
The LSC representatives were concerned that allowing the use of LSC
funds to support the representation of groups not composed primarily of
eligible clients would be problematic. In the examples given, the
``primary function'' of the group is easily discernable. It may be the
case, however, that there is or can be a wide variety of opinion on
what the ``primary function'' of any group is and on what is ``in the
interests'' of the eligible client community. The LSC representatives
were concerned that the risk and effort related to articulating and
enforcing a necessarily subjective standard would be inappropriate in
this case. Rather, LSC representatives were of the opinion that already
scarce legal services resources would be better devoted to providing
assistance to eligible individuals or groups of eligible individuals.
In the end, the Working Group did not achieve consensus on this issue
and the Draft NPRM did not propose to permit the representation of
groups other than those primarily composed of eligible individuals.
In its deliberations on the Draft NPRM, the Operations and
Regulations Committee acknowledged the legitimacy of the concerns of
the LSC representatives, but determined that the value of permitting
the representation of groups having a primary function of providing
services to, or furthering the interests of, those who would be
financially eligible outweighed any risks attendant upon such
representation. In approving the recommendation of the Committee, the
Board directed that the Draft NPRM be amended to propose permitting
such representation (including any conforming amendments necessary)
prior to publication of the NPRM for comment. This NPRM reflects this
direction. LSC specifically invites comment on this issue.
Accordingly, the proposed rule would permit a recipient to provide
legal assistance supported with LSC funds to a group, corporation,
association or other entity if the recipient has determined that the
group, corporation, association or other entity lacks and has not
practical means of obtaining private counsel in the matter for which
representation is sought and any of the following:
(1) At least a majority of the group's members are financially
eligible for LSC-funded legal assistance; or
(2) For a non-membership group, at least a majority of the
individuals who are forming or operating the group are
[[Page 70385]]
financially eligible for LSC-funded legal assistance; or
(3) The group has as its principal function or activity the
delivery of services to those persons in the community who would be
financially eligible for LSC-funded legal assistance; or
(4) The group has as its principal function or activity the
furtherance of the interests of those persons in the community who
would be financially eligible for LSC-funded legal assistance and the
representation sought relates to such function or activity.
The first two instances, relating to the eligibility and representation
of groups composed primarily of eligible individuals, represent the
current practice permitted by current Sec. 1611.5(c). The language of
the proposed rule would expressly incorporate the interpretation of
``primarily composed'' that has developed and been adopted in practice
over the years since 1983. In the case of membership groups, at least a
majority of the members would have to be eligible; in the case of non-
membership groups, at least a majority of members of the governing body
would have to be eligible persons. The latter two instances represent
the situations permitted by the pre-1983 rule, although the language
would be revised to focus on the primary ``function'' rather than the
primary ``purpose'' of the group. This choice is intended to make the
analysis required in determining the permissibility of the
representation more objective.
Finally, the proposed rule would retain and restate the current
provision of the rule that nothing in this part prohibits a recipient
from providing legal assistance to a group without regard to the nature
or financial eligibility of the group, if the legal assistance is
supported by funds from a source other than LSC, and is otherwise
permissible under applicable law and regulation.
LSC notes that, as with other aspects of this rule, proposed Sec.
1611.8 does not speak to eligibility of groups for legal assistance
under other applicable law and regulations. For example, the
eligibility of a group under proposed Sec. 1611.8 does not address
issues related to the eligibility of the group under part 1626 of the
Corporation's regulations, concerning citizenship and alien status
eligibility. Similarly, the fact that a recipient may determine a group
to be eligible for legal assistance under this part, does not address
other questions relating to permissibility of the representation (i.e.,
this part does not confer authority for the representation of group on
restricted matters, such as class action lawsuits or redistricting
matters, etc.)
The OIG dissents from the proposed Sec. 1611.8. The OIG's position
is that, in permitting the representation of groups without a
determination of financial eligibility of all group members, the
proposed rule allows the representation of ineligible individuals and,
therefore, is inconsistent with the LSC Act. The OIG contends that the
LSC Act contemplates the representation of individuals, rather than
groups. The LSC Act declares Congress's finding that ``there is a need
to provide equal access to the system of justice in our Nation for
individuals who seek redress of grievances,'' Sec. 1001(1) (emphasis
added). The LSC Act established the Corporation ``for the purpose of
providing financial support for legal assistance in noncriminal
proceedings or matters to persons financially unable to afford legal
assistance,'' Sec. 1003(a) (emphasis added). The Corporation is
required to ``establish, in consultation with the Director of the
Office of Management and Budget and with the Governors of the several
states, maximum income levels (taking into account family size, urban
and rural differences, and substantial cost-of-living variations) for
individuals eligible for legal assistance under this title,'' Sec.
