(a) General rulesSubject to this part, a State to which a grant is made under section 603 of this title may use the grant—(1) in any manner that is reasonably calculated to accomplish the purpose of this part, including to provide low income households with assistance in meeting home heating and cooling costs; or
(2) in any manner that the State was authorized to use amounts received under part A or F, as such parts were in effect on September 30, 1995, or (at the option of the State) August 21, 1996.
(b) Limitation on use of grant for administrative purposes(1) LimitationA State to which a grant is made under section 603 of this title shall not expend more than 15 percent of the grant for administrative purposes.
(2) ExceptionParagraph (1) shall not apply to the use of a grant for information technology and computerization needed for tracking or monitoring required by or under this part.
(c) Authority to treat interstate immigrants under rules of former StateA State operating a program funded under this part may apply to a family the rules (including benefit amounts) of the program funded under this part of another State if the family has moved to the State from the other State and has resided in the State for less than 12 months.
(d) Authority to use portion of grant for other purposes(1) In generalSubject to paragraph (2), a State may use not more than 30 percent of the amount of any grant made to the State under section 603(a) of this title for a fiscal year to carry out a State program pursuant to any or all of the following provisions of law:(A) Division A of subchapter XX of this chapter.
(B) The Child Care and Development Block Grant Act of 1990 [42 U.S.C. 9857 et seq.].
(2) Limitation on amount transferable to division A 11 See References in Text note below. of subchapter XX programs(A) In generalA State may use not more than the applicable percent of the amount of any grant made to the State under section 603(a) of this title for a fiscal year to carry out State programs pursuant to division A 1 of subchapter XX.
(B) Applicable percentFor purposes of subparagraph (A), the applicable percent is 4.25 percent in the case of fiscal year 2001 and each succeeding fiscal year.
(3) Applicable rules(A) In generalExcept as provided in subparagraph (B) of this paragraph, any amount paid to a State under this part that is used to carry out a State program pursuant to a provision of law specified in paragraph (1) shall not be subject to the requirements of this part, but shall be subject to the requirements that apply to Federal funds provided directly under the provision of law to carry out the program, and the expenditure of any amount so used shall not be considered to be an expenditure under this part.
(B) Exception relating to division A 1 of subchapter XX programsAll amounts paid to a State under this part that are used to carry out State programs pursuant to division A 1 of subchapter XX shall be used only for programs and services to children or their families whose income is less than 200 percent of the income official poverty line (as defined by the Office of Management and Budget, and revised annually in accordance with section 9902(2) of this title) applicable to a family of the size involved.
(e) Authority to carry over certain amounts for benefits or services or for future contingenciesA State or tribe may use a grant made to the State or tribe under this part for any fiscal year to provide, without fiscal year limitation, any benefit or service that may be provided under the State or tribal program funded under this part.
(f) Authority to operate employment placement programA State to which a grant is made under section 603 of this title may use the grant to make payments (or provide job placement vouchers) to State-approved public and private job placement agencies that provide employment placement services to individuals who receive assistance under the State program funded under this part.
(g) Implementation of electronic benefit transfer systemA State to which a grant is made under section 603 of this title is encouraged to implement an electronic benefit transfer system for providing assistance under the State program funded under this part, and may use the grant for such purpose.
(h) Use of funds for individual development accounts(1) In generalA State to which a grant is made under section 603 of this title may use the grant to carry out a program to fund individual development accounts (as defined in paragraph (2)) established by individuals eligible for assistance under the State program funded under this part.
(2) Individual development accounts(A) EstablishmentUnder a State program carried out under paragraph (1), an individual development account may be established by or on behalf of an individual eligible for assistance under the State program operated under this part for the purpose of enabling the individual to accumulate funds for a qualified purpose described in subparagraph (B).
(B) Qualified purposeA qualified purpose described in this subparagraph is 1 or more of the following, as provided by the qualified entity providing assistance to the individual under this subsection:(i) Postsecondary educational expensesPostsecondary educational expenses paid from an individual development account directly to an eligible educational institution.
(ii) First home purchaseQualified acquisition costs with respect to a qualified principal residence for a qualified first-time homebuyer, if paid from an individual development account directly to the persons to whom the amounts are due.
(iii) Business capitalizationAmounts paid from an individual development account directly to a business capitalization account which is established in a federally insured financial institution and is restricted to use solely for qualified business capitalization expenses.
(C) Contributions to be from earned incomeAn individual may only contribute to an individual development account such amounts as are derived from earned income, as defined in section 911(d)(2) of the Internal Revenue Code of 1986.
