U. S. Department of Housing and Urban Development

Public and Indian Housing

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Special Attention of: Notice PIH 98-2 (HA)

Secretary\'s Representatives; Issued: January 12, 1998

State/Area Coordinators;

Public Housing Directors; Expires: January 31, 1999

Public Housing Agencies;

Section 8 Housing Agencies;

Resident Management Corporations;

Resident Councils

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Subject: Treatment of Income Received from Training Programs

I. Purpose

This notice addresses questions regarding HUD\'s existing

policy on the treatment of amounts received from training

programs when determining annual income in assisted housing

programs. While all of the regulatory exclusions and

federally-mandated exclusions specific to training income are in
Appendix

1, this notice focuses on the two exclusions most directly

related to welfare reform \-- 24 CFR 5.609(c)(8)(v) and

5.609(c)(13). We anticipate that the passage of the Personal

Responsibility and Work Opportunity Reconciliation Act (Welfare

Reform Act) will increase the number of participants in these

training programs.

II\. Background

HUD believes that training income exclusions are an

important factor in helping public and assisted housing

participants move from welfare and dependence to greater

self-sufficiency.

HUD encourages housing agencies (HAs) and resident

management corporations (RMCs) to share this information

with applicants and participants, State welfare agencies,

social service agencies, advocates, and other interested

parties. Welfare agencies, for example, may be willing to

design or modify their programs so that welfare recipients

living in public and assisted housing will receive the

maximum benefits from these exclusions.

Actively marketing this information will better ensure that

the greatest number of families that could benefit from

these exclusions will in fact do so.

III\. Applicability

This notice covers the Public Housing program and the

Section 8 Certificate, Voucher, and Moderate Rehabilitation

programs.

With the exception of 5.609(c)(13), the regulations in

Appendix 1 are applicable to all of these programs.

5.609(c)(13) is applicable to public housing only.

IV\. Regulatory Focus

24 CFR 5.609(c) \"Annual income does not include the

following:

8(v) - incremental earnings and benefits resulting to

any family member from participation in qualifying

State or local employment training programs . . ..\"

\[Emphasis added\]

(For the complete text, see Appendix 1.)

This applies to both public housing and Section 8. For

public housing, it is intended to cover a number of training

programs that do not qualify under 5.609(c)(13).

It excludes incremental amounts from qualifying State or

local employment training programs. There is no additional

18-month exclusion after the training program is completed.

This exclusion was implemented in the April 5, 1995 Combined

Income and Rent Interim Rule, which became effective on

June 5, 1995. It was continued in the October 18, 1996

Combined Income and Rent Final Rule, with the clarification

that only incremental increases in income resulting from a

qualifying State or local employment training program are

excluded.

\"(13) - for public housing only: (i) the earnings and

benefits to any family member resulting from

participation in a program providing employment

training and supportive services in accordance with the

Family Support Act ( 42 U.S.C. 1437t ) or any comparable

Federal, State, or local law during the exclusion

period . . ..\"

Earnings and benefits means the incremental earnings. .

..\" \[Emphasis Added\]

(For the complete text, see Appendix 1.)

This applies to public housing only, not to Section 8.

It is based on Section 515(b) of the National Affordable

Housing Act of 1990 (NAHA). It was first implemented

through the August 24, 1994 TOPS final rule and became

effective on September 23, 1994.

This exclusion was listed in both the April 5, 1995 Combined

Income and Rent Interim Rule and the October 18, 1996

Combined Income and Rent Final Rule.

There are five components that must all be present for a

program to qualify under (c)(13). They are discussed in the

answer to question 2 in Section VII of this notice.

In order to be eligible for the 5.609(c)(8)(v) or (c)(13)

exclusion, the resident must actually receive training under

the provisions of the program. Merely being enrolled in a

program that provides training to some participants (but not

all) is not sufficient for purposes of this exclusion.

V. Definitions

The following definitions are provided to clarify terms that

are used in this notice.

Training Program - A learning process with goals and

objectives, generally having a variety of components, and

taking place in a series of sessions over a period of time.

It is designed to lead to a higher level of proficiency, and

it enhances the individual\'s ability to obtain employment.

It may have performance standards to measure proficiency.

Training may include, but is not limited to:

\- classroom training in a specific occupational skill;

\- on-the-job training with wages subsidized by the program;

or

\- basic education.

Incremental - The increase between the total amount of

welfare and earnings of a family member prior to enrollment

in the training program and welfare and earnings of the

family member after enrollment in the training program. All

other amounts, increases or decreases, are treated in the

usual manner in determining annual income.