1007(a)(2) (emphasis added.). In addition, the LSC authorizes the
Corporation ``to provide financial assistance to qualified programs
furnishing legal assistance to eligible clients,'' Sec. 1006(a)(1)(A),
and defines an ``eligible client'' as ``any person financially unable
to afford legal assistance.'' Sec. 1002(3). Although the LSC Act refers
to ``persons,'' and certain groups, such as corporations may be
recognized as ``persons'' under the law, loose associations of
individuals seeking representation as a group are not. Such a group
exists only because it has members, that is individuals each of whose
financial eligibility can be determined in the same way as any other
individual client.
The OIG also expressed concern that the proposed rule does not
address another issue growing out of allowing group representation
without determining the financial eligibility of all group members.
Group membership may, and likely will, change. It is easy to envision a
case where a group might be eligible for representation when the case
is accepted, but the composition of the group changes and ineligible
individuals become the majority of the membership. This is particularly
true if, as the proposed rule allows, only more than 50 percent of the
individuals must be eligible when the case is accepted. For example, if
a recipient accepts as a client a group of 100 members, with 51
eligible and 49 ineligible members, the eligibility status of the group
would change with the departure of but one eligible member. Thus, the
OIG is of the opinion that allowing a mere majority of eligible
individuals to determine the eligibility of the group, when there is a
liklihood that the eligiblity status of the group could easily change
during the course of the representation, is problematic.
LSC disagrees and believes that the proposed regulatory
requirements are consistent with the applicable laws. In particular,
LSC believes that the legislative history of the 1977 LSC Act
amendments demonstrates that Congress contemplated the representation
of groups. In discussing an amendment relating to the prohibition by
recipients on organizing, Senator Riegle stated:
A similar clarification is made in section 9(c) (of the Senate
Reauthorization Bill) regarding the prohibition on organizing
activities. Legal Services should not directly organize groups.
However, it should provide full representation, education and outreach
to those organized groups who are made up of or which represent
eligible clients. This section will remove any inhibition which may
have been improperly used to prevent such full representation to groups
of the poor.
Congressional Record of October 10, 1977, p. S 16804. In addition, the
House Report accompanying the 1997 LSC Act amendments bill states that
the bill:
[P]rohibits the use of Corporation funds for direct organizing, but
permits advice and legal assistance to clients who may themselves be
engaged in such activities. * * * The Committee recognizes a
distinction between proper activities such as (1) assisting groups
of poor people to organize by providing advice on matters of
incorporation, by-laws, tax problems and other matters essential to
the planning of an organization; (2) providing counsel to poor
people regarding appropriate behavior for group members; and (3)
encouraging poor people aggrieved by particular problems to consider
organizing to foster joint solutions to common problems on the one
hand, and those activities that are improper on the part of legal
services providers in that they usurp the rightful role of poor
people as potential members of such organizations, namely, actually
initiating the formation or organizing directly, an association,
group, or organization.
House Report 95-310 at p. 14.
In terms of demonstrating and documenting eligibility of a group,
the
[[Page 70386]]
proposed rule would require the program to collect information that
reasonably demonstrates that the group meets the eligibility
requirements. The OIG also dissents from this position and, for groups
comprised of eligible individuals, if group representation as set out
in the proposed rule is to be permitted, would require that the
eligibility of a majority of the individuals in the group be documented
in the same manner as is required for individual clients.
The proposed rule would allow recipients to determine the
eligibility of groups by collecting ``information that reasonably
demonstrates that the group, corporation, association or other entity
meets the eligibility requirements set forth herein.'' If LSC
determines that groups are eligible for federally funded legal
assistance, then, as with individuals, the OIG believes that it is
LSC's responsibility to set out the requirements by which such
eligibility is to be determined. The OIG believes that the proposed
rule does not provide sufficient guidance. In addition, by allowing
representation of groups ``primarily composed of individuals who are
financially eligible for legal assistance,'' but then allowing that
determination of eligibility to be assessed by some undefined
``reasonableness'' standard (presumably something less than that which
is required for a determination of the eligibility of individuals), the
proposed rule may result in the representation of groups that are not
in fact even primarily composed of eligible clients.
