[Code of Federal Regulations]
[Title 7 Volume 4]
[Revised as of January 1, 2001]
From the U.S. Government Printing Office via GPO Access
[CITE: 7CFR278.1]

[Page 919-929]
 
                          TITLE 7--AGRICULTURE
 
    CHAPTER II--FOOD AND NUTRITION SERVICE, DEPARTMENT OF AGRICULTURE
 
PART 278--PARTICIPATION OF RETAIL FOOD STORES, WHOLESALE FOOD CONCERNS AND INSURED FINANCIAL INSTITUTIONS--Table of Contents
 
Sec. 278.1  Approval of retail food stores and wholesale food concerns.

    (a) Application. Any firm desiring to participate or continue to be 
authorized in the program shall file an application as prescribed by 
FNS. Such an application shall contain information which will permit a 
determination to be made as to whether such an applicant qualifies, or 
continues to qualify, for authorization under the provisions of the 
program. FNS may require that a retail food store or wholesale food 
concern be visited to confirm eligibility for program participation 
prior to such store or concern being authorized or reauthorized in the 
program.

[[Page 920]]

Required visits shall be conducted by an authorized employee of the 
Department, a designee of the Secretary, or an official of the State or 
local government designated by the Secretary. FNS shall approve or deny 
the application within 45 days of receipt of a completed application. A 
completed application means that all information (other than an on-site 
visit) that FNS deems necessary in order to make a determination on the 
firm's application has been received. This information includes, but is 
not limited to, a completed application form, all information and 
documentation from the applicant, as well as any needed third-party 
verification and documentation.
    (b) Determination of authorization. An applicant shall provide 
sufficient data and information on the nature and scope of the firm's 
business for FNS to determine whether the applicant's participation will 
further the purposes of the program. Upon request, an applicant shall 
provide documentation to FNS to verify information on the application. 
Such information may include, but is not limited to, State and local 
business licenses, Social Security cards, drivers' licenses, 
photographic identification cards, bills of sale, deeds, leases, sales 
contracts, State certificates of incorporation, sales records, invoice 
records and business-related tax records. Retail food stores and 
wholesale food concerns and other entities eligible for authorization 
also shall be required to sign a release form which will authorize FNS 
to verify all relevant business related tax filings with appropriate 
agencies. In addition, they must obtain corroborating documentation from 
other sources as deemed necessary to ensure the legitimacy of applicant 
firms, as well as the accuracy of information provided by the stores and 
concerns. Failure to comply with any request for information or failure 
to sign a written release form shall result in denial of the application 
for authorization or withdrawal of a firm or concern from the program. 
In determining whether a firm qualifies for authorization, FNS shall 
consider all of the following:
    (1) The nature and extent of the food business conducted by the 
applicant. (i) Retail food stores which sell primarily food for home 
preparation and consumption and in which one or more staple food items, 
as defined in Sec. 271.2, make up more than 50 percent of eligible food 
sales shall normally be considered to have food business of a nature and 
extent which will further the purposes of the program. These stores 
shall include: Full-line grocery stores; convenience stores; stores 
which sell meat, poultry, or, fish; stands which sell agricultural 
commodities; farmers markets; milk routes; bread routes; day-old bread 
stores; bakeries which sell bread; and nonprofit cooperative food-
purchasing ventures which are properly licensed to sell food in the 
state and locality in which they are operating.
    (ii) Firms whose primary business is not the sale of food for home 
preparation and consumption, but who have recognized grocery departments 
in which staple foods make up more than 50 percent of eligible food 
sales, shall normally be considered to have food business of a nature 
and extent which will qualify the store for participation in the 
program. In determining whether a store's staple food business is 
sufficient for the store to qualify for participation in the program, 
the FNS officer in charge shall also consider:
    (A) The volume of staple food business the store does;
    (B) The amount of sales of staple foods compared to other business 
conducted by the firm; and
    (C) The availability of other authorized food stores in the area.
    (iii) Wholesale food concerns whose primary business is the sale of 
eligible food at wholesale, and in which one or more staple food items, 
as defined in Sec. 271.2, make up more than 50 percent of eligible food 
sales, shall normally be considered to have adequate food business for 
the purposes of the program.
    (iv) No co-located wholesale/retail food concern with 50 percent or 
less of its total sales in retail food sales may be authorized to redeem 
food stamps unless it meets the criteria applicable to all retail firms 
and:
    (A) It is a legitimate retail food outlet. Indicators which may 
establish to FNS that a firm is a legitimate retail food outlet include, 
but are not limited to, the following:

