Document: 470 U.S. 184 105 S.Ct. 1138 84 L.Ed.2d 138 Margaret M. HECKLER, Secretary of Health and Human Services, Petitionerv.Sandra TURNER et al. No. 83-1097. Argued Oct. 9, 1984. Decided Feb. 27, 1985. Syllabus Section 402(a)(7)(A) the Social Security Act (Act) provides that responsible agency a State participating in Aid to Families with Dependent Children (AFDC) program must, determining family's need, take into consideration "any other income resources" family. Before 1981, § 402(a)(7) also required state consider any "expenses reasonably attributable earning such income," under provision virtually all States deducted mandatory payroll-tax witholdings "income." In was amended by Omnibus Budget Reconciliation (OBRA) so as (1) eliminate requirement expenses "reasonably attributable" income, (2) provide 402(a)(8)(A)(ii) shall "disregard from earned income" monthly flat sum $75. Petitioner Services then advised agencies payroll deductions were be included new $75 work-expense disregard, which taken gross rather than net California issued regulations implementing petitioner's directions. class action Federal District Court challenging regulations, court held misconstrued term "income" mean thereby incorrectly subsumed tax withholdings within work covered flat-sum disregard 402(a)(8)(A)(ii), independently deducting when calculating 402(a)(7). The Appeals affirmed. Held: need for AFDC benefits, must treat expense encompassed separate deduction 402(a)(7)(A). Pp. 193-212. (a) makes no explicit withholdings, nor does it qualify meaning income. But common-sense "earned reflected existing includes since portions salary or wages withheld meet obligations are "earned." Since so, too, broader category congressional Reports accompanying OBRA amendments make clear Congress provided lieu itemized expenses, there is support statutory language structure inference contemplated an additional but unmentioned liabilities. administrative background against worked supports conclusion among items intended include disregard. 193-199. (b) erred concluding substitution had effect on treatment because they always been excluded working recipient's purposes virtue principle "actual availability" thus should continue earnings first step determination need. actual availability has not understood distinguish expenses. 199-204. (c) By could have rule would dilute financial incentives work, ignored choices manifest departure approaches previously favored. legislative history indicates embarked course, emphasizing requirements over incentives. 204-208. (d) Subsequent dispels doubt Congress' intention treated standard independent deduction. Particularly, Deficit Reduction 1984 (which became law after certiorari granted this case) 402(a)(8) "in [the section], 'earned income' prior taxes purposes." demonstrates enacted order resolve dispute presented here. 208-211. 707 F.2d 1109, reversed. Carter G. Phillips, Washington, D.C., petitioner. Mark N. Aaronson, San Francisco, Cal., respondents. Justice BLACKMUN delivered opinion Court. 1 This litigation concerns proper computation benefits recipients (AFDC), pursuant subch. IV, pt. A, 1935 (Act), amended, 42 U.S.C. 601 seq. Specifically, we decide whether, household's Act, 602(a)(8)(A)(ii), whether deduct sums 602(a)(7)(A). latter interpretation, accrue benefit recipient. 2 * eligibility "take . resources child claiming aid," well income." See Pub.L. 87-543, 106(b), 76 Stat. 188 (1962). 1981 (OBRA), 97-35, 95 357, however, effected While preserving instructs resources, Congress, 2302 OBRA, 844, eliminated account At same time, 2301, 843, placed "work expense" "disregard" individual's 3 response these amendments, petitioner promptly directions;1 significantly reducing paid approximately 45,000 families members. 4 Respondents, past, present, future who will affected changes wrought brought United Northern challenge Secretary's They contended relegated 402(a)(8); instead, according respondents, entitled disregarded third-party defendant. 5 agreed plaintiff class. It therefore respondents' motion summary judgment, State's judgment Secretary. enjoined its terminating federal matching funds due State. Turner v. Woods, 559 F.Supp. 603 (1982). 6 On appeal, Ninth Circuit Prod, 1109 (1983). Finding unhelpful, scrutinized interpretation two provisions before relying primarily "congressional purpose" conclude amounts mandatorily payment social security, federal, state, local taxes. Therefore, concluded, 7 Courts address issue concluded encompass income.2 We conflict. 465 1064, 104 1412, 79 739 (1984). July 19, 1984, writ heard oral argument, 98-369, 98 494, law. legislation provision, 2625(a), 1135, directly addresses raised case. basis action, REHNQUIST, his capacity Circuit, prospectively stayed injunction 18, 468 1305, 2, 82 891 (1984) (in chambers). now reverse Appeals. II 8 "The based scheme cooperative federalism." King Smith, 392 309, 316, 88 2128, 2133, 20 1118 (1968). Established Title IV 1935, 49 627, "to assistance needy dependent children parents relatives live care them," Shea Vialpando, 416 251, 253, 94 1746, 1750, 40 120 (1974), reimburses each chooses participate percentage expends. 