LSC disagrees and believes that the proposed regulatory
requirements are consistent with the applicable laws. LSC further notes
that the proposed rule would, essentially, codify the current practice
relating to financial eligibility and representation of groups
primarily composed of eligible individuals, which has not proven to be
problematic in the way envisioned by the OIG. LSC does not see why it
would prove any more problematic for demonstrating the eligibility of
groups which have as a primary function the delivery of services to, or
furtherance of the interests of, those who would be financially
eligible for legal assistance.
List of Subjects in 45 CFR Part 1611
Legal services.
For reasons set forth in the preamble, LSC proposes to amend 45 CFR
part 1611 by revising Sec. Sec. 1611.1 through 1611.8 to read as
follows:
PART 1611--FINANCIAL ELIGIBILITY
Sec.
1611.1 Purpose.
1611.2 Definitions.
1611.3 Financial eligibility policies.
1611.4 Financial eligibility for legal assistance.
1611.5 Authorized exceptions to the annual income ceilings.
1611.6 Manner of determining financial eligibility.
1611.7 Changes in financial eligibility status.
1611.8 Representation of groups.
Authority: 42 U.S.C. 2996e(b)(1), 2996e(b)(3), 2996f(a)(1),
2996f(a)(2); sec. 509(h) of Pub. L. 104-134, 110 Stat. 1321 (1996);
Pub. L. 105-119; 111 Stat. 2512 (1998).
Sec. 1611.1 Purpose.
This part sets forth requirements relating to the financial
eligibility of applicants for legal assistance supported with LSC funds
and recipients' responsibilities in making financial eligibility
determinations. This part is not intended to and does not create any
entitlement to service for persons deemed financially eligible. This
part also seeks to ensure that financial eligibility is determined in a
manner conducive to development of an effective attorney-client
relationship. This part also sets forth standards relating to the
eligibility of groups for legal assistance supported with LSC funds.
Sec. 1611.2 Definitions
Applicable rules of professional responsibility means the rules of
ethics and professional responsibility generally applicable to
attorneys in the jurisdiction where the recipient provides legal
services.
Applicant means an individual who is seeking legal assistance
supported with LSC funds from a recipient. The term does not include a
group, corporation or association.
Assets means cash or other resources that are readily convertible
to cash, which are currently and actually available to the applicant.
Governmental program for low income individuals or families means
any Federal, State or local program that provides benefits of any kind
to persons whose eligibility is determined on the basis of financial
need.
Governmental program for persons with disabilities means any
Federal, State or local program that provides benefits of any kind to
persons whose eligibility is determined on the basis of mental and/or
physical disability.
Income means actual current annual total cash receipts before taxes
of all persons who are resident members and contribute to the support
of an applicant's household, as that term is defined by the recipient.
Total cash receipts include, but are not limited to, money, wages and
salaries before any deduction; income from self-employment after
deductions for business or farm expenses; regular payments from
governmental programs for low income persons or persons with
disabilities; social security payments; unemployment and worker's
compensation payments; strike benefits from union funds; veterans
benefits; training stipends; alimony; child support payments; military
family allotments; public or private employee pension benefits; regular
insurance or annuity payments; income from dividends, interest, rents,
royalties or from estates and trusts; and other regular or recurring
sources of financial support that are currently and actually available
to the applicant. Total cash receipts do not include the value of food
or rent received by the applicant in lieu of wages; money withdrawn
from a bank; tax refunds; gifts; compensation and/or one-time insurance
payments for injuries sustained; non-cash benefits; and up to $2,000
per year of funds received by individual Native Americans that is
derived from Indian trust income or other distributions exempt by
statute.
Sec. 1611.3 Financial Eligibility Policies
(a) The governing body of a recipient shall adopt policies
consistent with this part for determining the financial eligibility of
applicants and groups. The governing body shall review its financial
eligibility policies at least once every three years and make
adjustments as necessary. The recipient shall implement procedures
consistent with its policy.
(b) As part of its financial eligibility policies, every recipient
shall specify that only individuals and groups determined to be
financially eligible under the recipient's financial eligibility
policies and LSC regulations may receive legal assistance supported
with LSC funds.
(c)(1) As part of its financial eligibility policies, every
recipient shall establish annual income ceilings for individuals and
households, which may not exceed one hundred and twenty five percent
(125%) of the current official Federal Poverty Level amounts for family
units. The Corporation shall annually calculate 125% of the Federal
Poverty Guidelines amounts and publish such calculations in the Federal
Register as a revision to appendix A to this part.
