Financial Eligibility, 29695-29710 [05-10061]

Agencies

• LEGAL SERVICES CORPORATION

[Federal Register Volume 70, Number 99 (Tuesday, May 24, 2005)]
[Proposed Rules]
[Pages 29695-29710]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 05-10061]


=======================================================================
-----------------------------------------------------------------------

LEGAL SERVICES CORPORATION

45 CFR Part 1611


Financial Eligibility

AGENCY: Legal Services Corporation.

ACTION: Notice of proposed rulemaking.

-----------------------------------------------------------------------

SUMMARY: The Legal Services Corporation (``LSC'' or ``Corporation'') is 
republishing for additional comment previously proposed amendments 
(with certain additional revisions) to its regulations relating to 
financial eligibility for LSC-funded legal services. The proposed 
revisions are intended to reorganize the regulation to make it easier 
to read and follow; simplify and streamline the requirements of the 
rule to ease administrative burdens faced by LSC recipients in 
implementing the regulation and to aid LSC in enforcement of the 
regulation; and to clarify the focus of the regulation on the financial 
eligibility of applicants for LSC-funded legal services.

DATES: Comments must be submitted on or before June 23, 2005.

ADDRESSES: Comments must be submitted in writing and may be sent by 
regular mail, or may be transmitted by fax or email to: Mattie C. 
Condray, Senior Assistant General Counsel, Office of Legal Affairs, 
Legal Services Corporation, 3333 K. St., NW., Washington, DC 20007-
3522; (202) 337-6519 (fax); mcondray@lsc.gov (e-mail).

FOR FURTHER INFORMATION CONTACT: Mattie C. Condray, Senior Assistant 
General Counsel, Office of Legal Affairs, Legal Services Corporation, 
3333 K. St., NW., Washington, DC 20007-3522; (202) 295-1624 (phone); 
(202) 337-6519 (fax); mcondray@lsc.gov (e-mail).

SUPPLEMENTARY INFORMATION: Section 1007(a) of the Legal Services 
Corporation Act requires LSC to establish guidelines, including setting 
maximum income levels, for the determination of applicants' financial 
eligibility for LSC-funded legal assistance. Part 1611 implements this 
provision, setting forth the requirements relating to determination and 
documentation of client financial eligibility.

Procedural Background

    On June 30, 2001, LSC initiated a Negotiated Rulemaking and 
appointed a Working Group comprised of representatives of LSC 
(including the Office of Inspector General), the National Legal Aid and 
Defenders Association, the Center for Law and Social Policy, the 
American Bar Association's Standing Committee on Legal Aid and Indigent 
Defendants and a number of individual LSC recipient programs. The 
Negotiated Rulemaking Working Group met three times throughout 2002 and 
developed a Draft Notice of Proposed Rulemaking (NPRM) which was the 
basis for the NPRM published by LSC on November 22, 2002 proposing 
significant revisions to to Part 1611 (67 FR 70376). LSC received 15 
comments on that NPRM. Except as specifically noted in the Section-by-
Section analysis below, the comments LSC received either affirmatively 
supported or raised no objection to the proposals in the November 2002 
NPRM.\1\
---------------------------------------------------------------------------

    \1\ For additional discussion of the Negotiated Rulemaking 
Working Group, see 67 FR 70376 (November 22, 2002).
---------------------------------------------------------------------------

    Upon receipt of the comments, LSC staff prepared a Draft Final Rule 
discussing the comments and making permanent the proposed revisions.

[[Page 29696]]

However, on the eve of the January 31-February 1, 2003 Board of 
Directors meeting at which the Draft Final Rule was scheduled to be 
considered, LSC received a request from Representative James 
Sensenbrenner, Chairman of the U.S. House of Representatives Judiciary 
Committee, to suspend action on the rulemaking pending the confirmation 
of new LSC Board of Directors members appointed by President Bush. The 
then-LSC Operations and Regulations Committee deferred to Chairman 
Sensenbrenner's request. After the confirmation of the nine newly 
appointed Board members, the reconsitituted Operations and Regulations 
Committee further deferred action on the rulemaking pending the 
appointment of a new LSC President. After the arrival of the new LSC 
President in January 2004, the reconstituted Operations and Regulations 
Committee resumed consideration of the Part 1611 rulemaking.
    At its meetings of May 1, 2004, June 5, 2004 and September 11, 
2004, the Operations and Regulations Committee discussed and provided 
policy direction to staff on the two aspects of the proposed changes to 
the regulations about which LSC and the field had failed to achieve 
consensus during the Working Group meetings--retainer agreements and 
group representation. The Committee reviewed these proposals and the 
remainder of the proposed revisions to Part 1611 at its meeting of 
April 1, 2005. At the meeting of the full Board of Directors on April 
30, 2005, upon the recommendation of the Committee, the Board 
determined that because two years has passed since the publication of 
the November 2002 NPRM, rather than adopting a final rule amending Part 
1611, the most prudent course of action would be to republish a revised 
NPRM for public comment. Accordingly, except for the retainer agreement 
and group eligibility sections, LSC is proposing the same revisions 
(with only a few, non-substantive differences) as LSC proposed in 
November 2002 and requests public comment thereon.

Proposed Revisions to Part 1611

    While specific proposed revisions are discussed in greater detail 
in the Section-by-Section analysis below, it should be noted that the 
proposed revisions reflect several overall goals of the Working Group: 
reorganization of the regulation to make it easier to read and follow; 
simplification and streamlining of the requirements of the rule to ease 
administrative burdens faced by LSC recipients in implementing the 
regulation, facilitate compliance and aid LSC in enforcement of the 
regulation; and clarification of the focus of the regulation on the 
financial eligibility of applicants for LSC-funded legal services as an 
issue separate from decisions on whether to accept a particular client 
for service. In particular, LSC is proposing to significantly 
reorganize and simplify the sections of the rule which set forth the 
various requirements relating to establishment of recipient annual 
income and asset ceilings, authorized exceptions and determinations of 
eligibility. These changes are intended to clarify the regulation and 
include substantive changes to make intake simpler and less burdensome 
and render basic financial eligibility determinations easier for 
recipients to make. LSC is also proposing to move the existing 
provisions on group representation, with some amendment, to a separate 
section of the regulation. Finally, LSC is proposing simplification and 
clarification of the retainer agreement requirement.
    One other general issue merits discussion. Section 509(h) of the FY 
1996 LSC appropriations act, Public Law 104-134, provides that, among 
other records, eligibility records ``shall be made available to any 
auditor or monitor of the recipient * * * except for such records 
subject to the attorney-client privilege.'' This provision has been 
retained in each subsequent appropriations measure and continues to be 
in force. During the prior stages of this rulemaking, there had been 
some discussion and consideration of having this language expressly 
incorporated into Part 1611. LSC continues to believe that, as 509(h) 
covers significantly more than eligibility records, having a full 
discussion of the meaning of 509(h) in the context of 1611, which 
addresses only financial eligibility issues, is not appropriate. 
Accordingly, LSC does not propose to include regulatory language 
implementing 509(h) with respect to records covered by this Part. For a 
fuller discussion of this issue, see the preamble to the November 22, 
2002 NPRM, 67 FR 70376.

