(1) Determining net income in AFDC involves a series of steps. Certain types of income are not counted under certain circumstances. This section outlines the steps involved in determining net income and explains criteria for excluding or disregarding income. The application of sanctions in income penalty situations is also described.

Exclusion of income means the income is not counted (excluded) in determining financial eligibility based on the Gross Income Standard (GIS) test or in computing the grant amount. Examples of excluded income include relocation assistance payments, WIC benefits, reimbursements for other than basic living expenses, etc. Exclusion of a child recipient's earnings for six months in a calendar year is an example of a temporary exclusion. Certain student status may be required for this exclusion (See § 1240-01-03-.19(1) 2 (i)).

Disregards are only applied to earned income. Certain types of disregards are applied only after a budgeting test or a technical factor is met.

(a) Disregard of earnings of a child recipient who is a full-time student or part-time student and not employed full-time if the GIS test is met. The child's earnings plus the family's gross countable income are computed in this test.

(b) Earned income disregards of the work allowance and child/dependent care.

(c) $30 disregard from each individual's earnings for 12 consecutive months if the individual is an active recipient or an applicant whose net income meets the Consolidated Need Standard (CNS) test or who has received AFDC in one of the preceding four months, and

(d) One third (1/3) Disregard of the remainder from each individual's earnings for four consecutive months if the same criteria is met as given for the $30 Disregard.

The following is an outline of steps used in determining net income. The requirements in each step must be met before progressing to the next step.

Steps in Determining Net Income - AFDC Only

Step 1 - Exclude "Excludable Income" (See Section 1240-01-04-.15).

Step 2 - Compare total countable gross income (earned and unearned) to the GIS (185 % of CNS) for the assistance unit size.

Step 3 - Disregard earnings of a child recipient with student status (full-time student or part-time student not employed full-time).

Step 4 - Apply applicable disregards to earnings of each individual in this order:

- Work Allowance of $75 for full or part-time employment.

- Child/Dependent Care deduction up to $160 per child/dependent per month.

Step 5 .For applicants, compare net earnings plus other income to the CNS for assistance unit size.

Step 6 - For recipients and applicants (meeting the criteria in Step 5 or who received assistance in at least one of the four preceding months) and are entitled according to the consecutive month rules and the 12 month rules, disregard from each individual's earnings:

- $30 of net earnings for up to 12 consecutive months and - 1/3 of the remainder for up to 4 consecutive months

Step 7 - Add net earned income to total countable unearned income for all members of the assistance unit.

(2) Criteria for the $30 Disregard and the 1/3 Disregard. The $30 and/or 1/3 are two different disregards. There are two different lengths of time for applying them but other criteria are the same for both.

(a) Consecutive Months Rule for $30 Disregard. The $30 disregard is applied to the earnings of each eligible individual for a maximum of twelve (12) consecutive months.

(b) Consecutive Months Rule for 1/3 Disregard. The 1/3 disregard is applied to the remainder (after the $30 disregard) of each eligible individual's earnings for a maximum of four (4) consecutive months.

(c) Interruption of the receipt of the $30 and/or 1/3 disregards starts the count of the consecutive months again except:

1. In penalty situations whereby the disregard(s) is/are not applied but counts as one of the consecutive months (See Penalties in following section) or

2. In suspension of grant in non-penalty situations. The suspension does not interrupt accumulation of the consecutive months, nor does it count as one of the consecutive months.

(d) Twelve Month Rule. An individual who has received the appropriate number of consecutive months of the $30 and/or 1/3 disregards can not receive the disregard(s) again until she/he has been off AFDC or AFDC-MO for twelve (12) consecutive months.

(e) Applicants. The $30 and 1/3 disregards can be applied to the earnings of an applicant if:

1. She/he was an AFDC recipient (including AFDC-MO) in at least one of the four months preceding the month of application and is eligible for the disregard according to consecutive months rules and the twelve month rule in (a) through (d) above; or

2. The assistance unit's income without the disregard is less than the consolidated standard and he/she is eligible for the disregard based on the criteria for the $30 disregard and the 1/3 disregard.

(3) For applicants/recipients receiving earned income from regular employment or on-the-job training through WIN (Section 432(b)(1) of the Act), the earned income disregards are applied in the same amounts and in the same order as for other applicants/recipients.

(4) Earned Income Penalties. Deem the $30 and/or 1/3 disregards as received the first month a change could be made effective if timely reported whenever one of the conditions listed below occurs. The $30 and/or 1/3 disregards as one of the twelve/four consecutive months. The following are penalty situations during an individual's receipt of AFDC or AFDC-MO (due to the $10 limitation):

(a) The individual, without good cause, reduced earnings or terminated or refused employment. Good cause includes, but is not limited to, unsafe or unhealthily working conditions, pay at less than the federal minimum wage, lack of adequate child care, lack of transportation, etc.

(b) The individual failed, without good cause, to make a timely report of income causing an overpayment. Good cause circumstances are instances such as severe illness, accident, hospitalization, natural disaster, etc. which prevent the client from making a timely report.

(c) The individual voluntarily requests termination of assistance for the primary purpose of avoiding receipt of the $30 and/or 1/3 disregards for the appropriate number of consecutive months.

(5) A deduction for payments for dependent care cannot be made when care is provided by:

(a) The parent, stepparent, or guardian of a child;

(b) A person who is a member of the assistance unit of which the dependent is a member; or

(c) The spouse of the dependent.

(Original rule filed August 15, 1980; effective September 29, 1980. Repeal and new rule filed December 10, 1981; effective January 25, 1982. Amendment filed January 7, 1985; effective February 6, 1985.)

Authority: T.C.A. §§ 14-8-106, 14-27-104; 7 CFR 273.99; 45 CFR 233.20; PL 97-35, PL 98-369 §§ 2622, 2623, 2642.

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