(2) As part of its financial eligibility policies, a recipient may
adopt authorized exceptions to its annual
[[Page 70387]]
income ceilings consistent with Sec. 1611.5.
(d)(1) As part of its financial eligibility policies, every
recipient shall establish reasonable asset ceilings for individuals and
households. In establishing asset ceilings, the recipient may exclude
consideration of a family's principal residence, vehicles required for
work, assets used in producing income, and other assets which are
exempt from attachment under State or Federal law.
(2) The recipient's policies may provide authority for waiver of
its asset ceilings under unusual circumstances and when approved by the
recipient's Executive Director, or his/her designee. When the asset
ceiling is waived, the recipient shall record the reasons for such
waiver and shall keep such records as are necessary to inform the
Corporation of the reasons for such waiver.
(e) Notwithstanding any other provision of this Part or the
recipient's financial eligibility policies, as part of its financial
eligibility policies, every recipient shall specify that in assessing
the income or assets of an individual applicant who is a victim of
domestic violence, the recipient shall consider only the assets and
income of the individual applicant and shall not include any jointly
held assets.
(f) As part of its financial eligibility policies, a recipient may
adopt policies that permit financial eligibility to be established by
reference to an applicant's receipt of benefits from a governmental
program for low-income individuals or families consistent with Sec.
1611.4(d).
(g) Before establishing its financial eligibility policies, a
recipient shall consider the cost of living in the service area or
locality and other relevant factors, including but not limited to:
(1) The number of clients who can be served by the resources of the
recipient;
(2) The population that would be eligible at and below alternative
income and asset ceilings; and
(3) The availability and cost of legal services provided by the
private bar and other free or low cost legal services providers in the
area.
Sec. 1611.4 Financial eligibility for legal assistance.
(a) A recipient may provide legal assistance supported with LSC
funds only to individuals whom the recipient has determined to be
financially eligible for such assistance. Nothing in this Part,
however, prohibits a recipient from providing legal assistance to an
individual without regard to that individual's income and assets if the
legal assistance is wholly supported by funds from a source other than
LSC, and is otherwise permissible under applicable law and regulation.
(b) Consistent with the recipient's financial eligibility policies
and this Part, the recipient may determine an applicant to be
financially eligible for legal assistance if the applicant's assets do
not exceed the recipient's applicable asset ceiling established
pursuant to Sec. 1611.3(d)(1), or the applicable asset ceiling has
been waived pursuant Sec. 1611.3(d)(2), and:
(1) The applicant's income is at or below the recipient's
applicable annual income ceiling; or
(2) The applicant's income exceeds the recipient's applicable
annual income ceiling but one or more of the authorized exceptions to
the annual income ceilings, as provided in Sec. 1611.5, applies.
(c) In making financial eligibility determinations, a recipient
shall make reasonable inquiry regarding sources of the applicant's
income, income prospects and assets. The recipient shall record income
and asset information in the manner specified for determining
eligibility under Sec. 1611.6.
(d) Consistent with the recipient's policies, a recipient may
determine an applicant to be financially eligible without making an
independent determination of income or assets, if the applicant's
income is derived solely from a governmental program for low-income
individuals or families, provided that the recipient's governing body
has determined that the income standards of the governmental program
are at or below 125% of the Federal Poverty Level amounts and that the
governmental program has eligibility standards which include an assets
test.
Sec. 1611.5 Authorized exceptions to the annual income ceiling.
(a) Consistent with the recipient's policies and this Part, a
recipient may determine that an applicant whose income exceeds the
recipient's applicable annual income ceiling to be financially eligible
if the applicant's assets do not exceed the recipient's applicable
asset ceiling established pursuant to Sec. 1611.3(c), or the asset
ceiling has been waived pursuant to Sec. 1611.3(c)(2) and:
(1) The applicant is seeking legal assistance to maintain benefits
provided by a governmental program for low income individuals or
families; or
(2) The Executive Director of the recipient, or his/her designee,
has determined on the basis of documentation received by the recipient,
that the applicant's income is primarily committed to medical or
nursing home expenses and that, excluding such portion of the
applicant's income which is committed to medical or nursing home
expenses, the applicant would otherwise be financially eligible for
service; or
(3) The applicant's income does not exceed 200% of the applicable
Federal Poverty Level amount and:
(i) The applicant is seeking to obtain governmental benefits for
low income individuals and families; or
(ii) The applicant is seeking to obtain or maintain governmental
benefits for persons with disabilities; or
(4) The applicant's income does not exceed 200% of the applicable
Federal Poverty Level amount and the recipient has determined that the
applicant should be considered financially eligible based on
consideration of one or more of the following factors as applicable to
the applicant or members of the applicant's household:
(i) Current income prospects, taking into account seasonal
variations in income;
(ii) Unreimbursed medical expenses including medical insurance
premiums;
(iii) Fixed debts and obligations;
(iv) Expenses necessary for employment, job training or educational
activities in preparation for employment, such as dependent care,
transportation, clothing and equipment expenses;
(v) Non-medical expenses associated with age or disability; or
(vi) Other significant factors that the recipient has determined
affect the applicant's ability to afford legal assistance.