[[Page 921]]

    (1) The firm's marketing structure; as may be determined by factors 
such as, but not limited to:
    (i) A retail business license;
    (ii) The existence of sales tax records documenting retail food 
sales; and/or separate bookkeeping records; and
    (2) The way the firm holds itself out to the public as evidenced by 
factors such as, but not limited to:
    (i) The layout of the retail sales space;
    (ii) The use of retail advertisements;
    (iii) The posting of retail prices;
    (iv) Offering specials to attract retail customers;
    (v) Hours of operation for retail business;
    (vi) Parking area for retail customers; and
    (B) It has total annual retail food sales of at least $250,000; or
    (C) It is a legitimate retail outlet but fails to meet the 
requirements in paragraph (b)(1)(iv)(B) of this section, and not 
authorizing such a firm would cause hardship to food stamp households. 
Hardship would occur in any one of the following circumstances:
    (1) Program recipients would have difficulty in finding authorized 
firms to accept their coupons for eligible food;
    (2) Special ethnic foods would not otherwise be available to 
recipients; or
    (3) Recipients would be deprived of an opportunity to take advantage 
of unusually low prices offered by the firm if no other authorized firm 
in the area offers the same types of food items at comparable prices.
    (2) The volume of coupon business which FNS may reasonably expect 
the firm to do. The FNS officer in charge may consider such factors as 
the location of a store and previous food sales volumes in evaluating 
the ability of an applicant firm to attract food stamp business.
    (3) The business integrity and reputation of the applicant. FNS 
shall deny the authorization of any firm from participation in the 
program for a period of time as specified in paragraph (k) of this 
section based on consideration of information regarding the business 
integrity and reputation of the firm as follows:
    (i) Conviction of or civil judgment against the owners, officers or 
managers of the firm for:
    (A) Commission of fraud or a criminal offense in connection with 
obtaining, attempting to obtain, or performing a public or private 
agreement or transaction;
    (B) Commission of embezzlement, theft, forgery, bribery, 
falsification or destruction of records, making false statements, 
receiving stolen property, making false claims, or obstruction of 
justice; or
    (C) Violation of Federal, State and/or local consumer protection 
laws or other laws relating to alcohol, tobacco, firearms, controlled 
substances, and/or gaming licenses;
    (ii) Administrative findings by Federal, State or local officials 
that do not give rise to a conviction or civil judgment but for which a 
firm is removed from such a program, or the firm is not removed from the 
program but FNS determines a pattern exists (3 or more instances) 
evidencing a lack of business integrity on the part of the owners, 
officers or managers of the firm;
    (iii) Evidence of an attempt by the firm to circumvent a period of 
disqualification, a civil money penalty or fine imposed for violations 
of the Food Stamp Act and program regulations;
    (iv) Previous Food Stamp Program violations administratively and/or 
judicially established as having been committed by owners, officers, or 
managers of the firm for which a sanction had not been previously 
imposed and satisfied;
    (v) Evidence of prior Food Stamp Program violations personally 
committed by the owner(s) or the officer(s) of the firm at one or more 
units of a multi-unit firm, or evidence of prior Food Stamp Program 
violations committed by management at other units of multi-unit firms 
which would indicate a lack of business integrity on the part of 
ownership and for which sanctions had not been previously imposed and 
satisfied; or
    (vi) Commission of any other offense indicating a lack of business 
integrity or business honesty of owners, officers or managers of the 
firm that seriously and directly affects the present responsibility of a 
person.

[[Page 922]]