403, 603. return, administer plan conforms applicable statutes regulations. 402, 602. Among relevant here—§ 402(a)(7), requires 402(a)(8), certain making determination.3 9 present controversy roots series sections. As originally did expressly require decrease grants sources. Effective 1, 1941, added mandated agency, aid children." Amendments 1939, 401(b), 53 1379. 10 amendment, turn, created problem. Because "families members incurred employment-related reduced available assistance," Board soon "recognized failure work-related result disincentive seek retain employment." U.S., at 259, S.Ct., 1753. To avoid defeating purpose encourage employment even where wholly public assistance, ibid.; see 401, 601, encouraged State, incidental encountered person.4 11 1962, converted prompting requirement. oblige consider, addition "income resources," Public Welfare 188. amendment made "mandatory widespread optional practice total assistance." 260, 12 statute again effective 1969, alter fundamentally 1967, 90-248, 202(b), 81 881. Instead merely protecting possibility disincentive, moved create affirmative incentive adding several deductions, earned-income disregards. left intact requiring both version subjected 402(a)(8). part, section computing $30 month, "plus one-third remainder month." 881.5 effect, amount increase benefits. 13 section, Department Health, Education, Welfare, which, successor predecessor administering program, defining incorporating disregards calculations. "Earned defined "total amount" "commissions, wages, salary," calculated "irrespective personal income-tax deductions. ." 45 CFR 233.20(a)(6)(iv) (1970). 14 altered noted above, place substituted child-care up $160, expenses." S.Rep. 97-139, p. 435 (1981) U.S.Code Cong. & Admin.News pp. 396, 701. addition, restricted "$30 plus one-third" four months employment, 402(a)(8)(B)(ii)(II), 602(a)(8)(B)(ii)(II), impact calculation subtracted, 402(a)(8)(A)(iv), 602(a)(8)(A)(iv).6 III A. 15 how tandem operate, look first, always, statute. North Dakota States, 460 300, 312, 103 1095, 1102, 75 77 do find language, informed pattern provisions, unhelpful 16 withholdings. Nor Instead, that, "except may otherwise in" agency's specified determination" Successive paragraphs statute, then, employ twin usages "income"—the unqualified, second limited Absent contrary indications, seems us sense read represent subset those one's nonetheless "earned," Such reflected, event, longstanding definition "the [of commissions, salary], irrespective deductions." (1984).7 mind reemployed too Thus, unless recipient gets Any authorization liabilities, if pay, found 17 monthly. 402(a)(8)(A)(ii). clear, (1981); H.R.Conf.Rep. 97-208, 979 (1981), 701, 1341. apparent, well, simultaneous elimination Tax liabilities indisputably attributable. Indeed, paradigmatic expense: while transportation, food, clothing, like often susceptible economies, proverbial certainty attaches Further, $160 monthly, expenditures, another species expense. contrast, absence special conferring thought come sum, notwithstanding unqualified benchmark 18 Until regulatory assessing although successive urged matter sound practice. appears acceded urging, least extent practices varied widely types App. 30-36, Bureau Assistance, Administration, Assistance Report 43: Methods Determining Need Program (March 1961). continued 1962 income; during period subtracted place. 19 work-incentive necessary detail steps response, HEW promulgated detailed application one regulation, remained unchanged initial promulgation, lunches, transportation personal, cost tools, materials, uniforms, call customers." 21 Another regulation—which unchanged, though longer applied calculations—set forth procedure applied: 22 income,' non-personal, deducted. Only remaining payment." 233.20(a)(7)(i) 23 echoing terminology clearly "personal" authority 402(a)(7).8 24 Administrative taxonomy Sometime acted, many A 1972 study reported every 47, Education Memorandum, Payments Rehabilitation Service, (Feb. 1972). Colorado said employment," 254-255, assumed much, id., 255, 1751. And, 1977, House Committee Government Operations received comprehensive report appeared indicate 43 responded inquiry deductible Congressional Research Administration Program: (Comm. Print 1977). 25 There reason suppose legislated ignorance generally accepted categorization contrary, Senate described understanding law: 26 "In income: earnings; (including care) 501 767. 27 unlikely omitted important parenthetical mention expenditures presages their revised only type separately disregarded. 28 Conference describes effect: 29 "States following earnings, order: 30 "(a) Eligibility Determination—the full time expenses); incapacitated adult, per month. 31 "(b) Benefit Calculation—the employment; costs month; disregarded." 