PART 278—PARTICIPATION OF RETAIL FOOD STORES, WHOLESALE FOOD CONCERNS AND INSURED FINANCIAL INSTITUTIONS Authority: 7 U.S.C. 2011-2036. Editorial Note: OMB control numbers relating to this part 278 are contained in § 271.8. § 278.1 Approval of retail food stores and wholesale food concerns. (a) Application. (b) Determination of authorization. (1) The nature and extent of the food business conducted by the applicant Retail food store. (B) A retail food store must meet eligibility determination factors which may be based on, but not limited to, visual inspection, sales records, purchase records, counting of stockkeeping units, or other inventory or accounting recordkeeping methods that are customary or reasonable in the retail food industry. In determining eligibility, such information may be requested for verification purposes, and failure to provide such documentation may result in denial or withdrawal from the program. (ii) Application of Criterion A. Stocking standards. ( 1 ( 2 ( 3 (B) Offer on a continuous basis. ( 1 ( 2 (C) Distinguishing staple food varieties. e.g., e.g., ( 1 ( 2 ( i ( ii ( 3 (D) Specially designated varieties. ( 1 Single-ingredient varieties. ( i ( ii ( iii ( iv ( v ( vi e.g., ( vii e.g., ( viii ( 2 Derivative food product varieties. e.g., e.g., ( i ( ii ( iii ( iv ( v ( vi ( vii ( viii ( ix ( x ( xi ( xii ( xiii ( 3 Shelf-stable varieties. 1 ( i ( ii ( iii (E) Plant-based alternatives. ( 1 ( 2 (iii) Application of Criterion B. (iv) Ineligible firms. (v) Wholesale food concerns. (vi) Co-located wholesale food concerns. (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: ( 1 ( i ( ii ( 2 ( i ( ii ( iii ( iv ( v ( vi (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 SNAP households. Hardship would occur in any one of the following circumstances: ( 1 ( 2 ( 3 (2) The volume of coupon business which FNS may reasonably expect the firm to do. (3) The business integrity and reputation of the applicant. (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 and Nutrition Act of 2008 and program regulations; (iv) Previous SNAP 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 SNAP 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 SNAP 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. (4) The submission of collateral bonds or irrevocable letters of credit for firms with previous sanctions. (A) The collateral bond must be issued by a bonding agent/company recognized under the law of the State in which the applicant is conducting business and which is represented by a negotiable certificate only. The irrevocable letter of credit must be issued by a commercial bank; (B) The collateral bond or irrevocable letter of credit must be made payable to the Food and Nutrition Service, U.S. Department of Agriculture; (C) The collateral bond cannot be canceled by the bonding agent/company for non-payment of the premium by the applicant. The irrevocable letter of credit cannot be canceled by the commercial bank for non-payment by the applicant; (D) The collateral bond or irrevocable letter of credit must have a face value of $1,000 or an amount equal to ten percent of the average monthly SNAP benefit redemption volume of the applicant for the immediate twelve months prior to the effective date of the most recent sanction which necessitated the collateral bond or irrevocable letter of credit, whichever amount is greater; (E) The applicant is required to submit a collateral bond or irrevocable letter of credit that is valid for a period of five years when re-entering the program; and (F) The collateral bond or irrevocable letter of credit shall remain in the custody of FNS 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 or irrevocable letter of credit 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 or letter of credit 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 or irrevocable letter of credit 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 result of the transfer or purchase of a disqualified firm, be required to furnish a bond or letter of credit prior to authorization. (5) Taxpayer identification numbers. (i) Employer Identification Number. (ii) Social Security Number. (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) Need for access. (7) Accessory foods. (i) Snack and dessert food items. (B) Baked, gelatin, and pudding desserts, including but not limited to, doughnuts, brownies, cupcakes, cookies, snack cakes, muffins, pastries, sweet rolls, pies, cakes, churros, scones, pudding, and any packaged mixes intended to create any of the aforementioned products; (C) Frozen snacks and desserts, including but not limited to, ice cream, ice milk, frozen yogurt, custard, whipped cream, sherbet, sorbet, gelato, granita, Italian ices, frozen carbonated beverages, snow cones, and ice pops; (D) Candy and chocolate, including but not limited to, mints, chocolate chips, marshmallow, gum, toffee, brittle, fudge, marzipan, nougat, and candy bars; (E) Snack bars, including but not limited to, protein, granola bars, and baked bars; and (F) Jerky, including but not limited to, dehydrated meat sticks and slices made from any type of animal, and plant-based substitutes. (ii) Food items that complement or