    (4) Bonding for firms with previous sanctions. (i) If the applicant 
firm has been sanctioned for violations of this part, by withdrawal or 
disqualification from program participation, or by a civil money 
penalty, the FNS officer-in-charge shall, as a condition of future 
authorization, require the applicant to present a collateral bond which:
    (A) Is issued by a bonding agent recognized under the law of the 
State in which the applicant is conducting business, and which is 
represented by a negotiable certificate only.
    (B) Is payable to the Food and Nutrition Service, U.S. Department of 
Agriculture;
    (C) Cannot be canceled by the bonding agent for non-payment of the 
premium by the applicant;
    (D) Has a face value of $1,000 or an amount equal to ten percent of 
the average monthly coupon redemption volume of the applicant for the 
immediate twelve months prior to the effective date of the most recent 
sanction which necessitated the bond, whichever amount is greater;
    (E) Is valid at all times during which the firm is authorized to 
participate in the program; and
    (F) Remains in the custody of the officer-in-charge unless released 
to the applicant as a result of the withdrawal of the applicant's 
authorization, without a fiscal claim established against the applicant 
by FNS.
    (ii) Furnishing a collateral bond shall not eliminate or reduce a 
firm's obligation to pay in full any civil money penalty or previously 
determined fiscal claim which may have been assessed against the firm by 
FNS prior to the time the bond was required by FNS, and furnished by the 
firm. A firm which has been assessed a civil money penalty shall pay FNS 
as required, any subsequent fiscal claim asserted by FNS. In such cases 
a collateral bond shall be furnished to FNS with the payment, or a 
schedule of intended payments, of the civil money penalty. A buyer or 
transferee shall not, as a result of the transfer or purchase of a 
disqualified firm, be required to furnish a bond prior to authorization.
    (5) Taxpayer identification numbers. At the time of an initial 
request for authorization as well as reauthorization, an applicant firm 
must provide its employer identification number and social security 
numbers as described below:
    (i) Employer Identification Number. The firm must provide its 
employer identification number (EIN) if one has been assigned to the 
firm by the Internal Revenue Service. The authority to request EINs and 
the guidelines for requesting EINs are set forth in section 6109(f) of 
the Internal Revenue Code of 1986 and Treas. Reg. Sec. 301.6109-2 (26 
CFR 301.6109-2).
    (ii) Social Security Number. In addition to the EIN, the firm must 
provide the social security numbers (SSNs) of the following individuals:
    (A) The SSN of an owner of a sole proprietorship.
    (B) The SSNs of general partners of firms which are partnerships.
    (C) The SSNs of up to five of the largest shareholders (owners) of 
privately owned corporations. (For purposes of this section, a privately 
owned corporation is one which has shares or stock that are not traded 
on a stock exchange or available for purchase by the general public.)
    (6) Other factors. Any other factors which the FNS officer in charge 
considers pertinent to the application under consideration.
    (c) Wholesalers. A wholesale food concern may be authorized to 
accept coupons only from a specified customer or customers if it meets 
the requirements of paragraphs (a) and (b) of this section, and FNS 
determines it is required as a redemption outlet:
    (1) For one or more specified authorized drug addict or alcoholic 
treatment programs,
    (2) For one or more specified authorized group living arrangements,
    (3) For one or more specified authorized shelters for battered women 
and children,
    (4) For one or more specified authorized nonprofit cooperative food-
purchasing ventures,
    (5) For one or more specified authorized public or private nonprofit 
homeless meal providers, or
    (6) For one or more specified authorized retail food stores which 
are without access to an insured financial institution which will redeem 
their coupons.

[[Page 923]]