Title of Part 1611

    LSC proposes to change the title of Part 1611 from ``Eligibility'' 
to ``Financial Eligibility.'' This proposed change is intended, first, 
to make clear that with respect to individuals seeking LSC-funded legal 
assistance, the standards of this part deal only with the financial 
eligibility of such persons. LSC believes this change will help clarify 
that a finding of financial eligibility under Part 1611 does not create 
an entitlement to service. Rather, financial eligibility is merely a 
threshold question and the issue of whether any otherwise eligible 
applicant will be provided with legal assistance is a matter for the 
recipient to determine with reference to its priorities and resources. 
In addition, this part does not address eligibility based on 
citizenship or alienage status; those eligibility requirements are set 
forth in Part 1626 of LSC's regulations, Restrictions on Legal 
Assistance to Aliens.

Section-by-Section Analysis

Section 1611.1--Purpose

    LSC is proposing to revise this section to make clear that the 
standards of this part concern only the financial eligibility of 
persons seeking LSC-funded legal assistance and that a finding of 
financial eligibility under Part 1611 does not create an entitlement to 
service. In addition, LSC proposes to remove the language in the 
current regulation referring to giving preferences to ``those least 
able to obtain legal assistance.'' Although the original LSC Act 
contained language indicating that recipients should provide 
preferences in service to the poorest among applicants, that language 
was deleted when the Act was reauthorized in 1977 and has remained out 
of the legislation ever since. Moreover, section 504(a)(9) of the FY 
1996 appropriations act, Public Law 104-134 (incorporated by reference 
in the current appropriations act and implemented by regulation at 45 
CFR part 1620) provides that recipients are to make service 
determinations in accordance with written priorities, which take into 
account factors other than the relative poverty among applicants. Thus, 
as there is no statutory basis for a preference for those least able to 
afford assistance and because LSC believes that the regulation should 
focus on financial eligibility determinations without reference to 
issues relating to determinations by a recipient to provide services to 
a particular applicant, such language should be removed from the 
regulation. LSC also proposes to add language specifying that this Part 
also sets forth financial standards for groups seeking legal assistance 
supported by LSC funds. Finally, LSC proposes to include a reference to 
the retainer agreement requirement in the purpose section to provide a 
notice at the beginning of the regulation that this subject is included 
in Part 1611.

Section 1611.2--Definitions

    LSC proposes to add definitions for several terms and to amend the

[[Page 29697]]

definitions for each of the existing terms currently defined in the 
regulation. LSC believes that the new definitions and the amended 
definitions will help to make the regulation more easily 
comprehensible.

Section 1611.2(a)--Advice and Counsel

    LSC proposes to add a definition of the term ``advice and counsel'' 
as that term appears in proposed section 1611.9, Retainer Agreements. 
Under the proposed definition, ``advice and counsel'' would be defined 
as limited legal assistance that involves the review of information 
relevant to the client's legal problem(s) and counseling the client on 
the relevant law or action(s) to take to address the legal problem(s). 
LSC anticipates that advice and counsel would generally be 
characterized by a one-time or very short term relationship between the 
attorney and the client. Advice and counsel does not encompass drafting 
of documents or making third-party contacts on behalf of the client. 
Thus, for example, advising a client of what notice a landlord is 
required to provide to a tenant before evicting the tenant would fall 
under ``advice and counsel,'' but making a phone call to a landlord to 
prevent the landlord from evicting a tenant would not be considered 
``advice and counsel.''

Section 1611.2(b)--Applicable Rules of Professional Responsibility

    LSC proposes to add a definition of the term ``applicable rules of 
professional responsibility'' as that term appears in proposed sections 
1611.8, Change in Financial Eligibility Status and 1611.9, Retainer 
Agreements. This definition is intended to make clear that the 
references in the regulation refer to the rules of ethics and 
professional responsibility applicable to attorneys in the jursidiction 
where the recipient either provides legal services or maintains its 
records.

Section 1611.2(c)--Applicant

    Consistent with the intention throughout to keep the focus of the 
regulation on the standards and criteria for determining the financial 
eligibility of persons seeking legal assistance supported with LSC 
funds, LSC proposes to use the term ``applicant'' throughout the 
regulation to emphasize the distinction between applicants, clients, 
and persons seeking or receiving assistance supported by other than LSC 
funds. Accordingly, LSC proposes to add a definition of applicant 
providing that an applicant is an individual seeking legal assistance 
supported with LSC funds. Groups, corporations and associations would 
be specifically excluded from this definition, as the eligibility of 
groups would be addressed wholly within proposed section 1611.6.
    Recipients currently may provide legal assistance without regard to 
a person's financial eligibility under Part 1611 when the assistance is 
supported wholly by non-LSC funds. LSC does not propose to change this 
(in fact, LSC proposes to restate this principle in proposed section 
1611.4(a)) and believes that the use of the term applicant as proposed 
herein will help to clarify the application of the rule.

Section 1611.2(d)--Assets

    LSC proposes to add a definition of the term assets to the 
regulation. The proposed definition, ``cash or other resources that are 
readily convertible to cash, which are currently and actually available 
to the applicant,'' is intended to provide some guidance to recipients 
as to what is meant by the term assets, yet provide considerable 
latitude to recipients in developing a description of assets that 
addresses local concerns and conditions. The key concepts intended in 
this definition are (1) ready convertibility to cash; and (2) 
availability of the resource to the applicant.
    Although the term is not defined in the regulation, current section 
1611.6(c) states that ``assets considered shall include all liquid and 
non-liquid assets. * * *'' The intent of this requirement is that 
recipients are supposed to consider all assets upon which the applicant 
could draw in obtaining private legal assistance. While there was no 
intent to change the underlying requirement, in discussing the issues 
of assets and asset ceilings in the Working Group it became apparent 
that the terms ``liquid'' and ``non-liquid'' were obscuring 
understanding of the regulation. To some, the term ``non-liquid'' 
implied something not readily convertible to cash, while to others the 
term implied an asset that was simply something other than cash, 
without regard to the ease of converting the asset to cash. Thus, the 
Working Group decided that the terms ``liquid'' and ``non-liquid'' 
should be eliminated and that the regulation should focus instead on 
the ready convertibility of the asset to cash.
    The other key concept in the definition of asset is the 
availability of the resource to the applicant. Although the current 
regulation notes that the recipient's asset guidelines ``shall take 
into account impediments to an individual's access to assets of the 
family unit or household,'' the Working Group was of the opinion that 
this principle could be more clearly articulated. LSC believes that the 
proposed language accomplishes that purpose.