(D) Withdrawal of fundsThe Secretary shall establish such regulations as may be necessary to ensure that funds held in an individual development account are not withdrawn except for 1 or more of the qualified purposes described in subparagraph (B).
(3) Requirements(A) In generalAn individual development account established under this subsection shall be a trust created or organized in the United States and funded through periodic contributions by the establishing individual and matched by or through a qualified entity for a qualified purpose (as described in paragraph (2)(B)).
(B) “Qualified entity” definedAs used in this subsection, the term “qualified entity” means—(i) a not-for-profit organization described in section 501(c)(3) of the Internal Revenue Code of 1986 and exempt from taxation under section 501(a) of such Code; or
(ii) a State or local government agency acting in cooperation with an organization described in clause (i).
(4) No reduction in benefitsNotwithstanding any other provision of Federal law (other than the Internal Revenue Code of 1986) that requires consideration of 1 or more financial circumstances of an individual, for the purpose of determining eligibility to receive, or the amount of, any assistance or benefit authorized by such law to be provided to or for the benefit of such individual, funds (including interest accruing) in an individual development account under this subsection shall be disregarded for such purpose with respect to any period during which such individual maintains or makes contributions into such an account.
(5) DefinitionsAs used in this subsection—(A) Eligible educational institutionThe term “eligible educational institution” means the following:(i) An institution described in section 1088(a)(1) or 1141(a) of title 20, as such sections are in effect on August 22, 1996.
(ii) An area vocational education school (as defined in subparagraph (C) or (D) of section 2471(4) of title 20) which is in any State (as defined in section 2471(33) of title 20), as such sections are in effect on August 22, 1996.
(B) Post-secondary educational expensesThe term “post-secondary educational expenses” means—(i) tuition and fees required for the enrollment or attendance of a student at an eligible educational institution, and
(ii) fees, books, supplies, and equipment required for courses of instruction at an eligible educational institution.
(C) Qualified acquisition costsThe term “qualified acquisition costs” means the costs of acquiring, constructing, or reconstructing a residence. The term includes any usual or reasonable settlement, financing, or other closing costs.
(D) Qualified businessThe term “qualified business” means any business that does not contravene any law or public policy (as determined by the Secretary).
(E) Qualified business capitalization expensesThe term “qualified business capitalization expenses” means qualified expenditures for the capitalization of a qualified business pursuant to a qualified plan.
(F) Qualified expendituresThe term “qualified expenditures” means expenditures included in a qualified plan, including capital, plant, equipment, working capital, and inventory expenses.
(G) Qualified first-time homebuyer(i) In generalThe term “qualified first-time homebuyer” means a taxpayer (and, if married, the taxpayer’s spouse) who has no present ownership interest in a principal residence during the 3-year period ending on the date of acquisition of the principal residence to which this subsection applies.
(ii) Date of acquisitionThe term “date of acquisition” means the date on which a binding contract to acquire, construct, or reconstruct the principal residence to which this subparagraph applies is entered into.
(H) Qualified planThe term “qualified plan” means a business plan which—(i) is approved by a financial institution, or by a nonprofit loan fund having demonstrated fiduciary integrity,
(ii) includes a description of services or goods to be sold, a marketing plan, and projected financial statements, and
(iii) may require the eligible individual to obtain the assistance of an experienced entrepreneurial advisor.
(I) Qualified principal residenceThe term “qualified principal residence” means a principal residence (within the meaning of section 1034 of the Internal Revenue Code of 1986), the qualified acquisition costs of which do not exceed 100 percent of the average area purchase price applicable to such residence (determined in accordance with paragraphs (2) and (3) of section 143(e) of such Code).
(i) Sanction welfare recipients for failing to ensure that minor dependent children attend schoolA State to which a grant is made under section 603 of this title shall not be prohibited from sanctioning a family that includes an adult who has received assistance under any State program funded under this part attributable to funds provided by the Federal Government or under the supplemental nutrition assistance program, as defined in section 2012(l) 1 of title 7, if such adult fails to ensure that the minor dependent children of such adult attend school as required by the law of the State in which the minor children reside.
(j) Requirement for high school diploma or equivalentA State to which a grant is made under section 603 of this title shall not be prohibited from sanctioning a family that includes an adult who is older than age 20 and younger than age 51 and who has received assistance under any State program funded under this part attributable to funds provided by the Federal Government or under the supplemental nutrition assistance program, as defined in section 2012(l) 1 of title 7, if such adult does not have, or is not working toward attaining, a secondary school diploma or its recognized equivalent unless such adult has been determined in the judgment of medical, psychiatric, or other appropriate professionals to lack the requisite capacity to complete successfully a course of study that would lead to a secondary school diploma or its recognized equivalent.