No firm may be authorized to accept and redeem coupons concurrently as 
both a retail food store and a wholesale food concern. Authorizations of 
wholesale food concerns granted prior to January 28, 1982 shall expire 
on May 31, 1982. Wholesale food concerns desiring to participate in the 
program after that date must reapply for authorization in accordance 
with the provisions of this paragraph.
    (d) Meal services. A meal delivery service or communal dining 
facility desiring to prepare and serve meals to households eligible to 
use coupons for those meals in addition to meeting the requirements of 
paragraphs (a) and (b) of this section, must establish that:
    (1) It is recognized as a tax exempt organization by the Internal 
Revenue Service; or
    (2) It is a senior citizens' center or apartment building occupied 
primarily by elderly persons and SSI recipients, and their spouses; or
    (3) It is a restaurant operating under a contract with a State or 
local agency to prepare and serve (or deliver) low-cost meals to 
homeless persons, elderly persons and SSI recipients (and in the case of 
meal delivery services, to elderly persons or handicapped persons) and 
their spouses. Such a facility must have more than 50 percent of its 
total sales in food. The contracts of restaurants must specify the 
approximate prices which will be charged.
    (e) Treatment programs. Drug addict or alcoholic treatment and 
rehabilitation programs wishing to redeem through wholesalers food 
stamps received from or on behalf of their participants shall in 
addition to meeting the requirements of paragraphs (a), (b) and (d)(1) 
of this section, be under Part B of Title XIX of the Public Health 
Service Act (42 U.S.C. 300x et seq.). Approval to participate is 
automatically withdrawn once the treatment and rehabilitation program no 
longer meets the criteria which would make it eligible for funding under 
part B of Title XIX (in accordance with the definition in Drug addiction 
or alcoholic treatment and rehabilitation program in Sec. 271.2).
    (f) Group living arrangements. FNS shall authorize as retail food 
stores those group living arrangements wishing to redeem coupons 
directly through wholesalers. The group living arrangement must, in 
addition to meeting requirements of paragraphs (a), (b), and (d)(1) of 
this section, be certified by the appropriate agency or agencies of the 
State under regulations issued under section 1616(e) of the Social 
Security Act or under standards determined by the Secretary to be 
comparable to standards implemented by appropriate State agencies under 
section 1616(e) of the Social Security Act. Approval to participate is 
automatically cancelled at any time that a program loses its 
certification from the State agency or agencies.
    (g) Shelters for battered women and children. FNS shall authorize as 
retail food stores those shelters for battered women and children 
wishing to redeem coupons directly through wholesalers. The shelter must 
be public or private nonprofit, as defined in paragraph (d)(1) of this 
section, and meet the requirements of paragraphs (a) and (b) of this 
section. Shelters which also serve other groups of individuals must have 
a portion of the facility set aside on a long-term basis to shelter 
battered women and children. Also required is that the shelter be a 
residence which serves meals or provides food to its residents.
    (h) House-to-house trade routes. FNS shall, in consultation with the 
Department's Office of Inspector General, determine those locations 
where the operation of trade routes damages the program's integrity. FNS 
may limit the authorization of house-to-house trade routes to those 
trade routes whose services are required by participating households in 
such areas in order to obtain food. The FNS Officer in Charge, in 
deciding whether households in such areas require a trade route's 
services, shall consider the volume of food business the trade route 
does and the availability of alternate sources of comparable food. An 
FNS official shall inspect any applicant trade route's vehicle to ensure 
that the trade route is a retail food store before authorizing it to 
accept coupons. An FNS official may require, as a condition of 
continuing authorization, that the trade route vehicle be reinspected 
semiannually to ensure that it continues to be a retail food store.

[[Page 924]]

    (i) Private homeless meal providers. FNS may authorize as retail 
food stores those restaurants which contract with the appropriate State 
agency to serve meals to homeless persons at ``concessional'' (low or 
reduced) prices. Restaurants shall be responsible for obtaining 
contracts with the appropriate State agency as defined in Sec. 272.9 and 
for providing a copy of the contract to FNS at the time it applies for 
authorization to accept food stamp benefits. Contracts must specify the 
approximate prices which will be charged. Examples of reduced prices 
include, but are not limited to, a percentage reduction, a set dollar 
amount reduction, a daily special meal, or an offer of a free food item 
or beverage (excluding alcoholic beverages).
    (j) Authorization. Upon approval, FNS shall issue a nontransferable 
authorization card to the firm. The authorization card shall be valid 
only for the time period for which the firm is authorized to accept and 
redeem food stamp benefits. The authorization card shall be retained by 
the firm until such time as the authorization period has ended, 
authorization in the program is superseded, or the card is surrendered 
or revoked as provided in this part. All firms will be authorized in the 
program for a period of 5 years. The specification of an authorization 
period in no way precludes FNS from periodically requesting information 
from a firm for purposes of reauthorization in the program or from 
withdrawing or terminating the authorization of a firm in accordance 
with this part.
    (k) Denying authorization. FNS shall deny the application of any 
firm if it determines that:
    (1) The firm does not qualify for participation in the program as 
specified in paragraph (b), (c), (d), (e), (f), (g) or (h) of this 
section; or
    (2) The firm has failed to meet the eligibility requirements for 
authorization under Criterion A or Criterion B, as specified in the Food 
Stamp Act of 1977, as amended; or, for co-located wholesale/retail 
firms, the firm fails to meet the requirements of paragraph (b)(1)(iv) 
of this section. Any firm that has been denied authorization on these 
bases shall not be eligible to submit a new application for 
authorization in the program for a minimum period of six months from the 
effective date of the denial;
    (3) The firm has been found to lack the necessary business integrity 
and reputation to further the purposes of the program. Such firms shall 
be denied authorization in the program for the following period of time:
    (i) Firms for which records of criminal conviction or civil judgment 
exist that reflect on the business integrity of owners, officers, or 
managers as stipulated in Sec. 278.1(b)(3)(i) shall be denied 
authorization permanently;
    (ii) Firms which have been officially removed from other Federal, 
State or local government programs through administrative action shall 
be denied for a period equivalent to the period of removal from any such 
programs; or, if the firm is not removed from the program, but FNS 
determines a pattern (3 or more instances) exists evidencing a lack of 
business integrity on the part of the owners, officers or managers of 
the firm, such firm shall be denied for a one year period effective from 
the date of denial;
    (iii) Firms for which evidence exists of an attempt to circumvent a 
period of disqualification, a civil money penalty, or fine imposed for 
violations of the Food Stamp Act of 1977, as amended, and program 
regulations shall be denied for a period of three years from the 
effective date of denial;
    (iv) Firms for which evidence exists of prior Food Stamp Program 
violations by owners, officers, or managers of the firm for which a 
sanction had not been previously imposed and satisfied shall be denied 
for a period of time equivalent to the appropriate disqualification 
period for such previous violations, effective from the date of denial;
    (v) Firms for which evidence exists of prior Food Stamp Program 
violations at other units of multi-unit firms as specified in 
Sec. 278.1(b)(3)(v) for which a sanction had not been previously imposed 
and satisfied shall be denied for a period of time equivalent to the 
appropriate disqualification period for such previous violations, 
effective from the date of denial;
    (vi) Firms for which any other evidence exists which reflects 
negatively on the business integrity or business

