Opinion ID: 4561573
Heading Depth: 2
Heading Rank: 3

Heading: HUD regulation on “Annual Income” and its

Text: exclusions The applicable federal regulation defines “annual income” broadly, as “all amounts, monetary or not.” (24 C.F.R. § 5.609(a) (2020).) For example, income includes “compensation for personal services” (id., § 5.609(b)(1) (2020)) and “[p]ayments in 7 REILLY v. MARIN HOUSING AUTHORITY Opinion of the Court by Chin, J. lieu of earnings, such as unemployment and disability compensation, worker’s compensation, and severance pay” (id., § 5.609(b)(5) (2020)). However, income does not include such amounts as “specifically excluded” under the regulation. (Id., § 5.609(a)(3) (2020).) There are 16 such exclusions. (Id., § 5.609(c)(1)–(17) (2020).) “An extensive set of statutory provisions and regulations governs the calculations of the subsidy that must be paid on behalf of each tenant.” (Nozzi v. Housing Authority of City of Los Angeles (9th Cir. 2015) 806 F.3d 1178, 1184.) In general, Section 8 tenants must contribute 30% of their monthly adjusted income or 10% of their gross monthly income, whichever is greater, towards each month’s rent. (42 U.S.C. § 1437f(o)(2)(A).) The housing assistance payment covers the balance of the rent, up to a statutorily capped amount. (Nozzi v. Housing Authority of City of Los Angeles, at pp. 1184–1185.) We do not examine the underlying method used to calculate the rental subsidy, however, but focus on whether Reilly’s IHSS compensation for care of her disabled daughter is “specifically excluded” (24 C.F.R. § 5.609(a)(3) (2020)) from income as “[a]mounts paid by a State agency to a family with a member who has a developmental disability and is living at home to offset the cost of services and equipment needed to keep the developmentally disabled family member at home” (id., § 5.609(c)(16) (2020), italics added). The parties do not dispute that if Reilly’s daughter received IHSS care from a third party rather than a family member, such amounts paid would qualify under the exclusion. MHA argues that for the exclusion to apply, however, a family must incur costs for hiring someone because only then would the “[a]mounts paid” by the state to a family truly “offset” those “cost[s].” (24 C.F.R. § 5.609(c)(16) 8 REILLY v. MARIN HOUSING AUTHORITY Opinion of the Court by Chin, J. (2020); see In re Ali (Minn. 2020) 938 N.W.2d 835, 840 (Ali) [“Cost means an actual monetary expense . . . incurred by the family to keep the disabled family member living at home”].) Because the state pays Reilly to provide care for her own daughter and not to hire a third party provider, MHA maintains there is no actual “cost” to Reilly for such services, and consequently, there is nothing to “offset.”
MHA’s interpretation is based in part on the dictionary definition of “offset,” which generally means to counterbalance or compensate for something. (See Steinmeyer v. Warner Cons. Corp. (1974) 42 Cal.App.3d 515, 518.) Echoing the Court of Appeal, MHA asserts that payments by the state must offset costs the family itself incurs to keep a developmentally disabled member at home; “[o]therwise the payment does not counterbalance or compensate for the costs of services.” As MHA puts it, “the payment must go to the same entity that incurs the cost of those services.” MHA further insists that “cost” is a monetary term that does not encompass emotional costs Reilly bears in caring for her daughter, nor any lost opportunity costs when Reilly forgoes outside employment to be her daughter’s IHSS provider. We disagree with MHA’s interpretation. Unlike the word “reimburse,” which means to “pay back or compensate (another party) for money spent or losses incurred” (American Heritage Dict. (5th ed. 2020) p. 1214, italics added), “offset” is not similarly restrictive. (See Briggs v. Eden Council for Hope & Opportunity (1999) 19 Cal.4th 1106, 1117 [“Where different words or phrases are used in the same connection in different parts of a statute, it is presumed the Legislature intended a 9 REILLY v. MARIN HOUSING AUTHORITY Opinion of the Court by Chin, J. different meaning”].) For example, the term “reimbursement” is used in two other exclusions. (24 C.F.R. § 5.609(c)(4), (8)(iii) (2020).) Consistent with the meaning of “reimburse,” those exclusions refer to compensation of specific, discrete amounts, e.g., “the cost of medical expenses” (id., § 5.609(c)(4) (2020)) and “out-of-pocket expenses” to participate in a publicly assisted program (id., § 5.609(c)(8)(iii)). While the term “reimburse” suggests there may be full recompense for any out-of-pocket expenses a family incurs under those exclusions, “offset” as used here does not necessarily reflect that same meaning. (See Briggs v. Eden Council for Hope & Opportunity, supra, 19 Cal.4th at p. 1117.) Here, what is “offset” is the “cost of services and equipment needed to keep the developmentally disabled family member at home.” (24 C.F.R. § 5.609(c)(16) (2020).) “[C]ost,” in turn, is defined to include both “an amount paid or required in payment for a purchase; a price” and “the expenditure