(k) Limitations on use of grant for matching under certain Federal transportation program(1) Use limitationsA State to which a grant is made under section 603 of this title may not use any part of the grant to match funds made available under section 3037 of the Transportation Equity Act for the 21st Century, unless—(A) the grant is used for new or expanded transportation services (and not for construction) that benefit individuals described in subparagraph (C), and not to subsidize current operating costs;
(B) the grant is used to supplement and not supplant other State expenditures on transportation;
(C) the preponderance of the benefits derived from such use of the grant accrues to individuals who are—(i) recipients of assistance under the State program funded under this part;
(ii) former recipients of such assistance;
(iii) noncustodial parents who are described in section 603(a)(5)(C)(iii) of this title; and
(iv) low-income individuals who are at risk of qualifying for such assistance; and
(D) the services provided through such use of the grant promote the ability of such recipients to engage in work activities (as defined in section 607(d) of this title).
(2) Amount limitationFrom a grant made to a State under section 603(a) of this title, the amount that a State uses to match funds described in paragraph (1) of this subsection shall not exceed the amount (if any) by which 30 percent of the total amount of the grant exceeds the amount (if any) of the grant that is used by the State to carry out any State program described in subsection (d)(1) of this section.
(3) Rule of interpretationThe provision by a State of a transportation benefit under a program conducted under section 3037 of the Transportation Equity Act for the 21st Century, to an individual who is not otherwise a recipient of assistance under the State program funded under this part, using funds from a grant made under section 603(a) of this title, shall not be considered to be the provision of assistance to the individual under the State program funded under this part.
(Aug. 14, 1935, ch. 531, title IV, § 404, as added Pub. L. 104–193, title I, § 103(a)(1), Aug. 22, 1996, 110 Stat. 2124; amended Pub. L. 105–33, title V, §§ 5002(a), 5503, 5514(c), Aug. 5, 1997, 111 Stat. 593, 609, 620; Pub. L. 105–178, title VIII, § 8401(b), June 9, 1998, 112 Stat. 499; Pub. L. 105–200, title IV, § 403(a), July 16, 1998, 112 Stat. 670; Pub. L. 106–113, div. B, § 1000(a)(4) [title VIII, § 801(d)], Nov. 29, 1999, 113 Stat. 1535, 1501A–283; Pub. L. 106–169, title IV, § 401(l), Dec. 14, 1999, 113 Stat. 1858; Pub. L. 110–234, title IV, §§ 4002(b)(1)(A), (B), (2)(V), 4115(c)(2)(G), May 22, 2008, 122 Stat. 1095–1097, 1110; Pub. L. 110–246, § 4(a), title IV, §§ 4002(b)(1)(A), (B), (2)(V), 4115(c)(2)(G), June 18, 2008, 122 Stat. 1664, 1857, 1858, 1871; Pub. L. 111–5, div. B, title II, § 2103, Feb. 17, 2009, 123 Stat. 449; Pub. L. 111–148, title VI, § 6703(d)(2)(A), Mar. 23, 2010, 124 Stat. 803; Pub. L. 112–96, title IV, § 4005(a), Feb. 22, 2012, 126 Stat. 198.)
Editorial Notes
References in TextPart F, referred to in subsec. (a)(2), was classified to section 681 et seq. of this title, prior to repeal by Pub. L. 104–193, title I, § 108(e), Aug. 22, 1996, 110 Stat. 2167.
The Child Care and Development Block Grant Act of 1990, referred to in subsec. (d)(1)(B), is subchapter C (§ 658A et seq.) of chapter 8 of subtitle A of title VI of Pub. L. 97–35, as added by Pub. L. 101–508, title V, § 5082(2), Nov. 5, 1990, 104 Stat. 1388–236, which is classified generally to subchapter II–B (§ 9857 et seq.) of chapter 105 of this title. For complete classification of this Act to the Code, see section 9857(a) of this title and Tables.
Division A of subchapter XX, referred to in subsec. (d)(2), (3)(B), was in the original a reference to subtitle 1 of title XX, which was translated as if referring to subtitle A of title XX of the Social Security Act, to reflect the probable intent of Congress. Title XX of the Act, enacting subchapter XX of this chapter, does not contain a subtitle 1.
The Internal Revenue Code of 1986, referred to in subsec. (h)(2)(C), (3)(B)(i), (4), (5)(I), is classified generally to Title 26, Internal Revenue Code.
Section 1088(a) of title 20, referred to in subsec. (h)(5)(A)(i), was repealed and section 1088(d) was redesignated section 1088(a), by Pub. L. 105–244, title I, § 101(c), Oct. 7, 1998, 112 Stat. 1617. Provisions similar to those in former section 1088(a)(1) are now contained in section 1002(a)(1) of Title 20, Education.