Section 1611.2(e)--Brief Services

    LSC proposes to add a definition of the term ``brief services'' as 
it is used in proposed section 1611.9, Retainer Agreements. LSC notes 
that brief services is legal assistance characterized primarily by 
being distinguishable from both extended service and advice and 
counsel. Under the proposed defintion, brief service is the performance 
of a discrete task (or tasks) which are not incident to continuous 
representation in a case but which involve more than the mere provision 
of advice and counsel. Examples of brief services would include 
activities such as the drafting of documents or personalized assistance 
with the completion of pleadings being prepared and filed by pro se 
litigants, and making limited third-party contacts on behalf of a 
client in a short time period.

Section 1611.2(f)--Extended Service

    LSC proposes to add a definition of the term ``extended service'' 
as that term is used in proposed section 1611.9, Retainer Agreements. 
As defined, extended service would mean legal assistance characterized 
by the performance of multiple tasks incident to continuous 
representation in which the recipient undertakes responsibility for 
protecting or advancing the client's interests beyond advice and 
counsel or brief services. Examples of extended service would include 
representation of a client in litigation, administrative adjudicative 
proceeding, alternate dispute resolution proceeding, or extended 
negotiations with a third party.

Section 1611.2(f)--Governmental Program for Low Income Individuals or 
Families

    LSC proposes to change the term that is used in the regulation from 
``governmental program for the poor'' to ``governmental program for low 
income individuals and families.'' This change is not intended to 
create any substantive change in the current definition, but merely 
reflect preferred nomenclature.

Section 1611.2(g)--Governmental Program for Persons With Disabilities

    LSC is proposing to add a definition of the term ``governmental 
program for persons with disabilities.'' LSC proposes to include in the 
authorized exceptions to the annual income ceilings an exception 
relating to applicants seeking to obtain or maintain govermental 
benefits for persons with disabilities. Accordingly, it is appropriate 
to include

[[Page 29698]]

a proposed definition for this term. The proposed definition, ``any 
Federal, State or local program that provides benefits of any kind to 
persons whose eligibility is determined on the basis of mental and/or 
physical disability,'' is intended to be similar in structure and 
application to the definition of the term ``governmental program for 
low income individuals and families.''

Section 1611.2(h)--Income

    LSC proposes to revise the current definition of income to refer to 
the total cash receipts of a ``household,'' instead of a ``family 
unit'' and to make clear that recipients have the discretion to define 
the term household in any reasonable manner. Currently, the definition 
of income refers to ``family unit,'' while the phrase ``household or 
family unit'' appears in the section on asset ceilings. It appears that 
there is no difference intended by the use of different terms in these 
sections and LSC believes that it is appropriate to simplify the 
regulation to use the same single term in each provision, without 
creating a substantive change in the meaning of either term. LSC 
proposes to use ``household'' instead of ``family unit'' because it is 
a simpler, more understandable term.
    As noted above, LSC does not intend the use of the term 
``household'' to have a different meaning from the current term 
``family unit.'' Under current guidance from the LSC Office of Legal 
Affairs, recipients have considerable latitude in defining the term 
``family unit.'' Specifically, OLA External Opinion No. EX-2000-1011 
states:

    Neither the LSC Act nor the LSC regulations define ``family 
unit'' for client eligibility purposes. The Corporation will defer 
to recipient determinations on this issue, within reason. Recipients 
may consider living arrangements, familial relationships, legal 
responsibility, financial responsibility or family unit definitions 
used by government benefits agencies, amongst other factors, in 
making such decisions.

    LSC intends that this standard would also apply to definitions of 
``household'' and the proposed definition would make this clear.
    Field representatives on the Working Group and several comments on 
the November 2002 NPRM also suggested deleting the words ``before 
taxes'' from the definition of income. Such a change is desirable, they 
contend, because automatically deducted taxes are not available for an 
applicant's use and the failure to take current taxes into account in 
determining income has an adverse impact on the working poor. While it 
is undoubtedly true that automatically deducted taxes are not available 
to an applicant, LSC does not believe that the definition of income is 
the appropriate place in the regulation to deal with this issue.
    Taking the phrase ``before taxes'' out of the definition of income 
would effectively change the meaning of income from gross income to net 
income. The term income has meant gross income since the original 
adoption of the financial eligibility regulation in 1976. See 41 FR 
51604, at 51606, November 23, 1976. The maximum income guidelines are 
based on the Department of Health and Human Services (DHHS) Federal 
Poverty Guidelines amounts. DHHS' Federal Poverty Guidelines are, by 
law, based on the Census Bureau's Federal Poverty Thresholds, which are 
calculated using gross income before taxes. 42 U.S.C. 9902(2); Office 
of Management and Budget Directive No. 14 (May 1978). Changing the 
definition of income effectively from gross to net would introduce two 
different uses of the term income into the regulations (one use in the 
income guidelines published annually by LSC in Appendix A to Part 1611 
and another use in the text of the regulation). This would have 
significant repercussions in the application of the regulation. LSC 
believes that this action would cause greater confusion. None of the 
comments previously received supporting removal of ``before taxes'' 
from the definition of income address this issue. Moreover, LSC 
believes that the practical problem (that taxes, indeed, are funds 
unavailable to the applicant), is better addressed by considering taxes 
as a separate factor which can be considered by the recipient in making 
financial eligibility determinations. LSC invites comment on this 
issue. This matter is presented in greater detail in the discussion of 
proposed section 1611.5, below.
    In addition, LSC proposes to move the information on what is 
encompassed by the term ``total cash receipts'' into the definition of 
income. LSC believes that having this information in the definition of 
income, rather than in a separate definition will make the regulation 
easier to understand, particularly as the term ``total cash receipts'' 
is used only in the definition of income. In incorporating the language 
on ``total cash receipts,'' LSC proposes to take the current definition 
of the term without any substantive amendment, but reorganized to make 
it easier to understand. Specifically, LSC proposes to separate the 
definition into two sentences, one of which sets forth those things 
which are included in total cash receipts and one which sets forth 
those things which are specifically excluded from the definition of 
total cash receipts. It is worth noting that the list of items included 
is not intended to be exhaustive, while the list of items to be 
excluded is intended to be exhaustive.
    Finally, LSC wishes to restate in this preamble guidance on the 
treatment of Indian trust fund monies in making income determinations. 
Several provisions of Federal law regulate whether or not income or 
interests in Indian trusts are taxable or should be considered as 
resources or income for Federal benefits. See 25 U.S.C. 1407-1408; 25 
U.S.C. 117a-117c. Under the terms of those laws, LSC has determined 
that recipients may disregard up to $2000 per year of funds received by 
individual Native Americans that are derived from income or interests 
in Indian trusts from being considered income for the purpose of 
determining financial eligibility of Native American applicants for 
service, and that such funds or interests of individual Native 
Americans in trust or restricted lands should not be considered as a 
resource for the purpose of LSC financial eligibility. See LSC Office 
of Legal Affairs External Opinion 99-17, August 27, 1999.
    As noted in External Opinion 99-17, the exclusion applies only to 
funds and other interests held in trust by the Federal government and 
investment income accrued therefrom. The following have been found to 
qualify for the exclusion from income in determining eligibility for 
various government benefits: income from the sale of timber from land 
held in trust; income derived from farming and ranching operations on 
reservation land held in trust by the Federal government; income 
derived from rentals, royalties, and sales proceeds from natural 
resources of land held in trust; sales proceeds from crops grown on 
land held in trust; and use of land held in trust for grazing purposes. 
On the other hand, per capita distributions of revenues from gaming 
activity on tribal trust property are not protected because such funds 
are not held in trust by the Federal government. Thus, such 
distributions are considered to be income for purposes of determining 
LSC financial eligibility.

