SSR 82-27a: SECTION 1612(a)(2)(F) (42 U.S.C. 1382a(a)(2)(F)) SUPPLEMENTAL SECURITY INCOME -- UNEARNED INCOME -- GRAZING FEES
20 CFR 416.1103(c), 416.1121(c), and 416.1234
- R, a recipient of Supplemental Security Income (SSI) benefits as a member of an eligible couple, is of Indian descent and the beneficial owner of certain real property, on which neither she nor her husband resides, that is located within an Indian reservation. Although R cannot sell her interest in the property without the approval of the Bureau of Indian Affairs, she does receive grazing fees from ranchers who graze their cattle on her and. R contends that the grazing fees do not constitute countable income for SSI benefit purposes. Instead, she contends, that the grazing fees constitute the conversion of a resource from one form to another within the meaning of 20 CFR 416.1103(c) and as such, are excludable as a resource under 20 CFR 416.1234. Held, the grazing fees do not constitute a resource or the conversion of a resource within the meaning of 20 CFR 416.1103(c); instead, the fees constitute rental income, as defined in 20 CFR 416.1121(d), because they are paid for the use of real property. Consequently, the grazing fees constitute unearned income for SSI benefit purposes.
The issue before the Appeals Council is whether the grazing fees received by the claimants constitute "income" or "resources," and whether such fees may be excluded from consideration in determining their eligibility for SSI benefits.
R and her husband, an eligible couple, first became eligible for SSI benefits effective February 1974, based upon an application filed on February 22, 1974. Both claimants are presently entitled to benefits payable under title II of the Social Security Act (the Act).
R is of Indian descent and the beneficial owner of certain real property located within an Indian reservation. She has complete ownership of one allotment of land and fractional interests in several other allotments, her interests ranging from approximately 2 to 11 percent. Neither R nor her husband resides on the property, but they permit ranchers to graze cattle on the land in return for grazing fees. R cannot sell any interest she holds in the property without the approval of the Bureau of Indian Affairs, as the property consists entirely of trust lands.
Ordinarily, non-home real property is considered a "resource," within the meaning of § 416.1201 of Regulations No. 16, and as such, would be counted towards the resource limitation of $2,250 contained in section 1611(a)(2)(B) of the Act. However, inasmuch as R cannot dispose of her interest in the property without the consent of the Bureau of Indian Affairs, the property is excluded from consideration as a "resource," pursuant to § 416.1234 of Regulations No. 16. R contends that grazing fees received for use of the restricted land constitute the conversion of a resource within the meaning of § 416.1103(c) of Regulations No. 16. Because the resource converted to yield the fees is excluded under § 416.1234 of Regulations No. 16, R asserts that the fees are also an excludable resource.
Section 416.1102 of Regulations No. 16 provides, in pertinent part, that --
- "Income is anything you receive in cash or in kind that you can use to meet your needs for food, clothing, or shelter. . . ."
Section 416.1103 of Regulations No. 16 provides, in pertinent part, that --
- ". . . what you receive from the sale or exchange of your own property is not income; it remains a resource. . . (c) . . . Receipts from the sale, exchange, or replacement of a resource are not income but are resources that have changed their form. . . ."
Section 416.1104 of Regulations No. 16 provides that "There are different types of income, earned and unearned." Earned income is defined in § 416.1110 of Regulations No. 16 as "what you receive as wages or as net earnings from self-employment. "Unearned income is defined in § 416.1120 as "all income that is not earned income."
Section 416.1121 of Regulations No. 16 provides, in pertinent part, that "rents" constitute unearned income. Paragraph (d) of that section of the regulations defines "rents" as "payments you receive for the use of real or personal property such as land, housing, or machinery."
Section 416.1201 of Regulations No. 16 provides, in pertinent part, that --
- ". . . resources mean cash or other liquid assets or any real or personal property that an individual (or spouse, if any) owns and could convert to cash to be used for his support and maintenance. If the individual has the right, authority or power to liquidate the property, or his share of the property, it is considered a resource. If a property right cannot be liquidated, the property will not be considered a resource of the individual (or spouse).
- . . . Liquid resources are those asset that are in cash or are financial instruments which are convertible to cash.
- . . . Nonliquid resources include all other properties. The term includes both real and personal property. . . ."
Section 416.1234 of Regulations No. 16 provides that --
- "In determining the resources of an individual (and spouse, if any) who is of Indian descent from a federally recognized Indian tribe, there shall be excluded such restricted, allotted lands as such individual (and spouse, if any) may possess if such individual (and spouse, if any) cannot sell, transfer or otherwise dispose of such land without permission of other individuals, his tribe or an agency of the Federal Government."
In considering this case, the Appeals Council is guided by the obvious intent of § 416.1103(c) of Regulations No. 16 that a resource not be counted differently simply by virtue of its having been changed to a different form, e.g., cash, where the total assets available to the claimant have remained the same. For example, the sale of a piece of equipment is a change of form (conversion), but does not result in increased assets. After the sale, the seller has cash instead of the resource. Here, however, because the land remains intact after grazing, the seller has both the cash and the land. Viewed in this light, the grazing fees cannot be considered a "sale or exchange" of a resource, and must be considered "unearned income." The Appeals Council believes that the grazing fees received by R represent rental income within the meaning of § 416.1121(d) of Regulations No. 16, as the fees are paid for the use of real property.