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EBT Restrictions

EBT Restrictions

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Published by Rick Karlin

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Published by: Rick Karlin on Feb 25, 2014
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03/18/2014

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State of New York 2014 Report to the Secretary of the U.S. Department of Health and Human Services Implementation of the Policies and Practices Required by Section 408(a)(12) of the Social Security Act February 21, 2014
Federal Requirements The Middle Class Tax Relief and Job Creation Act of 2012 (P.L. 112-96) requires states to report to the Secretary of the Department for Health and Human Services (HHS), no later than February 22, 2014, as to what “policies and practices” a state has put in place to prevent federal Temporary Assistance for Needy Families (TANF) benefits from being used in any electronic benefit transfer (EBT) transaction at liquor stores, casinos, gambling casinos, gaming establishments, and establishments which provide adult-oriented entertainment in which performers disrobe or perform in an unclothed state. On February 25, 2013, HHS issued a Q & A entitled “TANF Requirements Related to EBT Transactions” in which HHS stated: “Absent regulations, a state needs to formulate policies and implement the requirements in section 4004 of P.L. 112-96 based on its reasonable interpretation of these requirements. For the period before final federal rules are in effect, states will not be subject to penalties under section 4004 so long as the required report due February 22, 2014, indicates that the state has developed and is implementing policies and practices based on a reasonable interpretation of the statutory language.” As of the date of this report, HHS has not yet promulgated final regulations to implement the provisions of P.L. 112-96. Policies and Practices in Place in New York State Prior to February 22, 2014 The State of New York has formulated policies and implemented the requirements in section 4004 of P.L. 112-96, based on a reasonable interpretation of these requirements.
Gaming Establishments:
 In December 2011, in anticipation of the enactment of the federal statute, the New York State Racing and Wagering Board (a predecessor agency to the New York State Gaming Commission), at the request of the New York State Office of Temporary and Disability Assistance (OTDA), directed race tracks and Off-Track Betting facilities (OTBs) to block the use of New York State Electronic Benefit Transfer (EBT) cards at automated teller machines (ATMs) placed in public areas. In December 2011, the New York State Division of the Lottery (now part of the New York State Gaming Commission), at OTDA’s request, directed video lottery establishments in the State of New York to block the use of EBT cards at ATMs and at point of sale (POS) terminals located in such establishments. In February 2014, the Gaming Commission directed lessors of commercial bingo facilities to block the use of EBT cards at ATMs located in such establishments.
 
 
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The Gaming Commission will continue to identify prohibited locations subject to its oversight and will direct such entities to block the EBT cards at the restricted locations. The Gaming Commission conducts periodic reviews of its licensees to ensure compliance with law, and enforces compliance through its authority to sanction a regulated party or to limit, suspend or revoke a licensee’s license.
Liquor Stores and Adult-Oriented Entertainment Venues with Liquor Licenses:
 The Full Board of the New York State Liquor Authority (SLA) approved an advisory on January 3, 2014 that was posted to the SLA website on January 17, 2014 that provided information to the entities SLA regulates that sell liquor regarding the steps involved in blocking purchases from EBT accounts in their liquor stores (see Attachment 1, SLA Advisory #2014-1). The advisory was revised to reflect proposals in the New York State Executive Budget for State Fiscal Year 2014-15, and was reposted to the SLA website on January 28, 2014 (see Attachment 2, SLA Advisory #2014-3). The revised advisory was directed not only to liquor stores, but also to wine stores, on-premises licensees providing adult entertainment, and “C” beer wholesalers selling beer at retail. The SLA has issued this advisory to all licensees impacted by the federal legislation. The  Advisory provides instructions with respect to blocking the use of EBT cards at those licensed premises. In addition to issuing licenses to manufacture and sell alcoholic beverages, the SLA is also responsible for enforcing the laws and regulations governing licensees. New York State is identifying prohibited locations specified in P.L. 112-96 and is monitoring compliance through analysis of transactions in our EBT data warehouse. New York State will also conduct regular targeted sample reviews.
Vendor Restricted Cash:
 In the State of New York, public assistance recipients have limited cash assistance for which general item or service purchases can be made. New York’s current practice of vendor restriction significantly reduces the amount of cash assistance that is authorized on EBT cards. Through vendor restriction, a portion of a recipient’s cash assistance is paid directly to the vendor (e.g. landlord, utility company) on behalf of the household to meet basic living needs. Currently, 69 percent of all public assistance dollars are issued via a restricted payment. In addition, 81
 