of something, such as time or labor, necessary for the attainment of a goal.” (American Heritage Dict., supra, at p. 454.) Whether a family uses homecare payments to support itself so that it may care for a developmentally disabled member at home, or instead uses the funds to pay a third party to provide care for some of the time, these payments do no more than “offset” the “cost” of services and equipment needed to avoid institutionalization, costs that are not otherwise specified or limited. (24 C.F.R. § 5.609(c)(16) (2020).) Further, contrary to MHA’s suggestion, “cost” in this exclusion (24 C.F.R. § 5.609(c)(16) (2020)) does not have the same meaning as “cost” used in other provisions of the regulation. For instance, “actual cost of shelter and utilities” (24 C.F.R. § 5.609(b)(6)(ii) (2020)) and “cost of medical expenses for 10 REILLY v. MARIN HOUSING AUTHORITY Opinion of the Court by Chin, J. any family member” (id., § 5.609(c)(4) (2020)) both refer to discrete, monetary amounts. “[T]he presumption that ‘identical words used in different parts of the same act are intended to have the same meaning . . . readily yields whenever there is such variation in the connection in which the words are used as reasonably to warrant the conclusion that they were employed in different parts of the act with different intent.’ ” (Roberts v. Sea-Land Services, Inc. (2012) 566 U.S. 93, 108.)
Regulations par 5.609(c)(16) (2020) This interpretation of the terms “offset” and “cost” is also consistent with the rulemaking history of 24 Code of Federal Regulations part 5.609(c)(16) (2020). (See 60 Fed.Reg. 17388– 17395 (Apr. 5, 1995) [“Combined Income and Rent”; interim rule as precursor to 24 C.F.R. § 5.609(c)(16) (2020)]; 61 Fed.Reg. 54492–54504 (Oct. 18, 1996) [final rule]). Though the Court of Appeal found this history to be unhelpful and not illuminating, we do not share that view. (See Thomas Jefferson Univ. v. Shalala (1994) 512 U.S. 504, 512 [relevance of agency’s “ ‘intent at the time of the regulation’s promulgation’ ”].) In 1995, HUD published an interim rule proposing eight new income exclusions — among them the homecare payments exclusion — to the definition of annual income under Section 8 and other assisted housing programs. (See 60 Fed.Reg. 17388– 17395 (Apr. 5, 1995); 24 C.F.R. § 5.609(c) (2020).) It determined that the new exclusions “are essential for achieving its goals of ensuring economic opportunity, empowering the poor and expanding affordable housing opportunities. Moreover, HUD believes that the costs of additional exclusions will be offset by long-term future savings because the exclusions will increase 11 REILLY v. MARIN HOUSING AUTHORITY Opinion of the Court by Chin, J. the number of economically self-sufficient families residing in assisted housing.” (60 Fed.Reg. 17388, italics added.) Regarding the “homecare payments” exclusion in particular, HUD explained that the “exclusion exempts amounts paid by a State agency to families that have developmentally disabled children or adult family members living at home. States that provide families with homecare payments do so to offset the cost of services and equipment needed to keep a developmentally disabled family member at home, rather than placing the family member in an institution. Since families that strive to avoid institutionalization should be encouraged, and not punished, the Department is adding this additional exclusion to income. The Department wishes to point out that today’s interim rule does not define ‘developmentally disabled’ since whether a family member qualifies as developmentally disabled, and is therefore eligible for homecare assistance, is determined by each individual State.” (60 Fed.Reg. 17388, 17389 (Apr. 5, 1995), italics added.) In finalizing the rule and responding to public comment that “ ‘developmentally disabled children’ ” and “ ‘adult family members’ ” should be expressly defined, HUD rejected the suggestion as unnecessary: “There is no need for HUD to define these terms, as they are defined by the State program providing the payments. If the family is receiving such a payment from the State because a family meets the criteria of the definition, the [public housing authority] should consider the family eligible for the exclusion.” (61 Fed.Reg. 54492, 54497 (Oct. 18, 1996), italics added.) We find several points from this rulemaking history to be significant. As to the meaning of “offset,” HUD recognized that 12 REILLY v. MARIN HOUSING AUTHORITY Opinion of the Court by Chin, J. states that make payments for in-home services “do so to offset the cost” to the family keeping the developmentally disabled member at home “rather than placing the family member in an institution.” (60 Fed.Reg. 17388, 17389 (Apr. 5, 1995).) Significantly, HUD here did not use “cost” and “offset” in terms of a specific monetary expense or amount a Section 8 family incurs, but in a broad sense with respect to describing the overall objective of the exclusion. HUD regarded homecare payments as reducing or offsetting costs to families caring for developmentally disabled