supplement meals. (B) Condiments, including but not limited to, ketchup, mayonnaise, mustard, salad dressing, hot sauce, vinegar, relish, horseradish, chutney, salsa, and soy sauce; (C) Cheese or fruit dips and spreads, including but not limited to, cheese sprays, jams, jelly, marmalade, preserves, and compote; (D) Sweeteners, including but not limited to, sugar, honey, maple syrup, aspartame, molasses, high fructose corn syrup, and any other natural or artificial sweeteners; (iii) Edible items primarily used as part of the food preparation process. (B) Powdered, dried, and extracted spices or seasonings; (C) Baking soda, baking powder, yeast, and starch; (D) Cooking oils and fats, including but not limited to vegetable oil, olive oil, butter, shortening, and lard; (E) Broth, stock, gelatin, and bouillon; (F) Edible but non-caloric and non-digestible food products, including but not limited to, monosodium glutamate, sodium nitrate, olestra, and any other food additives. (iv) Other food items. (8) Co-location. (i) Share the same ownership in whole or in part; (ii) Sell similar foods; and (iii) Share inventory. (9) Other factors. (c) Wholesalers. (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. 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. (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. et seq. Drug addiction or alcoholic treatment and rehabilitation program (f) Group living arrangements. (g) Shelters for battered women and children. (h) House-to-house trade routes. (i) Private homeless meal providers. (j) Authorization. (k) Denying authorization. (1) The firm does not qualify for participation in the program as specified in paragraph (b), (c), (d), (e), (f), (g), (h) or (i) 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 paragraph (b)(1)(i) of this section; or, for co-located wholesale/retail firms, the firm fails to meet the requirements of paragraph (b)(1)(vi) 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 § 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 and Nutrition Act of 2008, 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 SNAP 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 SNAP violations at other units of multi-unit firms as specified in § 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 honesty of the owners, officers or managers of the firm as specified in § 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 § 278.6(e). Such firms shall be denied authorization for the periods specified in § 278.6(e)(1) or § 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 § 278.7, any fines assessed under §§ 278.6(l) or 278.6(m), or a transfer of ownership civil money penalty assessed under § 278.6(f). The FNS officer in charge shall issue a notice to the firm (using any delivery method that provides evidence of delivery) to inform the firm of any authorization denial and advise the firm that it may request review of that determination. (l) Withdrawing authorization. (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), (h), or (i) of this section; (iii) The firm fails to meet the requirements for eligibility under Criterion A or B, as specified in paragraph (b)(1)(i) of this section; or, for co-located wholesale/retail firms, the firm fails to meet the requirements of paragraph (b)(1)(vi) 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 § 278.7 or any fines assessed under §§ 278.6(l) or 278.6(m) or a transfer of ownership civil money penalty assessed under § 278.6(f); or (vi) The firm has failed to pay fines assessed under § 278.6(l) or § 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 using any delivery method as long as the method provides evidence of delivery 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 part 279. (m) Refusal to accept correspondence or to respond to inquiries. (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. (o) Applications containing false information. (p) Administrative review. (q) Use and disclosure of information provided by firms. (1) Criteria for requesting information. (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 SNAP benefits; (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. (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 and Nutrition Act of 2008, as amended, or for the purpose of investigating violations of other Federal laws or enforcing such laws. See Treas. Reg. § 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. § 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 § 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 (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 § 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 § 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. § 301.6109-2(f) (26 CFR 301.6109-2(f)). (3) Social Security numbers. (ii) The only persons permitted access to SSNs 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 SSNs for the administration or enforcement of the Food and Nutrition Act of 2008, 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 Commissioner of the Social Security Administration 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 Commissioner of the Social Security Administration 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. (5) Public