Total Cash Receipts

    LSC proposes to delete the definition of ``total cash reciepts,'' 
currently at section 1611.2(h), as a separately defined term in the 
regulation. Rather, LSC proposes to reorganize the information 
contained in the definition and move it directly into the definition of 
``income.'' As noted above, the only place the term ``total cash 
reciepts'' is

[[Page 29699]]

used is in the defintion of ``income'' and LSC believes that having a 
separate definition for ``total cash reciepts'' is cumbersome and 
unnecessary.

Section 1611.3--Financial Eligibility Policies

    LSC proposes to create a new section 1611.3, Financial Eligibility 
Policies, based on requirements currently found in sections 1611.5(a), 
1611.3(a)-(c) and 1611.6. The new section 1611.3 would address in one 
section recipients' responsibilities for adopting and implementing 
financial eligibility policies. Under the proposed new section, the 
current requirement that recipients' governing bodies have to adopt 
policies for determining financial eligibility would be retained. LSC 
proposes, however, to change the current requirement for an annual 
review of these policies and instead require recipients' governing 
bodies to conduct triennial reviews of policies. The Working Group 
agreed that an annual review was unnecessary and has tended to result 
in rather pro forma reviews of policies. In contrast, a triennial 
review requirement would be sufficient to ensure that financial 
eligibility policies remain relevant and would encourage a more 
thorough and thoughtful review when such review is undertaken. The 
section would also add an express requirement that recipients adopt 
implementing procedures. While this is already implicit in the current 
regulation, LSC believes it would be better for this requirement to be 
expressly stated. Such implementing procedures could be adopted either 
by a recipient's governing body or by the recipient's management.
    Proposed section 1611.3 would also contain certain minimum 
requirements for the content of recipient's financial eligibility 
policies. Specifically, LSC proposes that the recipient's financial 
eligibility policy must:
     Specify that only applicants for service determined to be 
financially eligible under the policy may be further considered for 
LSC-funded service;
     Establish annual income ceilings of no more than 125% of 
the current DHHS Federal Poverty Guidelines amounts;
     Establish asset ceilings; and
     Specify that, notwithstanding any other provisions of the 
regulation or the recipient's financial eligibility policies, in 
assessing the financial eligibility of an individual known to be a 
victim of domestic violence, the recipient shall consider only the 
income and assets of the individual applicant and shall not consider 
any assets jointly held with the abuser.
    In establishing income and asset ceilings, the recipient would have 
to consider the cost of living in the locality; the number of clients 
who can be served by the resources of the recipient; the potentially 
eligible population at various ceilings; and the availability of other 
sources of legal assistance. With respect to assets of domestic 
violence victims jointly held with their abusers, this requirement 
applies when the applicant has made the recipient aware that he or she 
is a victim of domestic violence.
    In addition, LSC proposes to permit recipients to adopt financial 
eligibility policies which provide for authorized exceptions to the 
annual income ceiling pursuant to proposed section 1611.5 and for 
waiver of the asset ceiling for an applicant in a particular case under 
unusual circumstances and when approved by the Executive Director or 
his/her designee. Finally, LSC proposes to permit recipients to adopt 
financial eligibility policies which permit financial eligibility to be 
established by reference to an applicant's receipt of benefits from a 
governmental program for low-income individuals or families consistent 
with proposed section 1611.4(b).
    These proposed provisions are, with two exceptions, based directly 
on current requirements with a few substantive changes. First among the 
changes, recipients would no longer be required to routinely submit 
their asset ceilings to LSC. This requirement appears to serve little 
or no purpose, as compliance with this requirement has been spotty and 
LSC has taken no action to obtain the information from recipients which 
have not automatically submitted it. Moreover, the information 
collected is not being put to any routine use. In addition, LSC has not 
had a parallel requirement for the submission of income ceilings. The 
Working Group determined that this requirement could be eliminated 
without any adverse effect on program compliance with or Corporation 
enforcement of the regulation.
    Another substantive change is that recipients would be permitted to 
provide in their financial eligibility policies for the exclusion of 
(in addition to a primary residence, as provided for in the existing 
regulation) vehicles, assets used in producing income (such as a 
farmer's tractor or a carpenter's tools) and other assets excluded from 
attachment under State or Federal law from the calculation of assets. 
In identifying other assets excluded from attachment under State or 
Federal law, LSC has in mind assets that are excluded from bankruptcy 
proceedings or other assets that may not be attached for the 
satisfaction of a debt, etc.
    There was discussion within the Working Group about the appropriate 
scope of this provision. Field representatives suggested that the list 
of exclusions should be illustrative, and not exhaustive, allowing 
recipients greater discretion in developing asset ceilings. Four of the 
comments LSC received on the November 2002 NPRM agreed with the 
suggestion that the list should be illustrative rather than exhaustive. 
LSC, however, prefers to retain the approach in the current regulation 
in which the list of excludable assets is set forth in toto. LSC 
believes that this approach emphasizes the policy that most assets are 
to be considered and maintains a basic level of consistency nationally 
with respect to this issue. However, LSC does agree that the regulation 
could afford recipients some additional flexibility in developing asset 
ceilings, consistent with the policy articulated above. The Working 
Group believes that the proposed language meets those objectives, 
particularly in light of the proposed amendment to the asset ceiling 
waiver standard discussed below. LSC invites comment on whether the 
list should be illustrative or exhaustive. LSC also invites comment on 
whether additional specific assets should be included in the list of 
excludable assets and, if so, what items might be appropriate.
    LSC is also proposing to change the asset ceiling waiver standard 
slightly. The current regulation permits waiver in ``unusual or 
extremely meritorious situations;'' the proposed rule would permit 
waiver in ``unusual circumstances.'' The Working Group determined that 
the current language is unnecessarily stringent and that it is unclear 
what the difference is intended to be between ``unusual'' and 
``extremely meritorious.'' It was suggested in the Working Group that 
the standard should be ``where appropriate.'' LSC, however, felt that 
the regulation should continue to reflect the policy that waivers of 
the asset ceilings should only be granted sparingly and not as a matter 
of course. The Working Group agreed that the revised language 
accomplishes this goal, while providing some additional appropriate 
discretion to recipients. In addition, where the current rule requires 
all waiver decisions to be made by the Executive Director, LSC proposes 
to permit those decisions to be made by the Executive Director or his/
her designee. LSC believes it is important that a person in significant 
authority be involved in making asset ceiling waiver decisions,