Supportive Services - Employment training programs offering

supportive services must include at least one of the

following, or similar types of, social services:

a\. child care;

b\. transportation;

c\. personal welfare counseling (family/parental

development counseling, parenting skills training for

adult and teenage parents, substance/alcohol abuse

treatment and counseling, self-development counseling);

d\. health care services (including outreach and

referrals);

e\. youth leadership skills; youth mentoring.

VI\. Cases Illustrating Exclusions

5.609(c)(8)(v) - Applicable to Section 8 and Public Housing

A. Scenario: A Section 8 family member is receiving \$300

per month in Temporary Assistance to Needy Families

(TANF) benefits (formerly AFDC). She enrolls in a

qualifying State employment training program and

receives \$450 per month in training income. The TANF

benefits stop.

Action: To determine the incremental amount of earnings

and benefits, subtract \$300 (benefits prior to enrollment

in the training program) from \$450 (earnings while

enrolled in the training program). The incremental amount

is \$150. In determining income, \$300 is counted and \$150

is excluded. After completion of the training program,

the exclusion ends. (There is no 18-month exclusion.)

B. Scenario: A public housing family member is in a state

training program that does not meet one or more of the

conditions of the 5.609(c)(13) exclusion (see Answer 2

in Q & A section VII). The person was at zero income

before entering the training program and received \$350

per month once he entered the program. He just got his

first job after completing the training and earns \$700

per month.

Action: The incremental earnings of this person would be

the difference between what he had before and what he made

during the training program: \$350. This amount would

have been excluded during the period of the training

program. Once he got the job paying \$700 per month, the

full \$700 would be counted. The 5.609(c)(8)(v) exclusion

does not extend beyond the completion of the training

program. (There is no subsequent 18-month exclusion.)

5.609(c)(13) - Applicable to Public Housing only

A. Scenario: The head of a tenant family is receiving

\$400 in TANF. She enrolls and participates in a

qualifying employment training program. TANF benefits

stop. She receives \$500 per month while in the

training program. Upon completion of the training

program, she obtains a job earning \$700 per month and

has the job indefinitely.

Action: During the time she is in the training program,

exclude \$100 (the difference between what she was

receiving from TANF and what she is now receiving in the

training program). When she obtains the job, exclude, for

18 months, \$300 per month (the difference between what she

was receiving prior to the training program and what she

is now receiving from employment). During the training

period, and for the subsequent 18 months, \$400 is

countable as income.

B. Scenario: A public housing tenant is making \$10,000

per year, but wants to get a better job. He leaves his

job and enrolls in a qualified training program,

receiving \$8,000 in compensation while in that program.

Immediately upon completion of the training program, he

secures a job paying \$12,000.

Action: After the tenant notifies the housing agency that

he has enrolled in the training program, his rent should

be reduced because he will be making less. For 18 months

after he secures the first job after completion of the

training, include \$10,000 as income, the amount earned

before he entered the training program.

C. Scenario: Prior to enrollment in a training program,

an individual was receiving \$300 in TANF benefits, \$100

in earnings and \$100 in child support. After

enrollment in the training program, she now receives

\$150 in TANF benefits, \$400 from the training program,

and no child support.

Action: To determine the incremental amount of earnings

and benefits, subtract \$400 (welfare benefits and earnings

prior to enrollment in the program) from \$550 (welfare

benefits and earnings after enrollment in the program).

The incremental amount is \$150. In determining income,

\$400 is counted as income and \$150 is excluded.

For purposes of determining the incremental amount only,

do not consider the child support received prior to

enrollment because it is not welfare or earnings (see

definition of \"incremental\" in Section V of this Notice).

After enrollment, the child support is no longer being

received, and so is not a factor.

D. Scenario: This family consists of a mother and two

daughters, ages 19 and 14, and the 19-year old

daughter\'s child, age 2. The mother is receiving \$550

in TANF. Her 19-year old daughter is receiving \$425 in

TANF. The 19-year old daughter enrolls in a training

program receiving \$500 per month in compensation. The

daughter\'s TANF benefits stop.

Action: To determine the incremental amount of earnings

and benefits, subtract \$425 (the daughter\'s earnings and

benefits prior to enrollment in the program) from \$500 per

month (the daughter\'s earnings and benefits after

enrollment in the training program). The incremental

amount during the training program is \$75.00. Count as

income \$975 (\$550 for the mother and \$425 for the

daughter). Exclude the incremental amount of \$75.