disclosure of firms sanctioned for SNAP violations. (r) Public and Private Nonprofit Homeless Meal Providers. (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. (t) Periodic notification. [Amdt. 136, 43 FR 43274, Sept. 22, 1978] Editorial Note: For Federal Register www.govinfo.gov. Effective Date Note: At 61 FR 53600, Oct. 15, 1996, in § 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. § 278.2 Participation of retail food stores. (a) Use of coupons. (b) Equal treatment for coupon customers. voluntary purchased (c) Accepting coupons. (d) Making change. (e) Accepting coupons before delivery. (f) Paying credit accounts. (g)(1) Redeeming coupons. (2) Notwithstanding paragraph (g)(1) of this section, authorized drug addict and alcoholic treatment and rehabilitation programs, group living arrangements, shelters for battered women and children, and public or private nonprofit homeless meal providers for homeless SNAP households may be authorized to redeem EBT benefits directly through an insured financial institution in areas where an Electronic Benefit Transfer (EBT) system has been implemented. (h) Identifying benefit users. (i) [Reserved] (j) Checking hunting and fishing equipment users. (k) [Reserved] (l) Checking public or private nonprofit homeless meal provider recipients. [Amdt. 136, 43 FR 43274, Sept. 22, 1978] Editorial Note: For Federal Register www.govinfo.gov. § 278.3 Participation of wholesale food concerns. (a) Accepting coupons. (b) Accepting legally obtained coupons. (c) Redeeming coupons. (1) The authorized retail food store's properly filled-out and signed redemption certificate for the coupons; and (2) The authorized wholesale food concern's properly filled-out and signed redemption certificate. (d) Handling retailer redemption certificates. [Amdt. 136, 43 FR 43274, Sept. 22, 1978, as amended by Amdt. 173, 46 FR 62810, Dec. 29, 1981; Amdt. 286, 52 FR 7558, Mar. 11, 1987; Amdt. 344, 56 FR 54778, Oct. 23, 1991; Amdt. 343, 61 FR 53601, Oct. 15, 1996] § 278.4 Procedure for redeeming coupons. (a) Coupons accepted without authorization. (b) Endorsing coupons. (c) Using redemption certificates. [Amdt. 136, 43 FR 43274, Sept. 22, 1978, as amended by Amdt. 286, 52 FR 7558, Mar. 11, 1987; Amdt. 344, 56 FR 54778, Oct. 23, 1991; Amdt. 343, 61 FR 53601, Oct. 15, 1996] § 278.5 Participation of insured financial institutions. (a) Accepting coupons. (2) An insured financial institution shall verify the amount of the coupons being redeemed and record the amount in the designated space on the redemption certificate. In order to conform with Federal Reserve requirements, the verified amount shall be recorded in the appropriate field on the redemption certificate using Magnetic Ink Character Recognition (MICR) encoding. Redemption certificates accepted by insured financial institutions shall be forwarded with the corresponding coupon deposits to the Federal Reserve Bank along with the Food Coupon Deposit Document (Form FNS-521). (3) Redeemed coupons must be indelibly cancelled on the face of the coupon by the first insured financial institution receiving them. If the cancellation on the coupon face does not show the depositing institution's name or its routing symbol transit number, this identifying information must appear on the straps affixed to each bundle of coupons of like denomination. Deposits not meeting these cancellation requirements may be returned to the depositing institution for reprocessing. Retail food stores may not be required to cancel the coupons by the insured financial institution nor may the insured financial institution charge the retail food stores a fee or other charge for cancellation of coupons. A portion of a coupon consisting of less than three-fifths of a whole coupon may not be redeemed. (4) Insured financial institutions which are members of the Federal Reserve System, insured nonmember clearing institutions, and insured nonmember institutions which have arranged with a Federal Reserve Bank to deposit coupons for credit to the account of a member institution on the books of a Federal Reserve Bank may forward coupons directly to the Federal Reserve Bank. Other insured financial institutions may forward cancelled coupons through ordinary collection channels. (b) Role of Federal Reserve Banks. (c) FNS liability for losses. (d) FNS use of coupons to detect violations. (e) Selling coupons to stores for internal checks. (f) Continued participation of households under investigation. [Amdt. 136, 43 FR 43274, Sept. 22, 1978, as amended by Amdt. 257, 49 FR 32538, Aug. 15, 1984; Amdt. 267, 51 FR 6514, Feb. 25, 1986; Amdt. 272, 51 FR 12498, Apr. 11, 1986; Amdt. 288, 52 FR 11815, Apr. 13, 1987; Amdt. 272, 52 FR 18198, May 14, 1987; Amdt. 356, 59 FR 29714, June 9, 1994; Amdt. 331, 59 FR 60062, Nov. 22, 1994] § 278.6 Disqualification of retail food stores and wholesale food concerns, and imposition of civil money penalties in lieu of disqualifications. (a) Authority to disqualify or subject to a civil money penalty. (b) Charge letter General provisions. (2) Charge letter for trafficking. (ii) Firms that request consideration of a civil money penalty in lieu of a permanent disqualification for trafficking