(b) In the event that a recipient determines that an applicant is
financially eligible pursuant to this section and is provided legal
assistance, the recipient shall document the basis for the financial
eligibility determination. The recipient shall keep such records as may
be necessary to inform the Corporation of the specific facts and
factors relied on to make such determination.
Sec. 1611.6 Manner of determining financial eligibility.
(a) A recipient shall adopt simple intake forms and procedures to
obtain information from applicants and groups to determine financial
eligibility in a manner that promotes the development of trust between
attorney and client. The forms shall be preserved by the recipient.
(b) If there is substantial reason to doubt the accuracy of the
financial eligibility information provided by an applicant or group, a
recipient shall
[[Page 70388]]
make appropriate inquiry to verify the information, in a manner
consistent with the attorney-client relationship.
(c) When one recipient has determined that a client is financially
eligible for service in a particular case or matter, that recipient may
request another recipient to extend legal assistance or undertake
representation on behalf of that client in the same case or matter in
reliance upon the initial financial eligibility determination. In such
cases, the receiving recipient is not required to review or redetermine
the client's financial eligibility unless there is a change in
financial eligibility status as described in Sec. 1611.7 or there is
substantial reason to doubt the validity of the original determination,
provided that the referring recipient provides and the receiving
recipient retains a copy of the intake form documenting the financial
eligibility of the client.
Sec. 1611.7 Change in financial eligibility status.
(a) If, after making a determination of financial eligibility and
accepting a client for service, the recipient becomes aware that a
client has become financially ineligible through a change in
circumstances, a recipient shall discontinue representation supported
with LSC funds if the change in circumstances is sufficient, and is
likely to continue, to enable the client to afford private legal
assistance, and discontinuation is not inconsistent with applicable
rules of professional responsibility.
(b) If, after making a determination of financial eligibility and
accepting a client for service, the recipient later determines that the
client is financially ineligible on the basis of later discovered or
disclosed information, a recipient shall discontinue representation
suported with LSC funds if the discontinuation is not inconsistent with
applicable rules of professional responsibility.
Sec. 1611.8 Representation of groups.
(a) A recipient may provide legal assistance supported with LSC
funds to a group, corporation, association or other entity if the
recipient has determined that the group, corporation, association or
other entity lacks and has not practical means of obtaining private
counsel in the matter for which representation is sought and:
(1) At least a majority of the group's members are financially
eligible for LSC-funded legal assistance; or
(2) For a non-membership group, at least a majority of the
individuals who are forming or operating the group are financially
eligible for LSC-funded legal assistance; or
(3) The group has as its principal function or activity the
delivery of services to those persons in the community who would be
financially eligible for LSC-funded legal assistance; or
(4) The group has as its principal function or activity the
furtherance of the interests of those persons in the community who
would be financially eligible for LSC-funded legal assistance and the
representation sought relates to such function or activity.
(b) In order to make a determination that a group, corporation,
association or other entity is eligible for legal services as required
by paragraph (a) of this section, a recipient shall collect information
that reasonably demonstrates that the group, corporation, association
or other entity meets the eligibility requirements set forth herein.
(c) Nothing in this part prohibits a recipient from providing legal
assistance to a group without regard to the nature or financial
eligibility of the group, if the legal assistance is supported by funds
other than LSC, and is otherwise permissible under applicable law and
regulation.
Appendix A--Legal Services Corporation Poverty Guidelines
Note: Appendix A: The Corporation is not requesting comments on
the current Appendix. The Appendix is revised annually, after the
Department of Health and Human Services issues the new Federal
Poverty Guidelines for that year.
Victor M. Fortuno,
General Counsel and Vice President for Legal Affairs.
[FR Doc. 02-29611 Filed 11-21-02; 8:45 am]
BILLING CODE 7050-01-P