Section 1141(a) of title 20, referred to in subsec. (h)(5)(A)(i), was repealed by Pub. L. 105–244, § 3, title I, § 101(b), title VII, § 702, Oct. 7, 1998, 112 Stat. 1585, 1616, 1803, effective Oct. 1, 1998.
Section 2471 of title 20, referred to in subsec. (h)(5)(A)(ii), was omitted in the general amendment of chapter 44 (§ 2301 et seq.) of Title 20, Education, by Pub. L. 105–332, § 1(b), Oct. 31, 1998, 112 Stat. 3076.
Section 2012(l) of title 7, referred to in subsecs. (i) and (j), was struck out, and a new section 2012(t) of title 7 similarly defining “supplemental nutrition assistance program” was enacted, by Pub. L. 113–79, title IV, § 4030(a)(3), (5), Feb. 7, 2014, 128 Stat. 813.
Section 3037 of the Transportation Equity Act for the 21st Century, referred to in subsec. (k)(1), (3), is section 3037 of Pub. L. 105–178, title III, June 9, 1998, 112 Stat. 387, which was formerly set out as a note under section 5309 of Title 49, Transportation, and was repealed by Pub. L. 109–59, title III, § 3018(c), Aug. 10, 2005, 119 Stat. 1605, effective Oct. 1, 2005.
Codification
Pub. L. 110–234 and Pub. L. 110–246 made identical amendments to this section. The amendments by Pub. L. 110–234 were repealed by section 4(a) of Pub. L. 110–246.
Prior ProvisionsA prior section 604, acts Aug. 14, 1935, ch. 531, title IV, § 404, 49 Stat. 628; Aug. 28, 1950, ch. 809, title III, pt. 6, § 361(c), (d), 64 Stat. 558; May 8, 1961, Pub. L. 87–31, § 4, 75 Stat. 77; July 25, 1962, Pub. L. 87–543, title I, §§ 104(a)(5)(B), 107(b), 76 Stat. 185, 189; Jan. 2, 1968, Pub. L. 90–248, title II, §§ 241(b)(4), 245, 81 Stat. 916, 918; Jan. 4, 1975, Pub. L. 93–647, § 101(c)(6)(B), 88 Stat. 2360; July 18, 1984, Pub. L. 98–369, div. B, title VI, § 2663(l)(1), 98 Stat. 1171, related to deviation from State plan, prior to repeal by Pub. L. 104–193, § 103(a)(1), as amended by Pub. L. 105–33, title V, § 5514(c), Aug. 5, 1997, 111 Stat. 620.
Amendments2012—Subsec. (d)(1)(A). Pub. L. 112–96 made technical amendment to reference in original act which appears in text as reference to division A of subchapter XX.
2010—Subsec. (d)(1)(A). Pub. L. 111–148, § 6703(d)(2)(A)(i), inserted “division A of” before “subchapter XX”.
Subsec. (d)(2). Pub. L. 111–148, § 6703(d)(2)(A)(ii), inserted “division A of” before “subchapter XX” in heading.
Subsec. (d)(2)(A). Pub. L. 111–148, § 6703(d)(2)(A)(i), inserted “division A of” before “subchapter XX”.
Subsec. (d)(3)(B). Pub. L. 111–148, § 6703(d)(2)(A)(iii), inserted “division A of” before “subchapter XX” in heading.
Pub. L. 111–148, § 6703(d)(2)(A)(i), inserted “division A of” before “subchapter XX”.
2009—Subsec. (e). Pub. L. 111–5 amended subsec. (e) generally. Prior to amendment, text read as follows: “A State or tribe may reserve amounts paid to the State or tribe under this part for any fiscal year for the purpose of providing, without fiscal year limitation, assistance under the State or tribal program funded under this part.”
2008—Subsecs. (i), (j). Pub. L. 110–246, § 4115(c)(2)(G), substituted “section 2012(l)” for “section 2012(h)”.
Pub. L. 110–246, § 4002(b)(1)(A), (B), (2)(V), substituted “supplemental nutrition assistance program” for “food stamp program” and made technical amendment to reference in original act which appears in text as reference to section 2012(h) of title 7.
1999—Subsec. (e). Pub. L. 106–169 inserted “or tribe” after “A State” and “to the State” and inserted “or tribal” after “under the State”.
Subsec. (k)(1)(C)(iii). Pub. L. 106–113 substituted “section 603(a)(5)(C)(iii) of this title” for “item (aa) or (bb) of section 603(a)(5)(C)(ii)(II) of this title”.