[[Page 29700]]

but recognizes that, especially as more recipients have consolidated 
and now serve larger areas, it is important for recipients to have the 
discretion to delegate certain authority to regional or branch office 
managers or directors to increase administrative efficiency.
    The first totally new element is the proposed language regarding 
victims of domestic violence. This proposal implements LSC's FY 1998 
appropriations law. Specifically, section 506 of that act provides:

In establishing the income or assets of an individual who is a 
victim of domestic violence, under section 1007(a)(2) of the Legal 
Services Corporation Act (42 U.S.C. 2996f(a)(2)), to determine if 
the individual is eligible for legal assistance, a recipient 
described in such section shall consider only the assets and income 
of the individual and shall not include any jointly held assets.

Although this law has been in effect since 1997, it has never been 
formally incorporated into Part 1611. This provision of law applies 
regardless of whether it appears in the regulation. However, 
incorporating this language into the regulation is appropriate, 
particularly in light of the goal of this rulemaking to clarify the 
requirements relating to financial eligibility determinations.
    Finally, the proposal to permit recipients to adopt financial 
eligibility policies which permit financial eligibility to be 
established by reference to an applicant's receipt of benefits from a 
governmental program for low-income individuals or families consistent 
with proposed section 1611.4(b) is also new. This proposal is discussed 
in greater detail below.

Section 1611.4--Financial Eligibility for Legal Assistance

    This proposed section would set forth the basic requirement that 
recipients may provide legal assistance supported with LSC funds only 
to those individuals whom the recipient has determined are financially 
eligible for such assistance pursuant to their policies, consistent 
with this Part. This section also contains a proposed statement that 
nothing in Part 1611 prohibits a recipient from providing legal 
assistance to an individual without regard to that individual's income 
and assets if the legal assistance is supported wholly by funds from a 
source other than LSC (regardless of whether LSC funds were used as a 
match to obtain such other funds, as is the case with Title III or VOCA 
grant funds) and the assistance is otherwise permissible under 
applicable law and regulation. This proposed section would further 
provide that a recipient may find an applicant to be financially 
eligible if the applicant's assets are at or below the recipient's 
applicable asset ceiling level (or the ceiling has been properly 
waived) and the applicant's income is at or below the recipient's 
applicable income ceiling, or if one or more of the authorized 
exceptions to the ceiling applies. These provisions are based on 
existing provisions found in sections 1611.3, 1611.4 and 1611.6. As 
revised, the new provisions do not represent a substantive change, but 
LSC believes having the basic statements as to who may be found to be 
financially eligible for assistance in one section makes the regulation 
much clearer. In addition, where the existing regulation uses a 
construction that speaks to when a recipient may provide legal 
assistance, the proposed new language emphasizes the point that the 
requirements speak only to determinations of financial eligibility and 
not to decisions regarding whether or not to actually provide legal 
assistance.
    LSC also proposes to incorporate into this section a significant 
substantive change to the regulation. Consistent with proposed section 
1611.3 as discussed above, if adopted, the regulation would permit 
recipients to determine an applicant to be financially eligible because 
the applicant's income is derived solely from a governmental program 
for low-income individuals or families, provided that the recipient's 
governing body has determined that the income standards of the 
governmental program are at or below 125% of the Federal Poverty 
Guidelines amounts. For many recipients, a significant proportion of 
applicants rely on governmental benefits for low-income individuals and 
families as their sole source of income. In order to qualify for these 
benefits, such persons have already been screened by the agency 
providing the benefits (using an eligibility determination process that 
is stricter than the one required under LSC regulations) and determined 
to be financially eligible for those benefits. In Working Group 
discussions, many representatives of the field noted that if they could 
rely on the determinations made by these agencies without having to 
otherwise make an independent inquiry into financial eligibility, it 
would substantially ease the administrative burden involved in making 
financial eligibility determinations.
    The Working Group also noted that current LSC practice permits 
recipients to determine that an applicant's assets are within the 
recipient's asset ceiling level without additional review if the 
applicant is receiving governmental benefits for low-income individuals 
and families, eligibility for which includes an asset test. Key to this 
practice is that the recipient's governing body has to take some 
identifiable action to recognize the asset test of the governmental 
benefit program being relied upon. This ensures that the eligibility 
standards of the govermental program have been carefully considered and 
are incorporated into the overall financial eligibility policies 
adopted and regularly reviewed by the recipient's governing body. As 
this practice has proved efficient and effective, it was determined 
that a parallel process could also be adopted for income screening and 
that these practices should be expressly included in the regulations. 
It is important to note that this provision would only apply to 
applicants whose sole source of income is derived from such benefits. 
Applicants who also have income derived from other sources would be 
subject to an independent inquiry and assessment of financial 
eligibility.
    Finally, in the November 2002 NPRM, LSC proposed to include in this 
section a provision requiring recipients to make reasonable inquiry 
into an applicant's financial status in making financial eligibility 
determinations. Upon reflection, LSC believes that this requirement is 
better included in proposed section 1611.7, Manner of Determining 
Financial Eligibility and has moved this proposal to that section. For 
a detailed discussion of this issue, see the discussion of proposed 
section 1611.7, below.