E. Scenario: The head of a tenant family is receiving

\$400 in TANF. She enrolls and participates in a HUD-

funded training program operated by the HA. TANF

benefits stop. She receives \$500 per month while in

the training program. Upon completion of the HUD-

funded training program, she obtains a job at the HA

earning \$700 per month. She has the job indefinitely.

Action: In this case the full amount received during the

training program is excluded. This comes under the

provisions of 5.609(c)(8)(i) which excludes the full

amounts received under HUD-funded training programs.

Upon employment with the HA, the full amount of employment

income received by the person is counted, because 24 CFR

5.609(c)(13), the only provision which provides an 18-

month exclusion of income upon employment, specifically

precludes the exclusion of wages funded under the 1937

Housing Act Programs (which includes public housing and

section 8).

The outcome in the above scenario would be the same if the

training were operated by a Resident Organization (either

acting on its own, or in collaboration with the HA), as

long as the training program is funded by HUD.

VII\. Frequently Asked Questions Related to Training Income Exclusions

Q1: Do all State welfare programs, established in

accordance with the Welfare Reform Act, qualify for

purposes of the 5.609(c)(13) exclusion?

A1: No. Merely being established pursuant to the Welfare

Reform Act does not guarantee that the program is a

JOBS comparable program.

Q2: How does a HA verify whether or not a person is in a

qualifying training program under 5.609(c)(13)?

A2: The HA must ascertain that the training program has all

five components listed in 5.609(c)(13). It must:

\- be a program providing employment training and

supportive services;

\- be authorized by a Federal, State or local law;

\- be funded by the Federal, State or local government;

\- be operated or administered by a public agency; and

\- have as its objective to assist participants in

acquiring employment skills.

Q3: What does it mean that a program must be funded by the

Federal, State or local government?

A3: It means that a material portion of the costs of the

training program must be paid by a Federal, State, or

local government entity.

Q4: What is needed in order to determine that a public

agency is actually operating or administering the

program, particularly where the actual training is

conducted by private companies?

A4: The public agency would have to establish a training

program with goals, standards, and timeframes. It

would normally include tracking and monitoring systems,

which would be applied universally for all training

providers. Training providers would generally have to

satisfy all of the standards and criteria established

by the public agency. It could then be said that the

program was established by the government and

implemented by private companies for and on behalf of

the government.

Q5: Can the income exclusion apply to more than one member

of the family?

A5: Yes.

Q6: Does the exclusion apply to all members in the family?

A6: The income exclusion applies only to the individual or

individuals enrolled in the qualifying employment

training program.

Q7: Can the exclusion be effective for different family

members for different time periods?

A7: Yes. For example, one family member might just be

entering a qualifying training program under (c)(13),

while another might be in the 10th month of a job under

the 18-month exclusion.

Q8: If an applicant participated in a qualified training

program under the 5.609(c)(13) exclusion prior to being

admitted to public housing, and secured his first job,

on completion of the program, after being admitted to

public housing, is he eligible for the 18-month

exclusion?

A8: Yes, provided he was in the training program on or

after the effective date of the Tenant Participation

and Tenant Opportunities Program (TOPS) rule (9/23/94),

which is when the 18-month exclusion was implemented.

Q9: If an applicant completed a training program and

started her first job prior to being admitted to public

housing, but only had the job for 12 months at the time

she entered public housing, is she entitled to the 18-

month exclusion?

A9: She would be entitled to the remainder of the 18-month

exclusion, 6 months.

Q10: Does the 18-month exclusion period run continuously or

does it stop and start again if the individual has some

period of time during the exclusion period that he is

unemployed?

A10: The 18-month exclusion period runs continuously from

the date the first job begins. It would continue to

run if the person switched to a second job during the

18-month period.

Q11: What would be counted as income if, during the 18 month

exclusion period, the person had a break in employment?

A11: Any other income the person has during the break would

be counted.

Q12: How much time can go by between finishing the training

program and starting the first job?

A12. The HA should have a fair and consistent policy on

this. The HA should certainly allow reasonable periods

like 6 months to go by. However, the HA might decide

that, if more than two years went by before the person

got the first job, the earnings from that job would be

counted in full.

Q13: Is all income excluded for individuals in a training

program under the (c)(8)(v) and (c)(13) provisions?

A13: Only the incremental amount is excluded (see definition

of incremental in Section V).

Q14: If a family with no income enrolls in welfare in a

state that requires families to go directly into a

training program in order to receive a payment, what

would the family\'s base amount be for purposes of

determining the incremental increase?

