You asked that we give an opinion concerning the LacVieux Desert Band's (LDB's) provision
of home energy assistance (HEA) to SSI eligible members of the tribe. Specifically,
you asked us to advise you on the appropriate ways by which the LDB could financially
assist these SSI recipients with heating bills, such that the assistance would qualify
under the agency's HEA exclusions from income. You also asked whether the assistance
to be provided would be considered HEA if the funds derive from the LDB's casino proceeds,
as opposed to federal funds.
For the reasons that follow, we advise that, pending state certification, if any difficulty
arises in analyzing possible excludability, an exclusion should be granted for any
assistance already being provided. The LDB should submit written statements from the
recipients (as discussed below) and, as soon as possible before or after assistance
is provided, submit written certification from the appropriate state agency indicating
that: (1) the assistance is based upon need; and (2) either the utility supplier(s)
provide(s) direct assistance to the SSI recipients, in cash or in kind, or, assuming
that the LDB establishes a separate organization, that meets the agency's definition
of private, nonprofit agency (i.e., qualifies as a tax-exempt organization under 26
U.S.C. § 501(c) of the Internal Revenue Code), the organization provides in kind assistance
to the recipients. We further advise, in the event that the LDB creates an organization
through which to assist recipients, that, so long as the organization meets the requirements
of 26 U.S.C. 501(c), the mere origin of the funds (casino proceeds, e.g.) will not
preclude qualification for the HEA exclusion.
Facts
To assist SSI recipients within in its tribe with home heating costs, the LDB has
proposed entering into a third-party agreement with the various suppliers of fuel
services and utilities. Under the proposed agreement, LDB would establish an account
with the provider, who in turn would deliver the propane or natural gas to the homes
as needed. Residents in the area receive heat through a variety of sources, including
propane and oil suppliers, natural gas companies, and a consolidated gas/electric
company. The LDB has not yet established any partnership or entity through which the
heating assistance would be provided; nor has LDB sought state certification for HEA.
The LDB is proposing the creation of an account, possibly funded from the tribe's
casino proceeds, to finance the HEA.
Discussion
General Background on HEA
SSA excludes from countable income certain support and maintenance assistance, including
HEA. 20 C.F.R. § 416.1157(a), (c); POMS SI 00830.605. HEA is defined as "any assistance relating to meeting the costs of heating or cooling
a home," and includes items such as "payments for utility service or bulk fuels; assistance
in kind such as portable heaters, fans, storm doors, or other items which help reduce
the costs of heating and cooling such as conservation or weatherization materials
and services." 20 C.F.R. § 416.1157(b)(3); POMS SI
00830.605(B)(6). HEA is excluded from countable income if it is certified in writing by the
appropriate state agency to be both based on need and: (1) provided in kind by a private
nonprofit agency; or (2) provided in cash or in kind by a supplier of home heating
oil or gas, a rate-of-return entity providing home energy, or a municipal utility
providing home energy. See 20 C.F.R. § 416.1157(c)(1)-(2); POMS SI
00830.605(C)(1).
The following discussion describes the state certification requirements for HEA, and
set forth the appropriate ways in which the LDB can structure a program that complies
with the HEA regulations.
1. General Certification Policies.
State certification of an HEA program may be made before any assistance is actually
provided. POMS SI
00830.605(D)(1). In some cases, however, the assistance is provided prior to certification.
Pending certification, the agency should exclude any assistance which "might meet
the requirements for certification, and if the application of the exclusion is later
deemed inappropriate, the agency should find the recipient without fault regarding
any resulting overpayments." POMS SI 0030.605(D)(3).
Here, there is no certification precedent, as the LDB has yet to seek certification.
Absent any reason to question the situation, however, SSA could apply the exclusion
pending state certification if LDB elects to provide assistance.
2. The Appropriate State Agency Certification and Required Statement to HEA
An "appropriate state agency" is that which has been designated by the chief executive
office of the State to handle the state's responsibilities with regard to the home
energy assistance and support and maintenance exclusion. 20 C.F.R. § 416.1157(b);
POMS SI
00830.605(B)(1).
In order to show that the HEA is based on need, the LDB must demonstrate to the state
agency that it (a) does not have any express obligation to provide the assistance;
(b) provides the aid for the purpose of home energy assistance (e.g., vouchers for
heating/cooling bills, storm doors); and (c) provides the aid for an SSI claimant,
member of the household in which an SSI claimant lives, or the household in which
an SSI claimant's ineligible spouse, parent, essential person, or sponsor (or the
sponsor's spouse) lives. See POMS SI 00830.605(B)(2).
In addition to obtaining the state certification, SSA also should obtain a signed
statement from the recipient, identifying the HEA received, when the HEA was received,
the name of the HEA recipient, and the source of the HEA. POMS SI 00830.605(D)(2).
3. Direct HEA from a Private, Nonprofit Agency
(a) LDB must satisfy the requirements of 26 U.S.C. 501(c) if it seeks certification
based on direct provision of HEA.
If LDB desires to seek state certification based upon its direct provision of heating
assistance to the recipients, it must first establish a separate public service entity
that meets the definition of a private nonprofit agency. A private nonprofit agency
is a "religious, charitable, educational, or other organization such as described
in section 501(c) of the Internal Revenue Code of 1954." 20 C.F.R. § 416.1157(b)(3).