Section 1611.5--Authorized Exceptions to the Annual Income Ceiling

    This proposed section provides for authorized exceptions to the 
annual income ceiling. The proposed language, like the current language 
of sections 1611.4 and 1611.5, on which it is based, is permissive. A 
recipient would be at liberty to include some, none, or all of the 
authorized exceptions discussed below in its financial eligibility 
policies. Thus, to the extent a recipient would choose to avail itself 
of the authority provided in this proposed section, a recipient would 
be permitted to determine an applicant to be financially eligible for 
assistance, notwithstanding that the applicant's income is in excess of 
the recipient's applicable income ceiling. In making such 
determinations, however, the recipient would have to detemine that the 
applicant's assets were at or below the recipient's applicable asset 
ceiling (or the ceiling would have had to have been waived). This 
requirement is consistent with the

[[Page 29701]]

current regulation, but would be affirmatively stated for greater 
clarity.
    Under the proposed section, there would be two situations in which 
an applicant's income could exceed the recipient's income ceiling 
without an absolute upper limit: (1) Where the applicant is seeking to 
maintain governmental benefits for low-income individuals and families; 
and (2) where the executive director (or his/her designee) determines, 
on the basis of documentation received by the recipient, that the 
applicant's income is primarily committed to medical or nursing home 
expenses and, in considering only that portion of the applicant's 
income which is not so committed, the applicant would otherwise be 
financially eligible.
    The first instance would be a new addition to the regulation. 
Currently, an applicant seeking to obtain governmental benefits for low 
income persons may be deemed financially eligible if the applicant's 
income does not exceed 150% of the LSC national eligibility level. The 
existing regulation, however, does not specifically address applicants 
seeking to maintain such benefits. Thus, under the current regulation, 
an applicant whose income is over the income ceiling but under 150% of 
the LSC national eligibility level may be deemed financially eligible 
for assistance in obtaining benefits, but not for assistance in 
maintaining them. Thus, the applicant seeking assistance to maintain 
benefits would have to be turned down, but that same applicant could 
then be found financially eligible for assistance to re-obtain such 
benefits once the benefits were lost. Accordingly, LSC proposes to 
address this problem in the regulation. However, unlike the situation 
in obtaining the benefits, in seeking to maintain benefits LSC 
considers an upper limit on income unnecessary since in such cases the 
applicant's income will necessarily be rather limited (for the 
applicant to have been eligible in the first place for the benefits he 
or she is seeking to maintain).
    The second instance is taken from section 1611.5(b)(1)(B) of the 
current regulation addressing instances in which the applicant's income 
is primarily devoted to medical or nursing home expenses and does not 
represent a substantive change in the current regulation. LSC does 
propose to specify in the regulation, however, that in such cases the 
recipient is still required to make a determination of financial 
eligibility with regard to the applicant's remaining income. The 
existing regulation could be read to permit an applicant with an income 
of $300,000 to be deemed financially eligible if $250,000 of the income 
is devoted to nursing home expenses, notwithstanding that the 
applicant's remaining income is $50,000--substantially in excess of the 
income ceiling. This situation is not intended, and, indeed, LSC has no 
reason to believe recipients are serving such persons. However, 
consistent with the overall goal of clarifying the regulation, LSC 
believes that a requirement that an applicant must be otherwise 
financially eligible considering only that portion of the applicant's 
income which is not devoted to medical or nursing home expenses should 
be clearly set forth in the regulation.
    LSC received two comments on the November 2002 NPRM regarding this 
proposed revision. Both comments asked LSC to remove the requirement 
that the determination that the applicant's income is primarily 
committed to medical or nursing home expenses be made by the Executive 
Director or his/her designee. These commenters argued that removing 
this requirement would afford recipients greater administrative 
flexibility in making financial eligibility determinations. One comment 
also argued that such a change is justified because other sections of 
the rule do not require determinations made by the Executive Director 
(or designee). The existing rule, however, does require that the 
Executive Director make determinations regarding whether an applicant's 
income is primarily committed to medical or nursing home expenses. LSC 
believes it is important to continue this requirement in this instance 
because a recipient is making a determination of financial eligibility 
for an applicant whose income exceeds the otherwise absolute upper 
limit of the income ceiling, that such a determination be made by a 
person in significant authority.\2\ This is similar to the LSC view 
regarding decisions to waive the asset ceiling. LSC does understand, 
however, that it is important for recipients to have the discretion to 
delegate certain authority to regional or branch office managers or 
directors to increase administrative efficiency. This is why LSC 
proposes broadening the existing rule to permit the Executive Director 
to designate a responsible individual to make such determinations. LSC 
believes that this approach provides additional administrative 
flexibility to recipients, yet is consistent with the underlying 
policy.
---------------------------------------------------------------------------

    \2\ This situation is distinguishable from the other exception 
to the absolute income limit relating to applicants seeking to 
maintain governmental benefits for low income persons. As noted 
above, in those instances, the applicant's income will already be 
rather limited, even if exceeding the absolute income ceiling. In 
the medical/nursing home expenses situation, this may not be the 
case and the applicant's income may be considerably in excess of the 
ceiling.
---------------------------------------------------------------------------