A14: To determine the base amount, use whatever earnings and

benefits that would have been counted prior to entering

the training program. In this case, the base amount

would generally be \$0 since the family had no income

prior to being enrolled in the training program.

Q15: What is included in the base amount?

A15: The base amount is the total amount of welfare and

earnings the family member was receiving prior to

entering the training program.

Q16: What if the family has had income in the recent past,

but did not have income the day they entered the

training program? For instance, a family that was

receiving welfare in one state terminates its welfare

assistance there and moves to another state,

immediately entering a training program in that second

state.

A16: The HA should examine situations such as this and

establish a consistent policy to follow. It is

certainly acceptable to use \$0 as the base amount. The

HA might also consider the person\'s income over a past

reasonable period of time, perhaps a few months.

Q17: If a family was receiving welfare, but was either

sanctioned or dropped from welfare due to refusal to

participate in a training program, but later returns

and agrees to participate in a training program, what

would the base amount be for determining the

incremental increase?

A17: As in the previous question, the HA should determine

the best way to handle this and similar situations, and

include it in their policies for consistent

application.

Q18: If a family member leaves the training program, just

prior to completion, in order to accept a job offer,

would he still be eligible for the 18-month exclusion

since he did not \"complete\" the training program?

A18: If he has substantially completed the program, the HA

could conclude that he qualifies for the 18-month

exclusion.

Q19: What if a family member starts a job, but continues to

participate in the training program simultaneously?

Since the training is not yet completed, does she

qualify for the 18-month exclusion?

A19: If a family member has completed that portion of the

training necessary for her to get a job, the HA policy

could allow for the 18-month exclusion, which

would start at the point she got the job, not after she

completed the training.

Q20: To get the benefit of the exclusion, does the job

acquired have to be directly related to the training?

A20: No.

Q21: Does the 5.609(c)(13) exclusion apply to individuals in

the Family Self-Sufficiency Program (FSS) who have an

escrow account?

A21: This exclusion applies to all public housing residents,

without regard to whether a resident participates in

the FSS program. The Combined Income and Rent Interim

rule, issued April 5, 1995, removed the parenthetical

in the former \'913.106(c)(11), which indicated it did

not apply to residents participating in the FSS program

who are utilizing the escrow account. This means that

for some families enrolled in FSS, the amount that goes

into the escrow account would be decreased or

eliminated for a period of time.

Q22: Are amounts received from resident-owned businesses or

professions considered \"earnings\"?

A22: Yes, but a HA must be careful to consider only the net

income from the operation of a business or profession.

As a general rule, this means taking all gross self-

employment income and then excluding the cost of

producing the self-employment income.

Q23: If a public housing tenant, who is on the waiting list

for Section 8, is having incremental earnings excluded

in determining her public housing rent, would these

incremental earnings also be excluded for purposes of

determining her eligibility for Section 8?

A23: Yes, but under the provisions of 5.609(c)(8)(v), not

(c)(13), since (c)(13) does not apply to Section 8.

Therefore, the exclusion would apply, for Section 8

eligibility purposes, only during the training period,

not for the 18 months after she begins her first job.

Q24: If a tenant is enrolled in a training program funded by

HUD, is the training income treated differently than

the income from training programs covered by

5.609(c)(8)(v) and (c)(13)?

A24: Yes. The provision at 5.609(c)(8)(i) excludes the full

amount received under training programs funded by HUD.

If it is a HUD-funded training program, we exclude the

FULL amount, not just the incremental amount. This

exclusion stops at the end of the training period.

Q25: What is a training program funded by HUD?

A25: It must be a bona fide training program, generally

meeting the definition in Paragraph V of this notice.

While an on-the-job training (OJT) program would

typically qualify, the orientation a new staff member

receives when hired into an organization or into a new

position at an organization would not constitute a

training program. The training program must be funded

directly or indirectly with HUD dollars - whether those

dollars are from operating subsidy, Section 8

administrative fees, or modernization, CDBG, or other

grant funds.

Q26: How is the training income counted for a public housing

tenant who is enrolled in an OJT program in the HA\'s

maintenance department?

A26: Income received through a HUD-funded training program

is excluded in full. Once the training is completed

and the individual joins the maintenance staff, the

entire amount of wages is counted as income.

Q27: If a resident organization, either alone or in

collaboration with an HA, uses its HUD grant money to

create an employment training program, would the income

of tenants participating in that training program be

excluded?

A27: Yes, as long as the training program is funded by HUD.

