Rulemaking Notice
LEGAL SERVICES CORPORATION
45 CFR Part 1611 Financial Eligibility
AGENCY: Legal Services Corporation.
ACTION: Notice of Proposed
Rulemaking
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 regulation and
to aid LSC in enforcement of the regulation; and to clarify the focus of the
regulation on the financial eligibility of applicant 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., N.E., 11th Floor,
Washington, DC 20002 4250; (202) 336-8952 (fax); mcondray@lsc.gov
(email).
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‑ 8817 (phone); 202/336-8952 (fax); mcondray@lsc.gov
(email).
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 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 section 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 section 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, P.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 section 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 section 1611.7.
Although the field representatives to the Working Group concur in this
decision, the OIG dissents. As noted 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 espeically warrented 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 expentidure 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 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 section 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 section 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 section 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.
Although
the term is not defined in the regulation, current section 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 section
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
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
section 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 section 1611.3, Financial Eligibility Policies, based
on requirements currently found in sections 1611.5(a), 1611.3(a)-(c) and 1611.6.
The new section 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 section
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:
- specify that only applicants for service determined to be financially
eligible under the policy may be further considered for LSC-funded service;
- establish annual income ceilings of no more than 125% of the current
Department of Health and Human Services Federal Poverty Guidelines amounts;
- establish asset ceilings; and
- 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 section 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 section
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 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 §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 use 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 sections 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 section 1611.6. This requirement would
replace the process currently required by section 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 section 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 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 sections
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 section 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 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 section 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:
- 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;
- 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;
- 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;
- 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 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 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 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 section 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 section 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
section 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 section 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
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 revise 45 CFR part
1611 to read as follows:
PART 1611-FINANCIAL ELIGIBILITY
1611.1 Purpose
1611.2 Definitions
1611.3 Financial Eligibility Policies
1611.4 Financial Eligibility for Legal Assistance
1611.5 Authorized Exceptions to the Recipient's Annual Income Ceiling
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); Section
509(h) of Pub.L. 104-134, 110 Stat. 1321 (1996); Pub. L. 105-119; 111 Stat. 2512
(1998).
§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.
§1611.2 Definitions
(a) "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.
(b) "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.
(c) "Assets" means cash or other resources that are readily convertible
to cash, which are currently and actually available to the applicant.
(d) "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.
(e) "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.
(f) "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.
§ 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 income
ceilings consistent with §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 §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.
§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 §1611.3(d)(1), or the
applicable asset ceiling has been waived pursuant §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 §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 §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.
§ 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 §1611.3(c),
or the asset ceiling has been waived pursuant to §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.
§1611.6 Manner of Determining 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
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 §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.
§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.
§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
Vice President for Legal Affairs and General Counsel
November 22, 2002
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