[[Page 925]]

honesty of the owners, officers or managers of the firm as specified in 
Sec. 278.1(b)(3)(vi) shall be denied for a period of one year from the 
effective date of denial;
    (4) The firm has filed an application that contains false or 
misleading information about a substantive matter, as specified in 
Sec. 278.6(e). Such firms shall be denied authorization for the periods 
specified in Sec. 278.6(e)(1) or Sec. 278.6(e)(3);
    (5) The firm's participation in the program will not further the 
purposes of the program;
    (6) The firm has been found to be circumventing a period of 
disqualification or a civil money penalty through a purported transfer 
of ownership;
    (7) The firm has failed to pay in full any fiscal claim assessed 
against the firm under Sec. 278.7, any fines assessed under 
Secs. 278.6(l) or 278.6(m), or a transfer of ownership civil money 
penalty assessed under Sec. 278.6(f). The FNS officer in charge shall 
issue a notice to the firm by certified mail or personal service of any 
authorization denial and shall advise the firm that it may request 
review of that determination.
    (l) Withdrawing authorization. (1) FNS shall withdraw the 
authorization of any firm authorized to participate in the program for 
any of the following reasons.
    (i) The firm's continued participation in the program will not 
further the purposes of the program;
    (ii) The firm fails to meet the specifications of paragraph (b), 
(c), (d), (e), (f), (g), or (h) of this section;
    (iii) The firm fails to meet the requirements for eligibility under 
Criterion A or B, as specified in the Food Stamp Act of 1977, as 
amended, or, for co-located wholesale/retail firms, the firm fails to 
meet the requirements of paragraph (b)(1)(iv) of this section, for the 
time period specified in paragraph (k)(2) of this section;
    (iv) The firm fails to maintain the necessary business integrity to 
further the purposes of the program, as specified in paragraph (b)(3) of 
this section. Such firms shall be withdrawn for lack of business 
integrity for periods of time in accordance with those stipulated in 
paragraph (k)(3) of this section for specific business integrity 
findings;
    (v) The firm has failed to pay in full any fiscal claim assessed 
against the firm under Sec. 278.7 or any fines assessed under 
Secs. 278.6(l) or 278.6(m) or a transfer of ownership civil money 
penalty assessed under Sec. 278.6(f); or
    (vi) The firm has failed to pay fines assessed under Sec. 278.6(l) 
or Sec. 278.6(m); or
    (vii) The firm is required under State and/or local law to charge 
tax on eligible food purchased with coupons or to sequence or allocate 
purchases of eligible foods made with coupons and cash in a manner 
inconsistent with 272.1 of these regulations.
    (2) The FNS officer in charge shall issue a notice to the firm by 
certified mail or personal service to inform the firm of the 
determination and of the review procedure. FNS shall remove the firm 
from the program if the firm does not request review within the period 
specified in Sec. 279.5.
    (m) Refusal to accept correspondence or to respond to inquiries. FNS 
may withdraw or deny the authorization of any firm which:
    (1) Refuses to accept correspondence from FNS;
    (2) Fails to respond to inquiries from FNS within a reasonable time; 
or
    (3) Cannot be located by FNS with reasonable effort.
    (n) Periodic reauthorization. At the request of FNS a retail food 
store or wholesale food concern will be required to undergo a periodic 
reauthorization determination by updating any or all of the information 
on the firm's application form. Failure to cooperate in the 
reauthorization process will result in withdrawal of the firm's approval 
to participate in the program.
    (o) Applications containing false information. The filing of any 
application containing false or misleading information may result in the 
denial of approval for participation in the program, as specified in 
paragraph (k) of this section, or disqualification of a firm from 
participation in the program, as specified in Sec. 278.6, and may 
subject the firm and persons responsible to civil or criminal action.
    (p) Administrative review. Any withdrawal or denial of authorization 
to participate in the program shall be subject to administrative review 
under Sec. 278.8.