1998—Subsec. (d)(2). Pub. L. 105–178 amended heading and text of par. (2) generally. Prior to amendment, text read as follows: “A State may use not more than 10 percent of the amount of any grant made to the State under section 603(a) of this title for a fiscal year to carry out State programs pursuant to subchapter XX of this chapter.”
Subsec. (k). Pub. L. 105–200 added subsec. (k).
1997—Pub. L. 105–33, § 5514(c), made technical amendment to directory language of Pub. L. 104–193, § 103(a)(1), which enacted this section.
Subsec. (a)(2). Pub. L. 105–33, § 5503, inserted “, or (at the option of the State) August 21, 1996” before period.
Subsec. (d)(1). Pub. L. 105–33, § 5002(a)(1), substituted “Subject to paragraph (2), a State may” for “A State may”.
Subsec. (d)(2). Pub. L. 105–33, § 5002(a)(2), amended heading and text of par. (2) generally. Prior to amendment, text read as follows: “Notwithstanding paragraph (1), not more than ⅓ of the total amount paid to a State under this part for a fiscal year that is used to carry out State programs pursuant to provisions of law specified in paragraph (1) may be used to carry out State programs pursuant to subchapter XX of this chapter.”
Statutory Notes and Related Subsidiaries
Effective Date of 2008 AmendmentAmendment of this section and repeal of Pub. L. 110–234 by Pub. L. 110–246 effective May 22, 2008, the date of enactment of Pub. L. 110–234, except as otherwise provided, see section 4 of Pub. L. 110–246, set out as an Effective Date note under section 8701 of Title 7, Agriculture.
Amendment by sections 4002(b)(1)(A), (B), (2)(V) and 4115(c)(2)(G) of Pub. L. 110–246 effective Oct. 1, 2008, see section 4407 of Pub. L. 110–246, set out as a note under section 1161 of Title 2, The Congress.
Effective Date of 1999 AmendmentsPub. L. 106–169, title IV, § 401(l), Dec. 14, 1999, 113 Stat. 1858, provided that the amendment made by section 401(l) is effective Dec. 14, 1999.
For effective date of amendment by Pub. L. 106–113, see section 1000(a)(4) [title VIII, § 801(e)] of Pub. L. 106–113, set out as a note under section 603 of this title.
Effective Date of 1998 AmendmentPub. L. 105–178, title VIII, § 8401(c), June 9, 1998, 112 Stat. 499, provided that: “The amendments made by this section [amending this section and section 1397b of this title] take effect on October 1, 1998.”
Effective Date of 1997 AmendmentPub. L. 105–33, title V, § 5002(b), Aug. 5, 1997, 111 Stat. 594, provided that: “The amendments made by subsection (a) of this section [amending this section] shall take effect as if included in the enactment of section 103(a) of the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 [Pub. L. 104–193].”
Amendment by section 5503 of Pub. L. 105–33 effective as if included in section 103(a) of the Personal Responsibility and Work Opportunity Reconciliation Act of 1996, Pub. L. 104–193, at the time such section 103(a) became law, see section 5518(a) of Pub. L. 105–33, set out as a note under section 602 of this title.
Amendment by section 5514(c) of Pub. L. 105–33 effective as if included in the provision of Pub. L. 104–193 amended at the time the provision became law, see section 5518(d) of Pub. L. 105–33, set out as a note under section 862a of Title 21, Food and Drugs.
Effective DateSection effective July 1, 1997, with transition rules relating to State options to accelerate such date, rules relating to claims, actions, and proceedings commenced before such date, rules relating to closing out of accounts for terminated or substantially modified programs and continuance in office of Assistant Secretary for Family Support, and provisions relating to termination of entitlement under AFDC program, see section 116 of Pub. L. 104–193, as amended, set out as a note under section 601 of this title.
Assets for IndependencePub. L. 105–285, title IV, Oct. 27, 1998, 112 Stat. 2759, as amended by Pub. L. 106–554, § 1(a)(1) [title VI, §§ 602–607(a), 608(a), 609, 610], Dec. 21, 2000, 114 Stat. 2763, 2763A–74 to 2763A–76; Pub. L. 107–110, title VII, § 702(h), Jan. 8, 2002, 115 Stat. 1947; Pub. L. 114–95, title IX, § 9215(l), Dec. 10, 2015, 129 Stat. 2168, provided that:
(I) is—
(aa) a credit union designated as a low-income credit union by the National Credit Union Administration (NCUA); or
(bb) an organization designated as a community development financial institution by the Secretary of the Treasury (or the Community Development Financial Institutions Fund); and
(II) can demonstrate a collaborative relationship with a local community-based organization whose activities are designed to address poverty in the community and the needs of community members for economic independence and stability.
