PS 01420.025 Michigan
A. PS 01-124 SSI-Michigan-Home Energy Assistance Provided by the LacVieux Desert Band (LDB) of Lake Superior Chippewa Indians Tribal Government
DATE: March 8, 2001
This issue concerns the Lac Vieux Desert Band's (LDB's) provision of home energy assistance (HEA) to SSI eligible members of the Tribe. It provides advice on how the LDB could assist tribal SSI recipients with their heating bills and have such assistance excluded under the SSI HEA exclusion. It also explains that the origin of the funds (e.g., from casino profits) does not preclude qualification for the HEA exclusion.
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.
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.
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).
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.