    LSC also proposes to permit exceptions for certain situations in 
which the applicant's income is in excess of the recipient's applicable 
income ceiling, but does not exceed 200% of the applicable Federal 
Poverty Guidelines amount. At the outset, LSC notes that this section 
also proposes to change the current upper income limit of 150% of the 
LSC national income guidelines amount, which is 150% of 125% of the 
Federal Poverty Guidelines amounts, or 187.5% of the Federal Poverty 
Guidelines amounts. Under the proposed new regulation, the upper limit 
would increase to 200% of the Federal Poverty Guidelines amounts. This 
change is being proposed to further simplify the language of the 
regulation and to recognize the changing demographic of the legal 
services client base, which now increasingly includes the working poor. 
The Working Group discussed the fact that this action would slightly 
increase the pool of potential applicants for service but was of the 
opinion that this would not have a negative impact on the quantity or 
quality of services delivered.
    Turning to the exceptions, LSC proposes to retain the current 
exception for individuals seeking to obtain governmental benefits for 
low-income individuals and families. Second, LSC proposes to add an 
exception for individuals seeking to obtain or maintain governmental 
benefits for persons with mental and/or physical disabilities. Many 
disability benefit programs provide only subsistence support and those 
individuals should be treated the same way as those seeking to obtain 
benefits available on the basis of financial need. However, many 
persons with disabilities who are eligible for disability benefits may 
not be particularly economically disadvantaged and should not be 
eligible for legal assistance simply by virtue of eligibility for such 
disability benefits. Therefore, those applicants must have incomes 
below 200% of the applicable poverty level in order to be considered 
financially eligible for LSC-funded services.
    Finally, the proposed regulation maintains the current authorized 
exceptions found in the factors listed in current section 1611.5. 
Specifically, the recipient would be permitted to determine an 
applicant whose income is below 200% of the applicable Federal

[[Page 29702]]

Poverty Guidelines amount to be financially eligible for legal 
assistance supported with LSC funds based on one or more enumerated 
factors that affect the applicant's ability to afford legal assistance. 
As in the current regulation, recipients would not be required to apply 
these factors in a ``spend down'' fashion. That is, although recipients 
would be permitted to do so, they would not be required to determine 
that, after deducting the allowable expenses, the applicant's income is 
below the applicable income ceiling before determining the applicant to 
be financially eligible. The regulation would also be amended to 
clarify that the factors apply to the applicant and members of the 
applicant's household. The factors proposed are identical to the ones 
in the current regulation, with the following exceptions:
     The factor relating to medical expenses would be restated 
to make clear that it refers only to unreimbused medical expenses, but 
that medical insurance premiums are included;
     The factor relating to employment expenses would be 
reorganized for clarity and would expressly include expenses related to 
job training or educational activities in preparation for employment;
     The factor relating to expenses associated with age or 
disability would no longer refer to resident members of the family as a 
reference to the applicant or members of the applicant's household is 
proposed to be incorporated elsewhere in this section of the 
regulation;
     The factor relating to fixed debts and obligations would 
be amended to read only ``fixed debts and obligations;''
     A new factor, ``current taxes'' would be added to the 
list.
    With regard to ``fixed debts and obligations,'' the current 
regulation provides little guidance as to what is meant by this term, 
except to specifically include unpaid taxes from prior years. LSC 
proposes to simply use the term ``fixed debts and obligations,'' while 
providing guidance in the preamble as to what is encompassed by the 
term. LSC believes that this approach will provide recipients with 
flexibility in applying the rule, while providing more guidance than 
could easily be contained in regulatory text.
    Prior guidance from the LSC Office of Legal Affairs has stated 
that, ``in the absence of any regulatory definition or guidance as to 
the meaning of ``fixed debts and obligations,'' the common meaning of 
the term applies'' and that it encompasses debts fixed as to both time 
and amount. See Letter of November 1, 1993 from J. Kelly Martin, LSC 
Assistant General Counsel, to Stephen St. Hilaire, Executive Director, 
Camden Regional Legal Services, Inc. Examples of such ``fixed debts and 
obligations'' would include mortgage payments, child support, alimony, 
and business equipment loan payments. LSC intends that this term should 
also include rent in addition to mortgage payments. Previous OLA 
opinions have addressed mortgage payments but not rent and rent has, 
heretofore, not been considered a fixed debt. LSC now sees no rational 
distinction between the two for the purposes of this regulation and 
therefore proposes to treat these expenses in a similar manner.
    The term ``fixed debts and obligations,'' however, is not without 
limit. It is not intended to include expenses, such as food costs, 
utilities, credit card debt, etc. These types of debts are usually not 
fixed as to time and amount. The Working Group considered whether there 
were additional factors which should be enumerated in this section and 
several members of the Working Group proposed adding other factors, 
such as utilities, to the list. Three of the comments LSC received on 
the November 2002 NPRM proposed adding utilities to the overall list of 
factors. Although, as the commenters note, applicants must pay for some 
measure of utilities, the same can be said for clothing and food, which 
are also certainly basic necessary expenses. However, these sorts of 
costs have never been covered by the types of expenses which recipients 
are generally permitted to consider in determining the ability of an 
applicant to afford legal assistance. With the exception of housing 
expenses (which fall under the heading of fixed debts and obligations, 
a category which does not generally include utilities because utility 
bills are not typically fixed as to time and amount), the other factors 
represent expenses for items which may not be particularly 
extraordinary, but which are for things other than the most basic 
necessities. Although LSC is not proposing adding any additional 
factors, LSC specifically invites comment on this matter.
    Another issue which was raised in the Working Group in the context 
of consideration of the scope of the term ``fixed debts and 
obligations'' was the inclusion of current taxes. Prior to 1983, Part 
1611 included current taxes along with past due unpaid taxes as a fixed 
debt. When the regulation was changed in 1983, the reference to taxes 
was amended to refer only to unpaid prior year taxes. This change was 
justified on the basis that the 1611.5 factors were intended to account 
only for ``special circumstances'' affecting the ability to afford 
legal assistance. See 48 FR 54201 at 54203 (November 30, 1983). 
However, given that other types of expenses included in the list do not 
seem to be particularly ``special'' (e.g., mortgage payments; child 
care expenses), LSC no longer finds this explanation pursuasive. 
Rather, LSC believes that the exclusion of current taxes, but not prior 
unpaid taxes, from the list of factors which recipients' may consider 
under exceptions to the income ceiling has the effect of punishing 
those persons who are in compliance with the law in favor of persons 
who are delinquent in their legal responsibility to pay taxes. 
Moreover, as noted above, applicants for legal services are 
increasingly the working poor. Excluding current taxes has a 
disproportionate effect on applicants who work versus applicants who do 
not work. Consequently, in the November 2002 NPRM, LSC proposed 
including current taxes within scope of the term ``fixed debts and 
obligations'' (as they had been prior to 1983).
    When the Operations and Regulations Committee once again addressed 
this issue, field representatives reiterated their recommendation that 
the term income should be defined as income after taxes. LSC continues 
to believe, as noted above, that effectively defining income as net 
income, while the LSC income guidelines (and the underlying DHHS 
Federal Poverty Guidelines amounts on which the LSC guidelines are 
based) are calculated on the basis of gross income would make the 
regulation internally inconsistent. Rather, LSC believes that 
considering taxes a factor which can be considered by the recipient in 
making financial eligibility determinations addresses the practical 
problem raised by the commenters. However, the Committee considered 
current taxes as fundamentally a different kind of expense than the 
other expenses falling within the scope of ``fixed debts or 
obligations.'' Instead, the Committee recommended, and the Board 
agreed, that current taxes should be a separate category of authorized 
exception to the annual income ceiling. Accordingly, LSC proposes to 
add a new subsection (iv) to section 1611.5(a)(4). LSC invites comment 
on the proposed addition of the authorized exception for current taxes 
and on the appropriate scope and specific terminology which LSC should 
use to describe and define this proposed exception.