shall have the opportunity to submit to FNS information and evidence as specified in § 278.6(i), that establishes the firm's eligibility for a civil money penalty in lieu of a permanent disqualification in accordance with the criteria included in § 278.6(i). This information and evidence shall be submitted within 10 days, as specified in § 278.6(b)(1). (iii) If a firm fails to request consideration for a civil money penalty in lieu of a permanent disqualification for trafficking and submit documentation and evidence of its eligibility within the 10 days specified in § 278.6(b)(1), the firm shall not be eligible for such a penalty. (c) Review of evidence. (d) Basis for determination. (1) The nature and scope of the violations committed by personnel of the firm, (2) Any prior action taken by FNS to warn the firm about the possibility that violations are occurring, and (3) Any other evidence that shows the firm's intent to violate the regulations. (e) Penalties. (1) Disqualify a firm permanently if: (i) Personnel of the firm have trafficked as defined in § 271.2; or (ii) Violations such as, but not limited to, the sale of ineligible items occurred and the firm had twice before been sanctioned. (iii) It is determined that personnel of the firm knowingly submitted information on the application that contains false information of a substantive nature that could affect the eligibility of the firm for authorization in the program, such as, but not limited to, information related to: (A) Eligibility requirements under § 278.1(b), (c), (d), (e), (f), (g) and (h); (B) Staple food stock; (C) Annual gross sales for firms seeking to qualify for authorization under Criterion B as specified in the Food and Nutrition Act of 2008, as amended; (D) Annual staple food sales; (E) Total annual gross retail food sales for firms seeking authorization as co-located wholesale/retail firms; (F) Ownership of the firm; (G) Employer Identification Numbers and Social Security Numbers; (H) SNAP history, business practices, business ethics, WIC disqualification or authorization status, when the store did (or will) open for business under the current ownership, business, health or other licenses, and whether or not the firm is a retail and wholesale firm operating at the same location; or (I) Any other information of a substantive nature that could affect the eligibility of a firm. (2) Disqualify the firm for 5 years if it is to be the firm's first sanction, the firm had been previously advised of the possibility that violations were occurring and of possible consequences of violating the regulations, and the evidence shows that: (i) It is the firm's practice to sell expensive or conspicuous nonfood items, cartons of cigarettes, or alcoholic beverages in exchange for food coupons; or (ii) The firm's coupon redemptions for a specified period of time exceed its food sales for the same period of time; or (iii) A wholesale food concern's redemptions of coupons for a specified period of time exceed the redemptions of all the specified authorized retail food stores, nonprofit cooperative food-purchasing ventures, group living arrangements, drug addict and alcoholic treatment programs, homeless meal providers, and shelters for battered women and children which the wholesale food concern was authorized to serve during that time; or (iv) A wholesale food concern's stated redemptions of coupons for a particular retail food store, nonprofit cooperative food-purchasing venture, group living arrangement, drug addict and alcoholic treatment program, homeless meal providers, or shelters for battered women and children exceeded the actual amount of coupons which that firm or organization redeemed through the wholesaler; or (v) Personnel of the firm knowingly accepted coupons from an unauthorized firm or an individual known not to be legally entitled to possess coupons. (3) Disqualify the firm for 3 years if it is to be the first sanction for the firm and the evidence shows that: (i) It is the firm's practice to commit violations such as the sale of common nonfood items in amounts normally found in a shopping basket and the firm was previously advised of the possibility that violations were occurring and of the possible consequences of violating the regulations; or (ii) Any of the situations described in paragraph (e)(2) of this section occurred and FNS had not previously advised the firm of the possibility that violations were occurring and of the possible consequences of violating the regulations; or (iii) The firm is an authorized communal dining facility, drug addiction or alcoholic treatment and rehabilitation program, group living arrangement, homeless meal provider, meal delivery service, or shelter for battered women and children and it is the firm's practice to sell meals in exchange for food coupons to persons not eligible to purchase meals with food coupons and the firm has been previously advised of the possibility that violations were occurring and of the possible consequences of violating the regulations; or (iv) A wholesale food concern accepted coupons from an authorized firm which it was not authorized to serve and the wholesale food concern had been previously advised