individuals, costs that would be borne by state and federal governments if the family member were institutionalized. (See Perkins & Boyle, Addressing Long Waits for Home and Community-Based Care Through Medicaid and the ADA (2001) 45 St. Louis U. L.J. 117, 119 [“Most states have reduced costly institutional care by shifting some public funding to home and community settings”].) This background clearly informs the interpretation of 24 Code of Federal Regulations part 5.609(c)(16) (2020). The language of the regulation (“amounts paid by a State agency . . . to offset the costs of services and equipment needed to keep the developmentally disabled family member at home” [italics added]) closely tracks this rulemaking language (“States that provide families with homecare payments do so to offset the costs of services and equipment needed to keep a developmentally disabled family member at home, rather than placing the family member in an institution”) (60 Fed.Reg. 17388, 17389, italics added), and the italicized phrases at issue here are identical. The only express limitation HUD has placed on this exclusion is that the in-home care payments must be for services and equipment needed to keep the “developmentally disabled” family member at home. (See post, at pp. 15–16.) Even then, 13 REILLY v. MARIN HOUSING AUTHORITY Opinion of the Court by Chin, J. HUD found “no need” to define what “developmentally disabled” meant, and instead left this up to the states to decide. (61 Fed.Reg. 54492, 54497 (Oct. 18, 1996; see 60 Fed.Reg. 17389 (Apr. 5, 1995) [“whether a family member qualifies as developmentally disabled, and is therefore eligible for homecare assistance, is determined by each individual State”].) From HUD’s perspective, “If the family is receiving such a payment from the State because a family member meets the criteria of the definition, the [public housing authority] should consider the family eligible for the exclusion.” (61 Fed.Reg. 54492, 54497, italics added.) Notwithstanding the general rule that exclusions from income should be construed narrowly (see Commissioner v. Schleier (1995) 515 U.S. 323, 328), we find no indication that HUD intended a narrow construction of the homecare payments exclusion. We perceive no reasoned basis — including any basis informed by the regulation’s language — why HUD would single out a parent provider’s compensation as unworthy for income exclusion. Rather, we find HUD’s stated goals of encouraging families to avoid the institutionalization of developmentally disabled individuals through the addition of this exclusion (60 Fed.Reg. 17388, 17389 (April 5, 1995)), and more globally of “ensuring economic opportunity, empowering the poor and expanding affordable housing opportunities” (60 Fed.Reg. 17388), would be furthered by permitting all homecare payments for services to keep developmentally disabled family members at home — whether the provider is a family member or third party — to be excluded from the meaning of “annual income.” (24 C.F.R. § 5.609(c)(16) (2020).) By allowing these families to realize the full benefit of the homecare payments without facing a corresponding increase in rent, the exclusion 14 REILLY v. MARIN HOUSING AUTHORITY Opinion of the Court by Chin, J. would operate as intended by not penalizing families who take on the onus of caring for a developmentally disabled family member at home. To that end, it is helpful to remember that “[t]he United States Housing Act is a program of ‘cooperative federalism.’ ” (James v. New York City Housing Authority (S.D.N.Y. 1985) 622 F.Supp. 1356, 1359; see 42 U.S.C. § 1437; see also Hodel v. Virginia Surface Mining & Recl. Assn. (1981) 452 U.S. 264, 289.) “HUD’s delegation of eligibility requirements to local public housing authorities is intended to effectuate the underlying policy of the United States Housing Act by promoting efficient management of the programs . . . .” (James v. New York City Housing Authority, at pp. 1361–1362.) With respect to the exclusion for homecare payments specifically (24 C.F.R. § 5.609(c)(16)) (2020)), HUD expressly left it to the states to define “developmentally disabled,” which in part determines a family’s eligibility for the income exclusion. (See ante, at p. 12.) Along these lines, HUD did not limit the income exclusion based on whether a state allows a family to use a family member or a third party to provide the necessary care; the exclusion covers “[a]mounts paid by a State agency to a family” with a developmentally disabled member (24 C.F.R. § 5.609(c)(16) (2020)). Indeed, acknowledging such a distinction would do little to advance the complementary purposes of the federal and state statutes. Congress established Section 8 with “the purpose of aiding low-income families in obtaining a decent place to live.” (42 U.S.C § 1437f(a).) And our Legislature created IHSS with the goal of providing “supportive services . . . to aged, blind, or disabled persons . . . who are unable to perform the services themselves and who cannot safely remain in their 15 REILLY v. MARIN HOUSING AUTHORITY Opinion of the Court by Chin, J. homes or abodes of their own choosing unless these services are provided.” (§ 12300, subd. (a).) Like the purpose of the federal exclusion (see ante, at pp. 12–13), the IHSS program’s purpose is to enable “ ‘disabled poor persons to avoid institutionalization by remaining in their homes with proper supportive services.’ ” (Basden v. Wagner, supra, 181 Cal.App.4th at p. 939.) Nevertheless, MHA would have us read in the words “from third parties” after the phrase “cost of services” (24 C.F.R. § 5.609(c)(16) (2020)) thereby making it correspondingly harder for certain families to provide necessary in-home care. Given this cooperative federalism regime, we ought to be reticent to interpret the HUD regulation in a way that would foreclose or hinder the objectives of the state IHSS program. The dissent overstates the import of the authority it cites (see dis. opn., post, at pp. 1–2, 16–19). (See Anthony v. Poteet Housing Authority (5th Cir. 2009) 306 Fed. Appx. 98, 101 (Anthony) [“One must incur costs before they can be offset”]; Ali, supra, 931 N.W.2d 835.) In Anthony, an unpublished Fifth Circuit decision that first addressed the issue, plaintiff Brenda Anthony provided in-home care for her severely disabled son in their Section 8 subsidized apartment. Unlike California, the State of Texas does not pay families directly for in-home care; such care is provided by third party intermediaries, who in turn employ in-home attendants and pay them wages partially funded by the state. Through her employment as a personal care attendant with two private for-profit companies, Anthony provided care not only for her son but also for other clients under the terms of her employment. In determining Anthony’s annual income for purposes of calculating her subsidized rent, the PHA refused to exclude Anthony’s wages under 24 Code of Federal Regulations part 16 REILLY v. MARIN HOUSING AUTHORITY Opinion of the Court by Chin, J. 5.609(c)(16) (2020)). The Fifth Circuit agreed with the PHA’s decision: “[T]he fact that Anthony’s employment income coincides with state funds that are set aside for her son’s care does not make that income a form of reimbursement.” (Anthony, supra, 306 Fed. Appx. at pp. 101–102.) The court further rejected Anthony’s claim that the services she provided her son were at a cost and were not free: “[F]or Anthony, they are free. She has no out-of-pocket expenses — ‘costs’ — that must be reimbursed or ‘offset’ by the state.” (Id. at p. 102.) We are not persuaded by Anthony’s reasoning on several grounds. Fundamentally, Texas’s program is distinct from the IHSS scheme in that “all state-funded in-home attendant-care services in Texas are provided by private intermediaries, and Texas does not provide any amounts directly to families to offset costs incurred to keep a disabled family member at home.” (Anthony, supra, 306 Fed. Appx. at p. 101.) Next, although Anthony’s private employers paid her to provide in-home care to her son “with money partially provided by the state” (id. at p. 101), it is unclear what portion of her wages truly constituted “pass-through” state funds. Her employers paid Anthony not just to care for her disabled son, but also to care for other clients. (Id. at p. 100.) Thus, Anthony’s compensation as an in-home attendant was arguably indistinguishable from wages a parent earns from outside employment, and therefore properly not excluded from income under 24 Code of Federal Regulations part 5.609(c)(16) (2020)). Finally, we do not agree with the Fifth Circuit’s narrow interpretation of the exclusion as limited to outof-pocket expenses that a state directly reimburses. (See Anthony, supra, 306 Fed. Appx. at pp. 101–102; see ante, at pp. 9–11.) 17 REILLY v. MARIN HOUSING AUTHORITY Opinion of the Court by Chin, J. Nor are we persuaded by the Minnesota Supreme Court’s recent decision in Ali, supra, 938 N.W.2d 835, which relied in part on both Anthony and the Court of Appeal opinion below to reach a similar conclusion. (See Reilly v. Marin Housing Authority, supra, 23 Cal.App.5th 425.) Under Minnesota’s Consumer Directed Community Support option for home and community-based services, a family receives a budget for specific services and equipment needed to keep a developmentally disabled member at home. (Ali, supra, 938 N.W.2d at p. 837.) The plaintiff, whose autistic son was eligible for the program, “chose to allocate a portion of the budget to herself as a paid parent to provide to her son some of the necessary services.” (Ibid.) Following Anthony and Reilly, the Ali court adopted a narrow view of “cost” to mean out-of-pocket expenses, and concluded that the mother incurred no actual monetary expenses to “offset.” (Id. at p. 840.) As with the Texas program, the Minnesota program — which allowed the mother to “allocate her budget as she saw fit to keep her son living at home” — is structured differently from the IHSS program in a way that makes Ali distinguishable. (Ali, supra, 938 N.W.2d at p. 837.) Moreover, as with Anthony, we disagree with the Ali court’s narrow interpretation of “cost” and “offset.”