IRS notifying OEO to suspend further payments due the grantee and to refuse to refund, make supplements, or provide any other assistance, as prescribed in section 115 of the 1969 amendments to the Economic Opportunity Act of 1964, until adequate provisions have been made to satisfy tax obligations.

(c) The use of funds withheld from employee's wages for taxes, for program purposes, even with the intent to later restore such funds from another source, is improper and is specifically prohibited.

(d) Section 115 of the Economic Opportunity Act of 1964, as amended, provides:

Upon notice from the Secretary of the Treasury or his delegate that any person otherwise entitled to receive a payment made pursuant to a grant, contract, agreement, loan or other assistance made or entered into under the Economic Opportunity Act of 1964 is delinquent in paying or depositing (1) the taxes imposed on such person under chapters 21 and 23 of the Internal Revenue Code of 1954, or (2) the taxes deducted and withheld by such person under chapters 21 and 24 of such Code, the Director of the Office of Economic Opportunity shall suspend such portion of such payment due to such person, which, if possible, is sufficient to satisfy such delinquency, and shall not make nor enter into any new grant, contract, agreement, loan or other assistance under such Act with such person until the Secretary of the Treasury or his delegate has notified him that such person is no longer delinquent in paying or depositing such tax or the Director of the Office of Economic Opportunity determines that adequate provision has been made for such payment *

(a) All OEO-funded organizations are required by IRS laws and regulations to withhold income taxes from their employees' wages. This includes those religious, educational or charitable organizations which are exempt from Federal income taxes by IRS ruling under section 501(c)(3) of the Internal Revenue Code.

(1) All grantees, except those who qualify as a 501(c)(3) organization, must provide mandatory social security coverage for their employees. These grantees are liable for taxes imposed under the Federal Insurance Contribu

(b) All OEO grantees must, if they have not already done so, obtain Form SS-4, "Application for Employer Identification Number," and IRS Publication No. 15, Circular E, "Employer's Tax Guide," from the nearest IRS District Office.

(c) Form SS-4 is to be completed by these organizations with the required information and returned to the appropriate IRS Office. The IRS Office will assign an "Employer Identification Number" and furnish the organization with reporting and deposit forms preinscribed with the address and identification number. The identification number is used by IRS to identify the organization's tax accounts and must be recorded on all reports, remittances and related correspondence.

(d) Circular E provides the detailed definitions, instructions, guidelines, and sample forms related to obtaining an Employer Identification Number, tables for computing tax amounts to be withheld from employees' wages, and depositing and reporting Federal income and social security taxes. Attached to this subpart are the essential procedures and requirements contained in Circular E.

(e) To avoid delay and insure timely processing of grant applications, all applicants, for OEO funds must record their "Employee Identification Number" on the following OEO forms:

CAP Form 3-Community Action Basic Information (section I, Item 6).

CAP Form 87-Delegate Agency Basic Information (section II, Item 6).

OEO Form 303 (Test)-Applicant Agency Basic Information (section I, Item 6).

The forms referred to in § 1068.8-4(e) are available through normal OEO Supply channels.

OEO Distribution Center, 5458 Third Street NE., Washington, DC 20011.

APPENDIX A TO SUBPART 1068.6

PROCEDURES FOR OBTAINING EMPLOYER IDENTIFICATION NUMBER AND DEPOSITING AND REPORTING WITHHELD FEDERAL INCOME AND SOCIAL SECURITY TAXES

Employer identification number. Each employer shall obtain Form SS-4, "Application for Employer Identification Number," and Internal Revenue Service Circular E, "Employer's Tax Guide," The form and tax guide may be obtained from any office of the Internal Revenue Service or Social Security Administration. Instructions for completion are on the reverse side of Form SS4. Upon completion, the forms must be filed with the District Director of Internal Revenue with whom Federal tax returns are filed. A copy of the form will be returned with the assigned "Employer Identification Number" recorded thereon. This identification number should be shown on all forms and attachments, and in all correspondence with the Internal Revenue Service and the Social Security Administration.

Payment of withheld income and social security taxes. In most cases, the employer is responsible not only for the employer's contribution of social security tax, but also for the employee tax and the income tax required to be withheld from the employee's wages. The amount of tax withheld by the employer becomes a special fund in trust for the United States. The employer is relieved of liability to any other person for such amount.