Actual tax exempt certification by the IRS is not required. Id. Organizations may
qualify for tax exemption under sections 501(a) and 501(c)(3) if three conditions
are satisfied: (1) they must be both organized and operated exclusively for exempt
purposes (i.e., charitable or educational purposes); (2) no part of the net earnings
may inure to the benefit of shareholders or other individuals; and (3) no substantial
part of the activities may be political or lobbying activities. 26 U.S.C. § 501(a),
(c); see also Greater United Navajo Development Enterprises, Inc. v. Commissioner
of Internal Revenue, 74 T.C. 69, 76 (1980).
The LDB itself presumably does not qualify as a tax exempt organization or corporation.
It owns and operates a casino for profit, the proceeds of which are assumed to inure
to the benefit of tribal members. Absent evidence that the LDB is a tax exempt organization
as defined by § 501(c) of the IRS code, the tribe's establishment of a mere third
party account with utility providers would not seem to satisfy the requirements for
HEA.
Accordingly, if the LDB wishes to provide direct heating assistance, it probably will
need to establish a separate corporation with a charter that expresses an exempt purpose
(e.g., providing charitable home energy assistance to SSI-eligible tribal members).
Such a corporation could not be organized or operated for any purpose that is not
considered exempt; no part of the net earnings could inure to the benefit of individuals;
and no substantial part of the corporation's activities could be for political or
lobbying purposes. See 26 U.S.C. § 501(a), (c).
We also conclude that the origin of the private nonprofit agency's funds for HEA (in
this case, gambling proceeds) should not have an impact on excludability, so long
as the entity complies with all of the requirements of § 501(c) of the IRS Code for
tax exemption, as outlined above. Legitimate charitable 501(c) corporations apparently
do not lose their exempt status merely because they are funded by gambling proceeds.
Organizations that derive funds from gambling proceeds lose their exempt status when
they fail to operate exclusively for exempt purposes, and instead benefit private
interests. See P.L.L. Scholarship Fund v. Commissioner of Internal Revenue, 82 T.C.
196, 200 (1984). However, SSA should exclude HEA, so long as the state certifies the
entity as a private nonprofit entity and the individual provides the requisite statement,
so long as there is no reason to question the situation. See POMS SI
00830.605(D)(1).
(a) Excludable Forms of HEA
In order to be excluded, the HEA that LDB's private nonprofit organization provides
must be in kind rather than in cash. See 20 C.F.R. § 416.1157((c)(1). Examples of
in kind assistance include portable heaters, fans, storm doors, or other items which
help reduce the costs of heating and cooling such as conservation or weatherization
materials and services. See POMS SI 00830.605(b)(6). The POMS further suggest that heating vouchers (similar to a gift certificate)
would qualify as in kind assistance. See POMS SI
00830.605(E)(4) (example of food vouchers that are excludable when issued through a state-certified
entity). We suggest that only non-transferable heating vouchers, issued solely for
heating assistance, be excluded as HEA, so that the vouchers could not be sold to
others in exchange for cash. Alternatively, the private nonprofit agency could pay
the individual heating bills to the utility suppliers directly, though an arrangement
with the respective suppliers.
(c) Documentation requirements
With respect to documentation requirements, it is only necessary for SSA to compute
inside in kind support and maintenance assistance or cash income from within a household,
for all months in which any member of a household receives excluded cash HEA. See
POMS SI
00835.331(C)(1), (2). Since the private nonprofit agency cannot issue HEA in the form of cash,
and must provide it in kind in order to qualify for the exclusion, documentation of
the assistance provided is not necessary.
1. HEA from the home energy/fuel suppliers
Alternatively, if LDB elects to arrange its program so that the home energy/fuel suppliers
provide assistance, such HEA may be issued in cash or in kind. See 20 C.F.R. § 416.1157(c)(2)
(suppliers of home heating oil or gas, rate-of-return entities providing home energy,
or municipal utilities providing home energy would qualify). If the HEA is provided
in cash (such as checks written to the recipients), however, either the recipient
or the LDB would have to provide documentation on a monthly basis of the amounts of
HEA issued. See POMS SI 00835.331(C)(1)-(2) (requiring that the amount of cash HEA be deducted from either the overall
household expenses, for determination of inside in kind support and maintenance received,
or from the total household cash contributions, for determination of the total cash
from within a household).
To avoid cumbersome documentation requirements, the LDB may elect to arrange for in
kind HEA, to be provided directly by the home energy/fuel suppliers. Again, this could
be provided in the form of non-transferable vouchers or credits that the recipients
could submit to the suppliers in exchange solely for home heating, or alternatively,
could take the form of portable heaters, fans, storm doors, or other items which help
reduce the costs of heating and cooling such as conservation or weatherization materials
and services. See POMS SI 00830.605(B)(6), (E)(4).
Conclusion
In summary, we advise that you exclude HEA pending state certification, if the LDB
provides assistance pending its written state certification. The LDB must submit written
statements from the recipients (as discussed above), as well as written certification
(either before or after it begins providing assistance) from the appropriate state
agency indicating that: (1) the assistance is based upon need; and (2) either the
utility supplier(s) provide(s) direct assistance to the SSI recipients, in cash or
in kind, or, assuming that the LDB establishes a separate organization that meets
the agency's definition of private, nonprofit agency (pursuant to 26 U.S.C. § 501(c)
of the Internal Revenue Code), the organization provides in kind assistance to the
recipients. We further conclude that, so long as the organization qualifies for state
certification as a private nonprofit agency, the mere origin of the funds (casino
proceeds, e.g.) will not preclude HEA exclusion.