[[Page 926]]

    (q) Use and disclosure of information provided by firms. With the 
exception of EINs and SSNs, the contents of an initial application, or 
other information required to be submitted by retail food stores and 
wholesale food concerns to determine continued eligibility, such as 
ownership information and sales and redemption data, may be disclosed to 
and used by Federal and State law enforcement and investigative agencies 
for the purpose of administering or enforcing the Food Stamp Act or any 
other Federal or State law, and the regulations issued under the Food 
Stamp Act or such other law. Such disclosure and use shall also include 
companies or individuals under contract for the operation by, or on 
behalf of FNS to accomplish an FNS function. Such purposes include the 
audit and examination of such information by the Comptroller General of 
the United States authorized by any other provision of law. Any person 
who publishes, divulges, discloses, or makes known in any manner or to 
any extent not authorized by Federal law or regulations any information 
obtained under this paragraph shall be fined not more than $1,000 or 
imprisoned not more than 1 year, or both. Safeguards with respect to 
employee identification numbers (EINs) are contained in paragraph (q)(2) 
of this section. Safeguards with respect to Social Security numbers 
(SSNs) are contained in paragraph (q)(3) of this section.
    (1) Criteria for requesting information. FNS shall determine what 
information can be disclosed and which government agencies have access 
to that information based on the following criteria:
    (i) Federal and State law enforcement or investigative agencies or 
instrumentalities administering or enforcing specified Federal and State 
laws, or regulations issued under those laws, have access to certain 
information maintained by FNS. Such agencies or instrumentalities must 
have among their responsibilities the enforcement of law or the 
investigation of suspected violations of law. However, only certain 
Federal entities have access to information involving SSNs and EINs in 
accordance with paragraph (q)(1)(ii) of this section;
    (ii) Except for SSNs and EINs, information provided to FNS by 
applicants and authorized firms participating in the FSP may be 
disclosed and used by qualifying Federal and State entities in 
accordance with paragraph (q)(1)(i) of this section. The disclosure of 
SSNs and EINs is limited only to qualifying Federal agencies or 
instrumentalities which otherwise have access to SSNs and EINs based on 
law and routine use. Release of information under this paragraph shall 
be limited to information relevant to the administration or enforcement 
of the specified laws and regulations, as determined by FNS;
    (iii) Requests for information must be submitted in writing, 
including electronic communication, and must clearly indicate the 
specific provision of law or regulations which would be administered or 
enforced by access to requested information, and the relevance of the 
information to those purposes. If a formal agreement exists between FNS 
and another agency or instrumentality, individual written requests may 
be unnecessary. FNS may request additional information if needed to 
clarify a request;
    (iv) Disclosure by FNS is limited to: Information about applicant 
stores and concerns with applications on file; information about 
authorized stores participating in the FSP; and information about 
unauthorized entities or individuals illegally accepting or redeeming 
food stamps;
    (v) Requests for information disclosure by FNS may involve a 
specific store or concern, or some or all stores and concerns covered by 
paragraph (q)(1)(iv) of this section. In addition, FNS may sign 
agreements allowing certain government entities direct access to 
appropriate FNS data, with access to EINs and SSNs limited only to other 
Federal agencies and instrumentalities that otherwise have access to 
such numbers.
    (2) Employer identification numbers. (i) The Department may have 
access to the EINs obtained pursuant to paragraph (b)(5) of this section 
for the purpose of establishing and maintaining a list of the names and 
EINs of the stores and concerns for use in determining those applicants 
who previously have