Section 1611.6--Representation of Groups

    The eligibility of groups for legal assistance supported with LSC 
funds

[[Page 29703]]

was a subject of extensive discussion among both the members of the 
Working Group and at the 2004 and 2005 meetings of the current 
Operations and Regulations Committee. Prior to 1983, the regulation 
permitted representation of groups that were either primarily composed 
of eligible persons, or which had as their primary purpose the 
furtherance of the interests of persons in the community unable to 
afford legal assistance. In 1983, the regulation was amended to 
preclude the use of LSC funds for the representation of groups unless 
they were composed primarily of individuals financially eligible for 
service and to add a requirement that any group seeking representation 
demonstrate that it lacks the funds or the means to obtain the funds to 
retain private counsel.
    During the Working Group meetings, representatives from the field 
proposed that LSC revise the regulation to once again permit the 
representation of groups which, although not primarily composed of 
eligible persons, have as a primary function the delivery of services 
to, or furtherance of the interests of, persons in the community unable 
to afford legal assistance. Examples of such a group might be a food 
bank or a rural community development corporation working to develop 
affordable housing in an isolated community. Field representatives 
noted that in such cases, there may not be local counsel willing to 
provide pro bono representation and that the group might not otherwise 
be able to afford private counsel. Further, the field representatives 
noted that restricting recipients to representing with LSC funds only 
those groups primarily composed of eligible individuals prevents them 
from providing legal assistance in the most efficient manner possible 
as other groups may be better able to accomplish results benefitting 
more members of the eligible community than would representation of 
eligible individuals or groups composed primarily of such individuals. 
Field representatives also noted that the rule requires that the group 
would have to provide information showing that it lacks and has no 
means of obtaining the funds to retain private counsel, so that the 
rule would not permit representation of well funded groups.
    The LSC representatives were concerned that allowing the use of LSC 
funds to support the representation of groups not composed primarily of 
eligible clients would be problematic. In the examples given, the 
``primary function'' of the group is easily discernable. It may be, 
however, that there is or can be a wide variety of opinion on what the 
``primary function'' of any group is and on what is ``in the 
interests'' of the eligible client community. The LSC representatives 
were concerned that the risk and effort related to articulating and 
enforcing a necessarily subjective standard would be inappropriate. 
Rather, LSC representatives were of the opinion that already scarce 
legal services resources would be better devoted to providing 
assistance to eligible individuals or groups of eligible individuals. 
In the end, the Working Group did not achieve consensus on this issue 
and the Draft NPRM did not propose to permit the representation of 
groups other than those primarily composed of eligible individuals.
    In its deliberations on the Draft NPRM, the Operations and 
Regulations Committee acknowledged the legitimacy of the concerns of 
the LSC representatives, but determined that the value of permitting 
the representation of groups having a primary function of providing 
services to, or furthering the interests of, those who would be 
financially eligible outweighed any risks attendant upon such 
representation. In approving the recommendation of the Committee, the 
Board directed that the Draft NPRM be amended to propose permitting 
such representation (including any conforming amendments necessary) 
prior to publication of the NPRM for comment. The NPRM published in 
November 2002 reflected this direction.
    When the new Operations and Regulations Committee considered this 
issue, field representatives once again supported changing the 
regulation to permit the representation of groups having as their 
primary function the provision of services to, or furthering the 
interests of, those who would be financially eligible (providing the 
group could demonstrate its inability to afford to retain private 
counsel), while LSC Management initially once again supported 
permitting only the representation of groups primarily composed of 
eligible individuals. However, upon further reflection and 
consideration of the arguments made by the field and the comments made 
by members of the Operations and Regulation Committee, LSC Management 
ultimately recommended that the regulation could be broadened to permit 
the representation, in addition to groups primarly composed of eligible 
individuals, groups which have as a primary activity the delivery of 
services to persons who would be eligible. Management continued to 
recommend that the regulation not permit the representation of groups 
whose primary activity is the ``furtherance of the interests of'' 
persons who would be eligible.
    The Board agreed that permitting LSC recipients to use LSC funds 
for the representation of groups which provide services to low income 
persons is consistent with the LSC mission and could be an efficient 
use of LSC resources, provided that the legal assistance is related to 
the services the group provides. The Board also agreed that extending 
the permissible use of LSC funds for the representation of groups whose 
primary activity is the ``furtherance of the interests of'' low income 
persons would not be appropriate because of the necessarily subjective 
nature of determining what is in the ``furtherance of the interests 
of'' low income persons.
    Accordingly, the proposed rule would permit a recipient to provide 
legal assistance supported with LSC funds to a group, corporation, 
association or other entity if the recipient has determined that the 
group, corporation, association or other entity lacks and has no 
practical means of obtaining private counsel in the matter for which 
representation is sought and either:
    (1) The group, or for a non-membership group, the organizing or 
operating body of the group, is primarily composed of individuals who 
would be financially eligible for legal assistance under the Act; or
    (2) The group has as a principal activity the delivery of services 
to those persons in the community who would be financially eligible for 
LSC-funded legal assistance and the legal assistance sought relates to 
such activity.
    The first instance, relating to the eligibility and representation 
of groups composed primarily of eligible individuals, represents the 
current practice permitted by current section 1611.5(c). The proposed 
rule is intended to have the same interpretation of ``primarily 
composed'' that has developed and been adopted in practice over the 
years since 1983. In the case of membership groups, at least 51% of the 
members would have to be individuals who would be financially eligible; 
in the case of non-membership groups, at least 51% of members of the 
governing body would have to be individuals who would be financially 
eligible. The latter instance represents a variation on one of the 
situations permitted by the pre-1983 rule, although the language would 
be revised to focus on ``principal activity'' rather than ``primary 
purpose'' and the rule would only permit the representation of groups 
which have as

[[Page 29704]]

a principal activity the delivery of services to low income persons.
    Limiting permissible represention to groups who have as a