percent of all public assistance households have at least a portion of their grant vendor restricted, and 89 percent of all assistance paid goes to households with at least a partial restriction. Such “vendor restriction” is consistent with the purposes of TANF and serves to promote the integrity of the program.  Additional Policies and Practices
Quest Operating Rule Change:
 OTDA is a member of the National Automated Clearing House Association (NACHA). NACHA is planning to amend the rules that govern EBT transactions in states, such as New York, that comply with the “Quest” operating rules. The Quest operating rules currently require all merchants, acquirers and processors in a participating Quest state to accept transactions from all EBT cardholders, including out-of-state cardholders. On January 17, 2014, NACHA provided OTDA with draft language that would prohibit terminals located on the premises of the venues identified in P.L. 112-96 from initiating
 
 
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cash EBT transactions: If this language is accepted by the NACHA board and by at least 60% of registered NACHA state representatives, it will be added to the Quest rules. Such a rule would provide a mechanism to block all EBT cash transactions in the federally prohibited venues in all Quest states.
Proposed Legislation:
 Budget language contained in bills Senate 8556/Assembly 6356 and Senate 6353/Assembly 8553 was included in the New York State Executive Budget for State Fiscal Year 2014-15 that will prohibit the use of federal, state and locally funded public assistance by any public assistance recipient in any electronic benefit transfer transaction at the locations identified in Public Law 112-96, and will subject recipients who fail to comply with these prohibitions to durational discontinuances of their public assistance. In addition, this legislation will provide for the imposition of sanctions and penalties on businesses that fail to comply with these prohibitions. This language is attached as Attachment 2 and Attachment 3. Under the provisions of the budget legislation, public assistance recipients found to have used their EBT card at one of the prohibited locations will be subject to an individual sanction for a specific timeframe depending on the occurrence of the infraction. Before a recipient’s public assistance could be discontinued, steps would be taken to document and verify the claim in accordance with regulation and directives. Recipients will have all due process afforded in any dispute regarding program compliance. Specifically, they will be entitled to challenge any proposed discontinuance in an administrative fair hearing. Although a recipient’s assistance may be discontinued for non-compliance with this requirement, the grant of assistance for the remainder of the household will continue. The budget legislation will also further strengthen New York’s compliance by explicitly setting forth in law the regulating entity’s authority to impose financial and licensing penalties against establishments that accept an EBT card at a prohibited location. With regard to liquor stores, wine stores, on-premises licensees providing adult entertainment, “C” beer wholesalers selling beer at retail, casinos and gaming establishments, violation of the provisions of the budget legislation will subject the venue to the possible revocation, cancellation or suspension of their license(s). With regard to establishments that provide adult-oriented entertainment in which performers disrobe or perform in an unclothed state, violations of the provisions of the budget legislation will subject the venue to an initial fine of not more than $100; a fine of not more than $500 for a second violation; and a fine of not more than $1,000 for a third violation, which would be a class B misdemeanor. Such venues that are licensed by the SLA may also be subject to the possible revocation, cancellation or suspension of their license(s).  Additionally, each State licensing agency (the Gaming Commission and the State Liquor  Authority) will be responsible for notifying the entities they license that are subject to the prohibitions, for monitoring compliance, and for determining whether to impose consequences. OTDA will conduct periodic targeted reviews of EBT transactions to monitor retailer compliance, and will provide the licensing agencies with data on suspect transactions for the agencies to follow-up. Within 60 days after enactment of the budget legislation, OTDA will:

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