(3) Failure to satisfy minimum participation rates (A) In general If the Secretary determines that a State to which a grant is made under section 603 of this title for a fiscal year has failed to comply with section 607(a) of this title for the fiscal year, the Secretary shall reduce the grant payable to the State under section 603(a)(1) of this title for the immediately succeeding fiscal year by an amount equal to the applicable percentage of the State family assistance grant. (B) “Applicable percentage” defined As used in subparagraph (A), the term “applicable percentage” means, with respect to a State— (i) if a penalty was not imposed on the State under subparagraph (A) for the immediately preceding fiscal year, 5 percent; or (ii) if a penalty was imposed on the State under subparagraph (A) for the immediately preceding fiscal year, the lesser of— (I) the percentage by which the grant payable to the State under section 603(a)(1) of this title was reduced for such preceding fiscal year, increased by 2 percentage points; or (II) 21 percent. (C) Penalty based on severity of failure The Secretary shall impose reductions under subparagraph (A) with respect to a fiscal year based on the degree of noncompliance, and may reduce the penalty if the noncompliance is due to circumstances that caused the State to become a needy State (as defined in section 603(b)(5) of this title ) during the fiscal year or if the noncompliance is due to extraordinary circumstances such as a natural disaster or regional recession. The Secretary shall provide a written report to Congress to justify any waiver or penalty reduction due to such extraordinary circumstances.
42 USC § 609(a)(3)
None identified, default scope is assumed to be the parent (part A) of this section.