978-979 1340-1341. 32 Again, implausible complete description proposed calculation, yet neglect "earnings" "monthly earnings" 33 acknowledge codified policy 1589, 87th Cong., 2d Sess., 17-18 (1962); H.R.Rep. 1414, (1962), 1943. true amending guide list 39-41, Handbook 3140 (Apr. 22, 1964). silence best ambiguous, however. resulted HEW's recognition acquiescing attempt realistically ascertain recipients' already levels. recognized, source reduce countable various unclear time. F.2d, 1120. identify 1981. disregarding satisfy home equally "itemized expenses" replace. B 34 recognized "if enter all, subject ceiling exists." avoided conclusion, rejecting premise. According Appeals, long-enshrined availability," disregards, governed payments, 35 disagree. Contrary Rather, served prevent conjuring fictional sources imputing persons obligation furnish overvaluing assets manner attributes nonexistent recipients. 36 traces origins 1939 Act. some Members expressed concern, specifically regard old-age assume potential sources, children, actually might contribute. Hearings Relative Ways Means, 76th 1st 2254 (1939) (statement A.J. Altmeyer, Chairman, Board); Cong.Rec. 6851 Rep. Poage). Shortly passage adopted statement programs, including AFDC. 17-20, Memorandum (Dec. 20, 1940). cautioned effecting directive ensure "actually exist," "fictitious" "imputed," "be hand ready use needed." short later, incorporated substantially form Board's guidelines 21-23, endorse principle. See, e.g., 3131.7 (1967) (quoted Lewis Martin, 397 552, 555, n. 6, 90 1282, 1284, 561 (1970)). suggested demanded 37 Court, viewed "clearly [to] comport statute," 319, 16, 2134, hesitated give case others. supra; Van Lare Hurley, 421 338, 1741, 44 208 (1975). Court's cases applying reflect imputed unrealizable artificially depreciate For example, Smith considered regulation holding Alabama deny eligible solely mother's cohabitation "substitute father," own, without putative substitute contributed children's support. 319-320, 16. 38 apply surprising. consume less living worker's paycheck necessarily employed. implicit analytic difficulty, helpful explanation,9 purported clarify ruling excluding "non-governmental deductions" compass, specifying taxes, security "state disability equivalent governmental programs" properly denominated "non-income items." 1124. individual respondents identical concession, Brief Respondents 46, they, also, fail trace similarly circumscribed rationale. Yet union dues, medical insurance, retirement programs more pass through wage earner's hands Insofar Appeals' pivots family distinction between "metaphysical indeed." James O'Bannon, 557 631, 641 (ED Pa.1982), aff'd, 715 794 (CA3 1983), cert. pending sub nom. Cohen, 83-6168. Likewise, expenditure meals, just effectively precludes needs That difference apparent import: superficial distinction; met sometime." Dickenson Petit, 728 23, (CA1 1984), pending, 83-6769. reason, why principle, once exclude render portion unavailable needs. negate enactment outline principled limit applicability telling. 39 "clear charged administration long regarded dealing exclusively." 1115. cited then-current embodying republished " 'in [n]et considered. .' Ibid., quoting 233.20(a)(3)(ii)(D), 47 Fed.Reg. 5647, 5675 (1982) (emphasis supplied Appeals).10 court, our view, context "net appeared. referred "after policies governing reserves allowances setting aside uniformly applied." 233.20(a)(3)(ii) (1983); 233.20(a)(3)(ii)(a ) "policies disregard" "[o]nly remaining" referent observed earlier regulation: 'income resources' applicant, §§ 233.20(a)(6)(iii-viii), consist 'only current regular currently resources.' 233.20(a)(3)(ii)(c). 602(a)(7). If, taking instant case, predetermined statewide applicant participation payments upon difference. 233.20(a)(3)(ii)(a) (c)" supplied). 253-254, 1750. 41 refers simply Finally, accepting view reaches much seek. face straightforward re-employment reworking items" starting point. duplicative until exceeded Respondents' permit greater either No party urges construction, senseless cumbersome way achieve result. But, us, implausibility interplay C Notwithstanding looked "primarily 1110. noted, sought "enabl[e] whom help attain capability maximum self-support independence consistent maintenance continuing parental protection. 601. acknowledging cost-cutting focus reasoned construction accommodated what saw competing 97th Congresses. First, citing one-third, OBRA's "chief economizing feature," imposition cap opined fully accomplished budgetary savings Congress. Next, compelled still produced lesser seeing "no believe pay handsomely privilege," decided desire welfare avoiding minimizing penalties employed 1123. 46 agree neither changed abandoned goals. scheme, implemented Secretary, threatens dissipate perhaps forcing wish apportion smaller home. Unlike hesitate tell achieved objectives range chose utilize, particularly information own Office, presumably relied, belies conclusion. 