of the possibility that violations were occurring and of possible consequences of violating the regulations; or (v) The firm is an authorized retail food store and personnel of the firm have engaged in food coupon transactions with other authorized retail stores, not including treatment programs, group living arrangements, homeless meal providers, or shelters for battered women and children, and the firm had been previously advised of the possibility that violations were occurring and of the possible consequences of violating the regulations. (vi) Personnel of the firm knowingly submitted information on the application that contained false information of a substantive nature related to the ability of FNS to monitor compliance of the firm with FSP requirements, such as, but not limited to, information related to: (A) Annual eligible retail food sales; (B) Store location and store address and mailing address; (C) Financial institution information; or (D) Store name, type of ownership, number of cash registers, and non-food inventory and services. (4) Disqualify the firm for 1 year if: (i) It is to be the first sanction for the firm and the ownership or management personnel of the firm have committed violations such as the sale of common nonfood items in amounts normally found in a shopping basket, and FNS had not previously advised the firm of the possibility that violations were occurring and of the possible consequences of violating the regulations; or (ii) The firm has accepted SNAP benefits in payment for items sold to a household on credit. (5) Disqualify the firm for 6 months if it is to be the first sanction for the firm and the evidence shows that personnel of the firm have committed violations such as but not limited to the sale of common nonfood items due to carelessness or poor supervision by the firm's ownership or management. (6) Double the appropriate period of disqualification prescribed in paragraphs (e) (2) through (5) of this section as warranted by the evidence of violations if the same firm has once before been assigned a sanction. (7) Send the firm a warning letter if violations are too limited to warrant a disqualification. (8) FNS shall disqualify from SNAP any firm which is disqualified from the WIC Program: (i) Based in whole or in part on any act which constitutes a violation of that program's regulation and which is shown to constitute a misdemeanor or felony violation of law, or for any of the following specific program violations: (A) A pattern of claiming reimbursement for the sale of an amount of a specific food item which exceeds the store's documented inventory of that food item for a specified period of time; (B) Exchanging WIC food instruments for cash, credit or consideration other than eligible food; or the exchange of firearms, ammunition, explosives or controlled substances, as defined in section 802 of title 21 of the United States Code, for food instruments; (C) A pattern of receiving, transacting and/or redeeming WIC food instruments outside of authorized channels; (D) A pattern of exchanging non-food items for a WIC food instrument; (E) A pattern of charging WIC customers more for food than non-WIC customers or charging WIC customers more than the current shelf price; or (F) A pattern of charging for food items not received by the WIC customer or for foods provided in excess of those listed on the food instrument. (ii) FNS shall not disqualify a firm from SNAP on the basis of a WIC disqualification unless: (A) Prior to the time prescribed for securing administrative review of the WIC disqualification action, the firm was provided individual and specific notice that it could be disqualified from SNAP based on the WIC violations committed by the firm; (B) A signed and dated copy of such notice is provided to FNS by the WIC administering agency; and (C) A determination is made in accordance with paragraph (a) of this section that such action will not cause a hardship for participating SNAP households. (iii) Such a SNAP disqualification: (A) Shall be for the same length of time as the WIC disqualification; (B) May begin at a later date than the WIC disqualification; and (C) Shall not be subject to administrative or judicial review under SNAP. (f) Criteria for civil money penalties for hardship and transfer of ownership. (2) In the event any retail food store or wholesale food concern which has been disqualified is sold or the ownership thereof is otherwise transferred to a purchaser or transferee, the person or other legal entity who sells or otherwise transfers ownership of the retail food store or wholesale food concern shall be subjected to and liable for a civil money penalty in an amount to reflect that portion of the disqualification period that has not expired, to be calculated using the method found at § 278.6(g). If the retail food store or wholesale food concern has been permanently disqualified, the civil money penalty shall be double the penalty for a ten year disqualification period. The disqualification shall continue in effect at the disqualified location for the person or other legal entity who transfers ownership of the retail food store or wholesale food concern notwithstanding the