The key point is not which organization administers the

training program, but rather whether HUD dollars are

funding a material portion of the program.

Q28: Once the HUD-funded training is completed, if either

the HA or resident organization hires the training

program graduate, is any of the employment income

excluded?

A28: No. The regulation is specific that employment income

funded by public housing assistance under the 1937

Housing Act will not be excluded. This means that

salaries paid by HAs or resident organizations using

funding received under any public housing or Section 8

programs are included as income in determining tenant

rent. (But see the provision on resident service

stipend at 5.609(c)(8)(iv).)

VIII\. References

\- 24 CFR 5.609(c)

\- Combined Income and Rent Final Rule, issued 10/18/96.

This rule became effective on 11/18/96. The rule was

transmitted by PIH Notice 96-93 , issued 12/18/96.

\- Combined Income and Rent Interim Rule, issued 4/5/95.

This rule became effective on 6/5/95.

\- \"TOPS\" Final Rule, issued 8/24/94. This rule became

effective on 9/23/94.

\- Federally Mandated Exclusions from Income, from the

Federal Register dated 8/3/93 (58 FR 41287-41288). This

Federal Register Notice was transmitted by PIH

Notice PIH 93-65, issued December 13, 1993.

\- Section 515(b) of the National Affordable Housing Act

(NAHA) of 1990.

/s/

Kevin Emanuel Marchman

Assistant Secretary for Public

Attachments

APPENDIX 1

HUD Regulations Pertaining to Training Income Exclusions

24 CFR 5.609

1\. (c)(6) - The full amount of student financial

assistance paid directly to the student or the

educational institution.

2\. (c)(8)(i) - amounts received under training programs

funded by HUD.

3\. (c)(8)(ii) - amounts set aside for use under a Plan to

Attain Self-Sufficiency (PASS).

4\. (c)(8)(iii) - amounts received by a participant in

other publicly assisted programs which are specifically

for or in reimbursement of out-of-pocket expenses

incurred (special equipment, clothing, transportation,

child care, etc.) and which are made solely to allow

participation in a specific program.

5\. (c)(8)(v) - incremental earnings and benefits resulting

to any family member from participation in qualifying

State or local employment training programs (including

training programs not affiliated with a local

government) and training of a family member as resident

management staff. Amounts excluded by this provision

must be received under employment training programs

with clearly defined goals and objectives, and are

excluded only for the period during which the family

member participates in the employment training program.

6\. (c)(11) - earnings in excess of \$480 for each full-time

student 18 years old or older (excluding the head of

household and spouse).

7\. (c)(13) - for public housing only: (i) the earnings

and benefits to any family member resulting from

participation in a program providing employment

training and supportive services in accordance with the

Family Support Act (42 U.S.C. 1437t); or any comparable

Federal, State, or local law during the exclusion

period (ii) for purposes of this paragraph, the

following definitions apply:

\(A\) Comparable Federal, State or local law means a

program providing employment training and

supportive services that:

\(1\) Is authorized by a Federal, State or local

law;

\(2\) Is funded by the Federal, State or local

government;

\(3\) Is operated or administered by a public

agency; and

\(4\) Has as its objective to assist participants

in acquiring employment skills.

\(B\) Exclusion period means the period during which the

family member participates in a program described

in this section, plus 18 months from the date the

family member begins the first job acquired by the

family member after completion of such program

that is not funded by public housing assistance

under the 1937 Act. If the family member is

terminated from employment with good cause, the

exclusion period shall end.

\(C\) Earnings and benefits means the incremental

earnings and benefits resulting from a qualifying

employment training program or subsequent job.

8\. (c)(17) - Amounts specifically excluded by any other

Federal statute from consideration as income for

purposes of determining eligibility or benefits under a

category of assistance programs that includes

assistance under any program to which the exclusions

set forth in 24 CFR 5.609(c) apply.

The last list of Federally-Mandated Exclusions was

published in the Federal Register on 8/3/93, 58 FR

41287-41288. This list excludes payments received

under programs funded in whole or in part under the Job

Training Partnership Act; payments to volunteers under

the Domestic Volunteer Services Act of 1973; amounts of

scholarships funded under Title IV of the Higher

Education Act of 1965; and payments received from

programs funded under Title V of the Older Americans

Act of 1965. Payments received from AmeriCorps are

also excluded (11/15/94 memorandum from General

Counsel).