“(B) Rule of construction.—Nothing in this paragraph shall be construed as preventing an organization described in subparagraph (A)(i) from collaborating with a financial institution or for-profit community development corporation to carry out the purposes of this title.
“(8) Qualified expenses.—The term ‘qualified expenses’ means one or more of the following, as provided by a qualified entity:
“(A) Postsecondary educational expenses.—Postsecondary educational expenses paid from an individual development account directly to an eligible educational institution. In this subparagraph:
“(i) Postsecondary educational expenses.—The term ‘postsecondary educational expenses’ means the following:
“(I) Tuition and fees.—Tuition and fees required for the enrollment or attendance of a student at an eligible educational institution.
“(II) Fees, books, supplies, and equipment.—Fees, books, supplies, and equipment required for courses of instruction at an eligible educational institution.
“(ii) Eligible educational institution.—The term ‘eligible educational institution’ means the following:
“(I) Institution of higher education.—An institution described in section 101 or 102 of the Higher Education Act of 1965 [20 U.S.C. 1001, 1002].
“(II) Postsecondary vocational education school.—An area vocational education school (as defined in subparagraph (C) or (D) of section 521(4) of the Carl D. Perkins Vocational and Applied Technology Education Act (20 U.S.C. 2471(4))) which is in any State (as defined in section 521(33) of such Act), as such sections are in effect on the date of enactment of this title [Oct. 27, 1998].
“(B) First-home purchase.—Qualified acquisition costs with respect to a principal residence for a qualified first-time homebuyer, if paid from an individual development account directly to the persons to whom the amounts are due. In this subparagraph:
“(i) Principal residence.—The term ‘principal residence’ means a main residence, the qualified acquisition costs of which do not exceed 120 percent of the average area purchase price applicable to such residence.
“(ii) Qualified acquisition costs.—The term ‘qualified acquisition costs’ means the costs of acquiring, constructing, or reconstructing a residence. The term includes any usual or reasonable settlement, financing, or other closing costs.
“(iii) Qualified first-time homebuyer.—
“(I) In general.—The term ‘qualified first-time homebuyer’ means an individual participating in the project involved (and, if married, the individual’s spouse) who has no present ownership interest in a principal residence during the 3-year period ending on the date of acquisition of the principal residence to which this subparagraph applies.
“(II) Date of acquisition.—The term ‘date of acquisition’ means the date on which a binding contract to acquire, construct, or reconstruct the principal residence to which this subparagraph applies is entered into.
“(C) Business capitalization.—Amounts paid from an individual development account directly to a business capitalization account that is established in a federally insured financial institution (or in a State insured financial institution if no federally insured financial institution is available) and is restricted to use solely for qualified business capitalization expenses. In this subparagraph:
“(i) Qualified business capitalization expenses.—The term ‘qualified business capitalization expenses’ means qualified expenditures for the capitalization of a qualified business pursuant to a qualified plan.
“(ii) Qualified expenditures.—The term ‘qualified expenditures’ means expenditures included in a qualified plan, including capital, plant, equipment, working capital, and inventory expenses.
“(iii) Qualified business.—The term ‘qualified business’ means any business that does not contravene any law or public policy (as determined by the Secretary).
“(iv) Qualified plan.—The term ‘qualified plan’ means a business plan, or a plan to use a business asset purchased, which—
“(I) is approved by a financial institution, a microenterprise development organization, or a nonprofit loan fund having demonstrated fiduciary integrity;
“(II) includes a description of services or goods to be sold, a marketing plan, and projected financial statements; and
“(III) may require the eligible individual to obtain the assistance of an experienced entrepreneurial adviser.
“(D) Transfers to idas of family members.—Amounts paid from an individual development account directly into another such account established for the benefit of an eligible individual who is—
“(i) the individual’s spouse; or
“(ii) any dependent of the individual with respect to whom the individual is allowed a deduction under section 151 of the Internal Revenue Code of 1986 [26 U.S.C. 151].
“(9) Qualified savings of the individual for the period.—The term ‘qualified savings of the individual for the period’ means the aggregate of the amounts contributed by an individual to the individual development account of the individual during the period.
“(10) Secretary.—The term ‘Secretary’ means the Secretary of Health and Human Services, acting through the Director of Community Services.
“(11) Tribal government.—The term ‘tribal government’ means a tribal organization, as defined in section 4 of the Indian Self-Determination and Education Assistance Act (25 U.S.C. 450b) [now 25 U.S.C. 5304] or a Native Hawaiian organization, as defined in section 6207 of the Native Hawaiian Education Act [20 U.S.C. 7517].