imposition of a civil money penalty under this paragraph. (3) At any time after a civil money penalty imposed under paragraph (f) (2) of this section has become final under the provisions of part 279, the Food and Consumer Service may request the Attorney General institute a civil action to collect the penalty from the person or persons subject to the penalty in a district court of the United States for any district in which such person or persons are found, reside, or transact business. (4) A bona fide transferee of a retail food store shall not be required to pay a civil money penalty imposed on the firm prior to its transfer. A buyer or transferee (other than a bona fide buyer or transferee) may not be authorized to accept or redeem coupons and may not accept or redeem coupons until the Secretary receives full payment of any penalty imposed on such store or concern. (g) Amount of civil money penalties for hardship and transfer of ownership. (1) Determine the firm's average monthly redemptions of coupons for the 12-month period ending with the month immediately preceding that month during which the firm was charged with violations. (2) Multiply the average monthly redemption figure by 10 percent. (3) Multiply the product arrived at in paragraph (g)(2) by the number of months for which the firm would have been disqualified under paragraph (e) of this section. The civil money penalty may not exceed an amount specified in § 3.91(b)(3)(i) of this title for each violation. (h) Notifying the firm of civil money penalties for hardship and transfer of ownership. (1) Disqualify the firm for the period determined to be appropriate under paragraph (e) of this section if the firm refuses to pay any of the civil money penalty; (2) Disqualify the firm for a period corresponding to the unpaid part of the civil money penalty if the firm does not pay the civil money penalty in full or in installments as specified by the FNS regional office; or (3) Disqualify the firm for the prescribed period if the firm does not present a collateral bond or irrevocable letter of credit within the required 15 days. Any payment on a civil money penalty which have been received by FNS shall be returned to the firm. If the firm presents the required bond or irrevocable letter of credit during the disqualification period, the civil money penalty may be reinstated for the duration of the disqualification period. (i) Criteria for eligibility for a civil money penalty in lieu of permanent disqualification for trafficking. Criterion 1. Criterion 2. prior Criterion 3. Criterion 4. (1) Compliance policy standards. (i) Documentation reflecting the development and/or operation of a policy to terminate the employment of any firm employee found violating FSP regulations; (ii) Documentation of the development and/or continued operation of firm policy and procedures resulting in appropriate corrective action following complaints of FSP violations or irregularities committed by firm personnel; (iii) Documentation of the development and/or continued operation of procedures for internal review of firm employees' compliance with FSP regulations; (iv) The nature and scope of the violations charged against the firm; (v) Any record of previous firm violations under the same ownership; and (vi) Any other information the firm may present to FNS for consideration. (2) Compliance training program standards. (i) Training for all managers and employees whose work brings them into contact with SNAP benefits or who are assigned to a location where SNAP benefits are accepted, handled or processed shall be conducted within one month of the institution of the compliance policy under Criterion 1 above. Employees hired subsequent to the institution of the compliance policy shall be trained within one month of employment. All employees shall be trained periodically thereafter; (ii) Training shall be designed to establish a level of competence that assures compliance with Program requirements as included in this part 278; (iii) Written materials, which may include FNS publications and program regulations that are available to all authorized firms, are used in the training program. Training materials shall clearly state that the following acts are prohibited and are in violation of the Food and Nutrition Act of 2008 and regulations: the exchange of food coupons, ATP cards or other program access devices for cash; and, in exchange for coupons, the sale of firearms, ammunition, explosives or controlled substances, as the term is defined in section 802 of title 21, United States Code. (j) Amount of civil money penalty in lieu of permanent disqualification for trafficking. (1) Determine the firm's average monthly redemptions for the 12-month period ending with the month immediately preceding the month during which the firm was charged with violations; (2) Multiply the average monthly redemption figure by 10 percent; (3) For the first trafficking offense by a firm, multiply the product obtained in § 278.6(j)(2) by 60 if the largest amount of food coupons, ATP cards, or other benefit instruments involved in a single trafficking transaction had a face value of $99 or less. If the face value of coupons, ATP cards or