APPENDIX 2

Income Exclusions Related to Training

Comparing Section 8 with Public Housing

SOURCE AMOUNT EXCLUDED FOR AMOUNT EXCLUDED FOR

SECTION 8 PUBLIC HOUSING

5.609(c)(6) - Student All All

Financial Assistance

5.609(c)(8)(i) - Training All All

Programs Funded By HUD

(e.g., PFS, Sec. 8 Admin.

Fee, Development and

Modernization, CDBG)

5.609(c)(8)(ii) - Amounts All All

set aside in SSI\'s \"Plan to

Attain Self-Sufficiency\"

(PASS)

5.069(c)(8)(iii) - Publicly All All

Assisted Program

Reimbursement of out-of-

pocket expenses incurred

5.609(c)(8)(v) - State or Incremental (and only for Incremental (and
only for

local employment training the period of time during the period of time
during

program participation in the participation in the

-must have clearly defined employment training employment training

goals and objectives program) program)

SOURCE EXCLUDE FOR EXCLUDE FOR

SECTION 8 PUBLIC HOUSING

5.609(c)(11) - Earnings of Amounts in excess Amounts in excess of \$480

Full Time Students 18 years of \$480

of age or order (excluding

head of household and

spouse)

5.609(c)(13) - A training N/A Incremental increase

program providing employment during training program

training and supportive plus 18 months from date

services in accordance with of 1st job after

the Family Support Act or completion of the

any comparable Federal, training program that is

State, or local law not funded by public

\- Authorized/funded by assistance under 1937 Act

Fed/State/Local law

\- Operated or administered

by public agency

\- Objective is to assist

participants in acquiring

employment skills

5.609(c)(17) - Amounts All All

excluded by any other

Federal statute, e.g.,

payments received under:

\- JTPA (in whole or in part)

\- Domestic Volunteer

Services Act of 1973

\- Title V of the Older

Americans Act of 1965

\- AmeriCorps

APPENDIX 3

Income Exclusions Related to Training

Comparing Two Regulatory Exclusions

The regulatory citation 24 CFR 5.609(c)(8)(v) 24 CFR 5.609(c)(13)

The housing programs for which Applies to PH & Section 8 Applies only to
PH

this exclusion is applicable

Type of program Employment training Employment training

program and supportive

services program

Who provides the program State or local (not Provided under

necessarily government) Federal, State or

local law, funded

by government,

administered by a

public agency

Characteristics of the program Must have clearly defined Has as its

goals and objectives objective to assist

participants in

acquiring

employment skills

What income is excluded Incremental earnings & Incremental earnings

benefits and benefits

Period of time for which Applies during training Applies during

exclusion applies period training period

and for 18 mos.

from the date

the family member

begins the

first job acquired

after

completion of the

program

Exceptions NA The exclusion does

not apply to

jobs funded by

public housing

assistance under

the 1937 Act

APPENDIX 4

Optional Earned Income Exclusions and Deductions

(for Public Housing only)

A. Optional Earned Income Exclusions

The Optional Earned Income Exclusions Interim Rule, effective 9/30/96,

allows HAs to amend HUD\'s definition of annual income (61 FR 46344) to

encourage them to take action to further the efforts of applicants and

tenants to seek employment and increase their earned income. The rule

permits HAs to adopt exclusions for earned income pursuant to an

established written policy. Any exclusions permitted may not be

deducted in determining adjusted income. A final rule, issued 5/5/97

and effective 6/4/97, made no substantive changes to the interim rule.

See paragraph C below for a discussion of the impact on operating

subsidy.

B. Optional Earned Income Deductions

Section 402(c) of the Balanced Budget Downpayment Act I (Continuing

Resolution), which became law on 1/26/96, (described in HUD Notice PIH

96-6 , issued 2/13/96), permitted HAs to adopt optional earned income

deductions in determining adjusted income. This provision has been

extended by the FY 1998 Appropriations Act. HAs may establish other

deductions to earned income, in addition to those defined in Section

3(b)(5) of the U.S. Housing Act of 1937, in accordance with the

Section 402(c) provisions. See paragraph C below for a discussion of

the impact on operating subsidy.

C. Impact of Optional Earned Income Exclusions/Deductions on Operating

Subsidies

Reference: Public and Indian Housing Performance Funding System:

Incentives; Interim Rule, published 9/30/96, (61 FR 51178). The PFS

Operating Subsidy will not increase to cover the amount of rental

income reductions resulting from these exclusions/deductions, but

will allow an HA that achieves net increases in rents from earned

income to have an incentive increase in subsidy up to an amount equal

to the PFS operating subsidy shortfall.