447, 552. More importantly, plain risk creating disincentives lead increased down road trouble During hearings Representative Stark voiced concern put mother distressing choice quitting her job money devote Administration's Proposed Savings Unemployment Compensation, Programs: Subcommittee Compensation Sess. Ser. 97-7, 1981). Rangel feared "[t]he marginally poor, penalized working, great work." Id., 41. Other numerous private witnesses similar warnings. (Rep. Russo); Chisholm); 318 (Kevin Aslanian, Recipients League, Inc.). And Report, called attention temporal limitation "increase program." 819. warnings, awareness felt threatened create. 48 underlay decision prompted draft allow 20% $175. 127 14476 (1981). rejected and, passed Senate. 14681-14682; 978-979. sounded warnings consequences substitute. 14104 Rostenkowski); 14663-14664 Biaggi). These concerns, deter Third observed, "[h]aving determined providing achieving goal self-sufficiency leading ever-increasing course." 809. proposing impatience inducing mothers self-sufficiency. 502-503. result, means combination temporally "decrease dependency, emphasize permanent guarantee." Ibid. authorize establish aimed promotingemployment "community experience designed improve employability participants training," 409(a)(1), 609(a)(1), condition program. 980. supplementation program," "make jobs available, voluntary basis, alternative plan." 414(a), 614(a). "Under approach, given depending lower grant. 980, 1342. "work-incentive demonstration program" programs. 445, 645; 981. Participation 445(b)(1)(B), 645(b)(1)(B). 402(a)(19), 602(a)(19). conjunction suggest change strategy part away toward them it. 50 elected pursue goals methods. D 51 Were subsequent dispel immediately succeeding session, Means introduced H.R. 6369, (1982), attempted restore OBRA. failed. bill, pre-OBRA "countable equaled "gross minus disregards." 97-587, Later, posed, 1967 expenses—such day costs, 12. listed components "disposable (wages benefits)." recounted need: disregarded: (3) month (any care, income)." Each statements expenses; none admits constituted 52 understandings actions one, eschew guidance offer. Consumer Product Safety Comm'n GTE Sylvania, Inc., 447 102, 117-120, 13, 100 2051, 2060-2062, 64 766 (1980); Cannon University Chicago, 441 677, 686-687, 7, 99 1946, 1952, 60 560 (1979). Here, whose thick fight preceding session reveal common ground grouped subsume. most recent confirmation intentions came 2625, amends very Specifically noting conflicting conclusions petition leaves construction. 98-861, 1394-1395 (1984), 697, 2082-2083. echoed explanation: 54 historically interpreted gross, net, earnings. 55 agrees approved amendments. notes Office estimated expected derived followed shared earnings." Finance, 98th vol. 982 (Senate 98-169, 1984). 56 reiterated immediate predecessor's words deed—not express "histori[c] interpret[ation]" sufficient resolving disagreement amend legislation, said, "[c]larif[y] law," Print, 79, prospective statute,11 carries considerable retrospective weight. Fidelity Loan Assn. De la Cuesta, 458 141, 166-167, 102 3014, 3028-3029, 73 664 (1982); Red Lion Broadcasting Co. FCC, 395 367, 380-381, 89 1794, 1801, 371 (1969); FHA Darlington, 358 84, 90, 145, 132 (1958). contemporaneous evidence 1982 removes doubt. 57 early days regularly certainly All compels 58 amici offered reasons wrong. point value, pecuniary inherent, search long-term discouraging families' efforts economic independence. We, sit wisdom course set. Our task determine identified correctly. satisfied she did. 59 ordered. Manual Policy Procedure, Standards 44-113.21 (Nov.1981). 83-6769; 83-6168; Bell Massinga, 721 131 (CA4 83-6269. afforded "broad discretion level benefits." (1974); 318-319, 2133-2134, establishes "which deemed maintain hypothetical subsistence level," determines "how given, is, 'level benefits' paid," Rosado Wyman, 397, 408, 1207, 1216, 442 Both comparing If "is difference." 254, entire difference, instead dollar maxima 408-409, 1215-1216. California, respondent here Rule 19.6, filed, others, brief 24, 25, Agency, Board, Letter 30, 1942) ("It person food like"); 28, 291 (Mar. 11, 1957), (1957). 37, worded follows: "A services "(7) except clause (8), shall, relative (8) (7), agency— "(A) respect disregard— "(ii) [or] receiving ., provided: paragraph children. "(8)(A) (living child) determination, (or prescribe engaged full-time throughout month); "(iii) child, relative, (ii), equal (for .) exceed "(iv) subparagraph thereof .; "(B) (with month) "(II) (A)(iv) consecutive months, he continues receive thereafter expiration twelve aid." 1970. Connecticut Dept. HEW, 448 209, 216 (CA2 1971) (treating (1970) nonexhaustive 402(a)(7)). "are easily verified," 1124, stub records. "[n]et replaced "[i]ncome 233.20(a)(3)(ii)(D) (D). 35586, 35592, 35600 text 35592 explains correct "misinterpret[ations]" phrase version. Heckler Turner, 1306-1307, 3-4, (REHNQUIST, J.,

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