other benefit instruments involved in the largest single trafficking transaction was $100 or more, the amount of the product obtained in this paragraph shall be doubled; (4) For a second trafficking offense by a firm, multiply the product obtained in § 278.6(j)(2) by 120 if the largest amount of food coupons, ATP cards, or other benefit instruments involved in a single trafficking transaction had a face value of $99 or less and the same firm has once before been sanctioned for trafficking in food coupons, ATP cards, or other benefit instruments. If the face value of food coupons, ATP cards, or other benefit instruments involved in the largest single trafficking transaction was $100 or more, the amount of the product obtained in this paragraph shall be doubled; and (5) If a third trafficking offense is committed by the firm, the firm shall not be eligible for a civil money penalty in lieu of disqualification. (k) Payment of civil money penalty in lieu of a permanent disqualification for trafficking. (l) Fines for the acceptance of loose coupons. plus (m) Fines for unauthorized third parties that accept SNAP benefits. plus (n) Review of determination. Notwithstanding the above, any FNS determination made on the basis of paragraph (e)(8) of this section shall not be subject to further administrative or judicial review. (o) Delivery of notice. (p) Freedom of Information Act (FOIA) requests and appeals. [Amdt. 136, 43 FR 43274, Sept. 22, 1978] Editorial Note: For Federal Register www.govinfo.gov. § 278.7 Determination and disposition of claims—retail food stores and wholesale food concerns. (a) Claims against violators. (b) Forfeiture of a collateral bond or draw down on an irrevocable letter of credit. (1) Determine the amount of the bond to be forfeited or irrevocable letter of credit drawn down on the basis of the loss to the Government through violations of the Act, and this Part, as detailed in a letter of charges to the firm; (2) Send written notification by method of proof of delivery to the firm and the bonding agent or commercial bank of FNS' determination regarding forfeiture or draw down of all or specified part of the collateral bond or irrevocable letter of credit and the reasons for the forfeiture or draw down action; (3) Advise the firm and the bonding agent or commercial bank of the firm's right to administrative review of the claim determination; (4) Advise the firm and the bonding agent or commercial bank that if payment of the current claim is not received directly from the firm, FNS shall obtain full payment through forfeiture of the bond or draw down of the irrevocable letter of credit; (5) Proceed with collection of the bond or irrevocable letter of credit in the amount forfeited or drawn down if a request for review is not filed by the firm within the period established in § 279.5 of this chapter, or if such review is unsuccessful; and (6) Upon the expiration of time permitted for the filing of a request for administrative and/or judicial review, deposit the bond or irrevocable letter of credit in a Federal Reserve Bank account or in the Treasury Account, General. If FNS requires only a portion of the face value of the bond or irrevocable letter of credit to satisfy a claim, the entire bond or irrevocable letter of credit will be negotiated, and the remaining amount returned to the firm. (c) Coupons accepted without authorization. (i) The coupons were received in accordance with the requirements of this part governing acceptance of coupons except the requirement that the firm be authorized before acceptance; (ii) The coupons were accepted by the firm in good faith, and without intent to circumvent this part; and (iii) The firm receives authorization to participate in the program. (2) Firms seeking approval to redeem coupons accepted without authorization shall present a written application for approval to the local FNS field office. This application shall be accompanied by a written statement signed by the firm of all the facts about the acceptance of the coupons. The statement shall also include a certification that the coupons were accepted in good faith, and without any intent to circumvent this part. (d) Burned or mutilated coupons. (e) Old series coupons. (f) Denials of claims brought by authorized firms against FNS. (g) Lost or stolen coupons. [Amdt. 136, 43 FR 43274, Sept. 22, 1978, as amended by Amdt. 258, 49 FR 28393, July 12, 1984; Amdt. 257, 49 FR 32538, Aug. 15, 1984; Amdt. 262, 49 FR 50598, Dec. 31, 1984; 68 FR 41052, July 10, 2003; Amdt. 397, 70 FR 72354, Dec. 5, 2005; 73 FR 79595, Dec. 30, 2008] § 278.8 [Reserved] § 278.9 Implementation of amendments relating to the participation of retail food stores, wholesale food concerns and insured financial institutions. (a) Amendment 224. (b) Amendment 257. (c) Amendment 267. (d) The program changes of Amendment 272 (e) Amendment No. 286. Amendment No. 286 (f) Amendment No. 280. (g) Amendment No. 304. Amendment No. 304 (h) Amendment No. 323. (i) Amendment No. 334. (j) Amendment No. 354. (k) Amendment No. 331. (l) Amendment No. 335. (m) Amendment No. 383. [Amdt. 136, 43 FR 43274, Sept. 22, 1978] Editorial Note: For Federal Register www.govinfo.gov. § 278.10 [Reserved]