In general, the withheld income and social security taxes must be deposited with an authorized commercial bank depository or a Federal Reserve Bank with a Federal Tax Deposit Form 501. Deposits are required to be made as follows.

(a) Every employer who holds more than $100 in social security and withheld income taxes (reduced by any deposits for the quarter) must deposit these taxes on or before the last day of the month following the close of the quarter.

(b) Monthly deposits are required if the total of the social security and withheld income taxes is more than $100 for that month.

(c) Any employer who has withheld more than $2,500 of social security and withheld income taxes for any month of a calendar quarter must make semimonthly deposits of the taxes for the next quarter regardless of the amount.

Form 941 must be filed with the Internal Revenue Service Center for the IRS region in which the grantee or delegate agency is located as prescribed in Circular E. No more than one calendar quarter may be reported on one Form 941. Instructions for preparation of Form 941 are included on its reverse side. Preaddressed forms will be furnished for use by the grantee or delegate agency. Taxes not required to be deposited must be remitted with the return, or at the option of the employer, deposited on Form 501.

Penalties. Both criminal and civil penalties are provided for the willful failure to make returns (Form 941) and payments (Form 501) of tax, or for willfully filing false or fraudulent returns (Form 941).

A penalty is provided for failure, without reasonable cause, to make timely required deposits of taxes.

How to make deposits of taxes. Preinscribed Forms 501 will automatically be furnished the employer after he applies for an identification number.

The employer shall fill in a preinscribed Form 501, "Federal Tax Deposit," in accordance with the instructions printed on the reverse side of that form. Each Form 501, and a single remittance covering the amount of the taxes to be deposited, should be sent or taken to any commercial bank qualified as a depository for Federal taxes, or to a Federal Reserve Bank. The names of authorized commercial bank depositories may be ascertained at a local bank or Federal Reserve Bank. Checks or money orders covering deposits should be made payable to the bank to which the completed Form 501 is taken or sent.

Quarterly return of income tax withheld and social security taxes. Every grantee or delegate agency required to withhold Federal income and social security taxes from wages must file a quarterly return on Form 941, "Employer's Quarterly Federal Tax Return". The dates on which the return and tax payments are due, are as follows:

Records to be kept. Every employer subject to the employment taxes described in this attachment is required to keep all records pertinent to these taxes available for inspection by officers of the Internal Revenue Service if the need should arise. Such records should be kept for a period of at least 4 years after the date the related tax becomes due, or the date the tax is paid, whichever is later.

(a) Legislative requirement (secs. 221 and 222(a)). All grants funded under sections 221 and 222(a) of the EOA which become effective on or after October 1, 1978 carry a requirement for a 20 percent matching share. for ongoing grants, the 80/20 matching requirement is applicable to that portion of the time remaining in the grant year. (See Appendix A, re procedures for prorating the non-Federal share for grants to which both the higher rate and the new requirements apply.) (b) Administrative requirement

(231). Beginning October 1, 1979 all grants funded under Section 231 of the Economic Opportunity Act carry a 50% non-Federal share requirement.

[43 FR 52438, Nov. 9, 1978, as amended at 44 FR 47935, Aug. 16, 1979]

§ 1068.20-3 Waivers of non-Federal share requirements and criteria.

Section 225(c) of the EOA as amended also provides that, "The Director may approve assistance in excess of such percentages if he determines, in accordance with regulations establishing objective criteria, that such action is required in furtherance of the purpose of (title II)." Following are notices of waivers for certain programs, communities, and activities. Publication of the following, however, does not preclude the Director from developing additional waiver criteria for other circumstances; however, in the event that such criteria are developed

they will be published in the FEDERAL REGISTER.

(a) Program waivers. (1) Community Food and Nutrition (222(a)(1)). Because the requirement of non-Federal share could pose serious obstacles to meeting program objectives on an emergency basis the non-Federal share requirments have been waived for this program since its inception and continue to be waived. The waiver is automatic and does not require a request for waiver.

(2) Emergency energy conservation program-Crisis intervention (222(a)(5)). Non-Federal share requirements are waived for grants made under section 222(a)(5) for intervention activities to prevent hardship or danger to health due to the emergency nature of these grants. Components include grants, loans, fuel voucher or stamp programs, or payment guarantees; mediation with utility companies or fuel suppliers, warm clothing, and blankets. The waiver is automatic and does not require a request for waiver from grant applicants.