“SEC. 405. APPLICATIONS.
“(a) Announcement of Demonstration Projects.—Not later than 3 months after the date of enactment of this title [Oct. 27, 1998], the Secretary shall publicly announce the availability of funding under this title for demonstration projects and shall ensure that applications to conduct the demonstration projects are widely available to qualified entities.
“(b) Submission.—Not later than 6 months after the date of enactment of this title, a qualified entity may submit to the Secretary an application to conduct a demonstration project under this title.
“(c) Criteria.—In considering whether to approve an application to conduct a demonstration project under this title, the Secretary shall assess the following:
“(1) Sufficiency of project.—The degree to which the project described in the application appears likely to aid project participants in achieving economic self-sufficiency through activities requiring one or more qualified expenses.
“(2) Administrative ability.—The experience and ability of the applicant to responsibly administer the project.
“(3) Ability to assist participants.—The experience and ability of the applicant in recruiting, educating, and assisting project participants to increase their economic independence and general well-being through the development of assets.
“(4) Commitment of non-federal funds.—The aggregate amount of direct funds from non-Federal public sector and from private sources that are formally committed to the project as matching contributions.
“(5) Adequacy of plan for providing information for evaluation.—The adequacy of the plan for providing information relevant to an evaluation of the project.
“(6) Other factors.—Such other factors relevant to the purposes of this title as the Secretary may specify.
“(d) Preferences.—In considering an application to conduct a demonstration project under this title, the Secretary shall give preference to an application that—
“(1) demonstrates the willingness and ability to select individuals described in section 408 who are predominantly from households in which a child (or children) is living with the child’s biological or adoptive mother or father, or with the child’s legal guardian;
“(2) provides a commitment of non-Federal funds with a proportionately greater amount of such funds committed from private sector sources; and
“(3) targets such individuals residing within one or more relatively well-defined neighborhoods or communities (including rural communities) that experience high rates of poverty or unemployment.
“(e) Approval.—Not later than 9 months after the date of enactment of this title [Oct. 27, 1998], the Secretary shall, on a competitive basis, approve such applications to conduct demonstration projects under this title as the Secretary considers to be appropriate, taking into account the assessments required by subsections (c) and (d). The Secretary shall ensure, to the maximum extent practicable, that the applications that are approved involve a range of communities (both rural and urban) and diverse populations.
“(f) Contracts With Nonprofit Entities.—The Secretary may contract with an entity described in section 501(c)(3) of the Internal Revenue Code of 1986 [26 U.S.C. 501(c)(3)] and exempt from taxation under section 501(a) of such Code to carry out any responsibility of the Secretary under this section or section 412 if—
“(1) such entity demonstrates the ability to carry out such responsibility; and
“(2) the Secretary can demonstrate that such responsibility would not be carried out by the Secretary at a lower cost.
“(g) Grandfathering of Existing Statewide Programs.—Any statewide individual asset-building program that is carried out in a manner consistent with the purposes of this title, that is established under State law as of the date of enactment of this Act [Oct. 27, 1998], and that as of such date is operating with an annual State appropriation of not less than $1,000,000 in non-Federal funds, shall be deemed to meet the eligibility requirements of this subtitle [title], and the entity carrying out the program shall be deemed to be a qualified entity. The Secretary shall consider funding the statewide program as a demonstration project described in this subtitle [title]. In considering the statewide program for funding, the Secretary shall review an application submitted by the entity carrying out such statewide program under this section, notwithstanding the preference requirements listed in subsection (d). Any program requirements under sections 407 through 411 that are inconsistent with State statutory requirements in effect on the date of enactment of this Act, governing such statewide program, shall not apply to the program.
“SEC. 406. DEMONSTRATION AUTHORITY; ANNUAL GRANTS.
“(a) Demonstration Authority.—If the Secretary approves an application to conduct a demonstration project under this title, the Secretary shall, not later than 10 months after the date of enactment of this title [Oct. 27, 1998], authorize the applicant to conduct the project for 5 project years in accordance with the approved application and the requirements of this title.
“(b) Grant Authority.—For each project year of a demonstration project conducted under this title, the Secretary may make a grant to the qualified entity authorized to conduct the project. In making such a grant, the Secretary shall make the grant on the first day of the project year in an amount not to exceed the lesser of—
“(1) the aggregate amount of funds committed as matching contributions from non-Federal public or private sector sources; or
“(2) $1,000,000.
“SEC. 407. RESERVE FUND.