[[Page 927]]

been sanctioned or convicted under sections 12 and 15 of the Food Stamp 
Act of 1977, as amended, (7 U.S.C. 2021 or 2024). The Department also 
may share EINs with other Federal agencies and instrumentalities that 
otherwise have access to EINs if the Department determines that such 
sharing would assist in verifying and matching such information against 
information maintained by such other agency or instrumentality. Any such 
information shared pursuant to this paragraph may be used by the 
Department or such other agency or instrumentality for the purpose of 
effective administration and enforcement of the Food Stamp Act of 1977, 
as amended, or for the purpose of investigating violations of other 
Federal laws or enforcing such laws. See Treas. Reg. Sec. 301.6109-2 (b) 
and (c) (26 CFR 301.6109-2 (b) and (c)).
    (ii) The only persons permitted access to EINs obtained pursuant to 
paragraph (b) of this section are officers and employees of the United 
States, who otherwise have access and whose duties or responsibilities 
require access to the EINs for the administration or enforcement of the 
Food Stamp Act of 1977, as amended, or for the purpose of investigating 
violations of other Federal laws or enforcing such laws. See Treas. Reg. 
Sec. 301.6109-2(d)(1) (26 CFR 301.6109-2(d)(1)).
    (iii) The Department or any agency or instrumentality of the United 
States shall provide for any additional safeguards that the Secretary of 
the Treasury determines to be necessary or appropriate to protect the 
confidentiality of the EINs. The Department may also provide for any 
additional safeguards to protect the confidentiality of EINs so long as 
these safeguards are consistent with any safeguards determined by the 
Secretary of the Treasury to be necessary or appropriate. See Treas. 
Reg. Sec. 301.6109-2(d)(2) (26 CFR 301.6109-2(d)(2)).
    (iv) EINs maintained by the Department or maintained by any agency 
or instrumentality of the United States pursuant to Sec. 278.1(b)(5) are 
confidential. Except as provided in paragraph (q)(2)(ii) of this section 
above, no officer or employee of the United States who has or had access 
to any such EIN may disclose that number in any manner. For purposes of 
paragraph (q)(2)(iv) of this section the term officer or employee 
includes a former officer or employee. See Treas. Reg. Sec. 301.6109-
2(e) (26 CFR 301.6109(e)).
    (v) Sections 7213(a) (1), (2) and (3) of the Internal Revenue Code 
of 1986 apply with respect to the unauthorized, willful disclosure to 
any person of EINs obtained by the Department pursuant to 
Sec. 278.1(b)(5) in the same manner and to the same extent as sections 
7213(a) (1), (2) and (3) apply with respect to unauthorized disclosure 
of returns and return information described in those sections. Section 
7213(a)(4) of the Internal Revenue Code of 1986 applies with respect to 
the willful offer of any item of material value in exchange for any EIN 
obtained by the Department pursuant to Sec. 278.1(b)(5) in the same 
manner and to the same extent as section 7213(a)(4) applies with respect 
to offers (in exchange for any return or return information) described 
in that section. See Treas. Reg. Sec. 301.6109-2(f) (26 CFR 301.6109-
2(f)).
    (3) Social Security numbers. (i) The Department may have access to 
SSNs obtained pursuant to paragraph (b)(5) of this section for the 
purpose of establishing and maintaining a list of names and SSNs of 
stores and concerns for use in determining those applicants who 
previously have been sanctioned or convicted under section 12 or 15 of 
the Food Stamp Act of 1977, as amended, (7 U.S.C. 2021 or 2024). The 
Department may use this determination of sanctions and convictions in 
administering sections 12 and 15 of the Food Stamp Act of 1977, as 
amended, (7 U.S.C. 2018, 2021). The Department also may share SSNs with 
other Federal agencies and instrumentalities if the Department 
determines that such sharing would assist in verifying and matching such 
information against information maintained by the Department or such 
other agency or instrumentality. Any such information shared pursuant to 
this paragraph shall be used for the purpose of effective administration 
and enforcement of the Food Stamp Act of 1977, as amended, or for the 
purpose of investigating violations of other Federal laws or enforcing 
such laws.
    (ii) The only persons permitted access to SSNs obtained pursuant to