(3) Emergency energy conservation program-Program Support (222(a)(5))

Eligible activities under Program Support (training and technical assistance, research and demonstration, and evaluation) are not the type that can generate non-Federal share since they are process-oriented rather than operational in nature. Therefore, the nonFederal-share requirement is automatically waived for Program Support projects funded under section 222(a)(5).

(4) SEOOS (Section 231). (i) It is recognized that there are circumstances beyond an SEOO's control which inhibit its ability to raise the required non-Federal share or where the imposition of a 50% matching requirement would seriously affect the SEOO's ability to operate non-CSA-funded anti-poverty programs. Therefore, requests for waivers will be considered based on the following criteria:

(A) The State has not been able to appropriate matching funds due to the timing of the legislative calendar;

(B) Substantial progress has been made toward assuring an appropriation for purposes of providing the required match;

(C) Through the direct efforts of the SEOO there has been substantial state anti-poverty and social services activity; and/or

(D) Failure to provide waiver will result in the loss of essential non-CSAfunded social services and antipoverty programs operated by the SEOO.

(ii) The amount of non-Federal share waived under the above criteria may not result in a matching requirement which, in absolute dollar value (cash and/or in kind), is less than that which was required under the terms of the grantee's last grant which carried a 20% matching requirement.

(iii) A request for waiver must be submitted in writing to the appropriate CSA Regional Office along with documentation to support the grantee's contention that at least one of the conditions cited in paragraphs (a)(4)(i) (A) through (D) of this section.

(b) Activity waivers. (1) Crisis relief (natural disasters). One of the major objectives of non-Federal share is to provide local resources for and to encourage involvement at the local level in the operating programs of CSA grantees. However, to require non-Federal share contributions for grants awarded to provide crisis intervention assistance to communities affected by natural disasters over which there is no control, for example floods and tornadoes, is inconsistent with the major intent of the legislation. Consequently, the Director is exercising his/her authority under section 225(c) of the Economic Opportunity Act of 1964 as amended by waiving the non-Federal share for grants to provide crisis relief as a result of a natural disaster. The waiver is automatic and does not require a request for waiver from the grant applicant.

(2) Phaseout grants. (i) In certain instances and under defined procedures, CSA terminates and closes out grantee operations. As necessary, CSA may award additional Federal funds when there is a grantee termination and phaseout action and there are not sufficient funds on hand to meet liabilities of the grantee and/or its delegate agencies to third parties when such costs result from the phaseout activities. To require non-Federal share contributions for grants awarded to meet

the legal obligations of grantees is inconsistent with the major intent of the legislation. Consequently, the Director is exercising his/her authority under section 225(c) of the Economic Opportunity Act of 1964 as amended by waiving the non-Federal requirement for a phaseout grant as a result of termination. The grant, however, must include no operational elements, all previously required portions of the work program must have been completed, and there must be documented evidence that the grantee has insufficient funds to meet those liabilities which are costs of phasing out.

(ii) The grantee must formally request a waiver and the above conditions must exist or be satisfied by the grantee prior to consideration of a waiver under this subsection.

(c) Communities. (1) Low-income counties. (i) A long-standing objective of CSA's exemption policy has been to assure that the poorest counties in the Nation are able to participate in community action programs despite their lack of local economic resources to match Federal grant funds. These exemtions continue.

(ii) CSA's waiver criteria in this instance reflects a percentage of the population below the poverty threshold.

1

Counties with 35 percent or more of families poor1 are eligible for waivers of a portion or all of the required NFS. In addition those counties with at least 24.5 percent of families poor may request a waiver of up to 50 percent of the required NFS. Appendices B and C provide complete listings of the eligible counties.

(iii) A request for a waiver must be in the form of a letter accompanying application for a grant and shall state (A) the amount of the non-Federal share which the community can provide, and (B) that the applicant has made a reasonable effort to raise more non-Federal share and has been unsuccessful. CSA may require that additional evidence be submitted in support of these representations.

11970 Census of Housing and Population, PC-1(c) series as shown in the 1972 CountyCity Data Book.