“(a) Establishment.—A qualified entity under this title, other than a State or local government agency or a tribal government, shall establish a Reserve Fund that shall be maintained in accordance with this section.
“(b) Amounts in Reserve Fund.—
“(1) In general.—As soon after receipt as is practicable, a qualified entity shall deposit in the Reserve Fund established under subsection (a)—
“(A) all funds provided to the qualified entity from any public or private source in connection with the demonstration project; and
“(B) the proceeds from any investment made under subsection (c)(2).
“(2) Uniform accounting regulations.—The Secretary shall prescribe regulations with respect to accounting for amounts in the Reserve Fund established under subsection (a).
“(c) Use of Amounts in the Reserve Fund.—
“(1) In general.—A qualified entity shall use the amounts in the Reserve Fund established under subsection (a) to—
“(A) assist participants in the demonstration project in obtaining the skills (including economic literacy, budgeting, credit, and counseling skills) and information necessary to achieve economic self-sufficiency through activities requiring qualified expenses;
“(B) provide deposits in accordance with section 410 for individuals selected by the qualified entity to participate in the demonstration project;
“(C) administer the demonstration project; and
“(D) provide the research organization evaluating the demonstration project under section 414 with such information with respect to the demonstration project as may be required for the evaluation.
“(2) Authority to invest funds.—
“(A) Guidelines.—The Secretary shall establish guidelines for investing amounts in the Reserve Fund established under subsection (a) in a manner that provides an appropriate balance between return, liquidity, and risk.
“(B) Investment.—A qualified entity shall invest the amounts in its Reserve Fund that are not immediately needed to carry out the provisions of paragraph (1), in accordance with the guidelines established under subparagraph (A).
“(3) Limitation on uses.—Not more than 15 percent of the amounts provided to a qualified entity under section 406(b) shall be used by the qualified entity for the purposes described in subparagraphs (A), (C), and (D) of paragraph (1), of which not less than 2 percent of the amounts shall be used by the qualified entity for the purposes described in paragraph (1)(D). Of the total amount specified in this paragraph, not more than 7.5 percent shall be used for administrative functions under paragraph (1)(C), including program management, reporting requirements, recruitment and enrollment of individuals, and monitoring. The remainder of the total amount specified in this paragraph (not including the amount specified for use for the purposes described in paragraph (1)(D)) shall be used for nonadministrative functions described in paragraph (1)(A), including case management, budgeting, economic literacy, and credit counseling. If the cost of nonadministrative functions described in paragraph (1)(A) is less than 5.5 percent of the total amount specified in this paragraph, such excess funds may be used for administrative functions. If two or more qualified entities are jointly administering a project, no qualified entity shall use more than its proportional share for the purposes described in subparagraphs (A), (C), and (D) of paragraph (1).
“(d) Unused Federal Grant Funds Transferred to the Secretary When Project Terminates.—Notwithstanding subsection (c), upon the termination of any demonstration project authorized under this section, the qualified entity conducting the project shall transfer to the Secretary an amount equal to—
“(1) the amounts in its Reserve Fund at the time of the termination; multiplied by
“(2) a percentage equal to—
“(A) the aggregate amount of grants made to the qualified entity under section 406(b); divided by
“(B) the aggregate amount of all funds provided to the qualified entity from all sources to conduct the project.
“SEC. 408. ELIGIBILITY FOR PARTICIPATION.
“(a) In General.—Any individual who is a member of a household that is eligible for assistance under the State temporary assistance for needy families program established under part A of title IV of the Social Security Act (42 U.S.C. 601 et seq.), or that meets each of the following requirements shall be eligible to participate in a demonstration project conducted under this title:
[Pub. L. 106–554, § 1(a)(1) [title VI, § 607(b)], Dec. 21, 2000, 114 Stat. 2763, 2763A–76, provided that: “Notwithstanding the amendment made by subsection (a) [amending section 412(c) of Pub. L. 105–285, set out above], the submission of the initial report of a qualified entity under section 412(c) [section 412(c) of Pub. L. 105–285, set out above] shall not be required prior to the date that is 90 days after the date of enactment of this title [Dec. 21, 2000].”
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[Pub. L. 106–554, § 1(a)(1) [title VI, § 608(b)], Dec. 21, 2000, 114 Stat. 2763, 2763A–76, provided that: “Notwithstanding the amendment made by subsection (a) [amending section 414(d)(1) of Pub. L. 105–285, set out above], the submission of the initial interim report of the Secretary under section 412(c) [section 412(c) of Pub. L. 105–285, set out above] shall not be required prior to the date that is 90 days after the date of enactment of this title [Dec. 21, 2000].”
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