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paragraph (b) of this section are officers and employees of the United 
States, who otherwise have access, and whose duties or responsibilities 
require access to the SSNs for the administration or enforcement of the 
Food Stamp Act of 1977, as amended, or for the purpose of investigating 
violations of other Federal laws or enforcing such laws. Such access 
shall also include companies or individuals under contract for the 
operation by, or on behalf of FNS to accomplish an FNS function.
    (iii) The Department shall provide for all additional safeguards 
that the Secretary of Health and Human Services determines to be 
necessary or appropriate to protect the confidentiality of the SSNs. The 
Department may also provide for any additional safeguards to protect the 
confidentiality of SSNs so long as these safeguards are consistent with 
any safeguards determined by the Secretary of Health and Human Services 
to be necessary or appropriate.
    (iv) The SSNs and related records that are obtained or maintained by 
authorized persons are confidential, and no officer or employee shall 
disclose any such SSN or related record except as authorized. The term 
``related record'' means any record, list, or compilation that 
indicates, directly or indirectly, the identity of any individual with 
respect to whom a request for a SSN is maintained. For purposes of 
paragraph (r)(3)(iv) of this section the term ``officer or employee'' 
includes a former officer or employee.
    (v) The sanctions under sections 7213(a) (1), (2) and (3) of the 
Internal Revenue Code of 1986 will apply with respect to the 
unauthorized, willful disclosure to any person of SSNs and related 
records obtained or maintained in the same manner and to the same extent 
as sections 7213(a) (1), (2) and (3) apply with respect to unauthorized 
disclosures of returns and return information described in those 
sections. The sanction under section 7213(a)(4) of the Internal Revenue 
Code of 1986 will apply with respect to the willful offer of any item of 
material value in exchange for any SSN or related record in the same 
manner and to the same extent as section 7213(a)(4) applies with respect 
to offers (in exchange for any return or return information) described 
in that section.
    (4) FNS initiated matches. Under the restrictions noted in paragraph 
(r) of this section, FNS will periodically initiate cross matches of 
retailer data with other Federal and State agencies' files for the 
purpose of verifying information provided by applicant and participating 
firms, and for the purposes of administering and enforcing other Federal 
or State laws. Such matches could involve all firms participating after 
implementation for the purpose of verifying information such as, but not 
limited to, SSNs and retail sales data.
    (r) Public and Private Nonprofit Homeless Meal Providers. FNS shall 
authorize as retail food stores, those public and private nonprofit 
homeless meal providers which apply and qualify for authorization to 
accept food stamps from homless food stamp recipients. Such meal 
providers must be public or private nonprofit organizations as defined 
by the Internal Revenue Service (I.R.C. 501(c)(3)), must serve meals 
that include food purchased by the provider, must meet the requirements 
of paragraphs (a) and (b) of this section, and must be approved by an 
appropriate State or local agency, pursuant to Sec. 272.9. Public and 
private nonprofit homeless meal providers shall be responsible for 
obtaining approval from an appropriate State or local agency and shall 
provide written documentation of such approval to FNS prior to approval 
of the meal provider's application for authorization. (If such approval 
is subsequently withdrawn, FNS authorization shall be withdrawn). Public 
and private nonprofit homeless meal providers serving meals which 
consist wholly of donated foods shall not be eligible for authorization. 
In an area in which FNS, in consultation with the Department's Office of 
Inspector General, finds evidence that the authorization of a public and 
private nonprofit homeless meal provider would damage the Food Stamp 
Program's integrity, FNS shall limit the participation of that public 
and private nonprofit homeless meal provider, unless FNS determines that 
the establishment or shelter is the only one of its kind serving the 
area.

[[Page 929]]

    (s) Each authorized retail food store shall post in a suitable and 
conspicuous location in the store a sign designed and provided by FNS 
which provides information on how persons may report abuses they have 
observed in the operation of the program. Refusal or repeated failure to 
display such a sign by an authorized retail food store may result in the 
withdrawal of the firm's approval to participate in the program.

[Amdt. 136, 43 FR 43274, Sept. 22, 1978]

    Editorial Note:  For Federal Register citations affecting 
Sec. 278.1, see the List of CFR Sections Affected, which appears in the 
Finding Aids section of the printed volume and on GPO Access.

    Effective Date Note: At 61 FR 53600, Oct. 15, 1996, in Sec. 278.1, 
paragraph (i) was redesignated as paragraph (j) and a new paragraph (i) 
was added. This paragraph contains information collection and 
recordkeeping requirements and will not become effective until approval 
has been given by the Office of Management and Budget. The Food and 
Nutrition Service will publish a document in the Federal Register 
announcing the effective date.