EXEMPTION.

SEC. 1001. EXEMPTION. Section 6(o) of the Food Stamp Act of 1977 (7 U.S.C. 2015(o)) is amended— (1) in paragraph (2)(D), by striking “or (5)” and inserting “(5), or (6)”; (2) by redesignating paragraph (6) as paragraph (7); and (3) by inserting after paragraph (5) the following: “(6) 15-percent exemption.— “(A) Definitions.—In this paragraph: “(i) Caseload.—The term ‘caseload’ means the average monthly number of individuals receiving food stamps during the 12-month period ending the preceding June 30. “(ii) Covered individual.—The term ‘covered individual’ means a food stamp recipient, or an individual denied eligibility for food stamp benefits solely due to paragraph (2), who— “(I) is not eligible for an exception under paragraph (3); “(II) does not reside in an area covered by a waiver granted under paragraph (4);111 STAT. 252 “(III) is not complying with subparagraph (A), (B), or (C) of paragraph (2); “(IV) is not receiving food stamp benefits during the 3 months of eligibility provided under paragraph (2); and “(V) is not receiving food stamp benefits under paragraph (5). “(B) General rule.—Subject to subparagraphs (C) through (G), a State agency may provide an exemption from the requirements of paragraph (2) for covered individuals. “(C) Fiscal year 1998.—Subject to subparagraphs (E) and (G), for fiscal year 1998, a State agency may provide a number of exemptions such that the average monthly number of the exemptions in effect during the fiscal year does not exceed 15 percent of the number of covered individuals in the State in fiscal year 1998, as estimated by the Secretary, based on the survey conducted to carry out section 16(c) for fiscal year 1996 and such other factors as the Secretary considers appropriate due to the timing and limitations of the survey. “(D) Subsequent fiscal years.—Subject to subparagraphs (E) through (G), for fiscal year 1999 and each subsequent fiscal year, a State agency may provide a number of exemptions such that the average monthly number of the exemptions in effect during the fiscal year does not exceed 15 percent of the number of covered individuals in the State, as estimated by the Secretary under subparagraph (C), adjusted by the Secretary to reflect changes in the State’s caseload and the Secretary’s estimate of changes in the proportion of food stamp recipients covered by waivers granted under paragraph (4). “(E) Caseload adjustments.—The Secretary shall adjust the number of individuals estimated for a State under subparagraph (C) or (D) during a fiscal year if the number of food stamp recipients in the State varies from the State’s caseload by more than 10 percent, as determined by the Secretary. “(F) Exemption adjustments.—During fiscal year 1999 and each subsequent fiscal year, the Secretary shall increase or decrease the number of individuals who may be granted an exemption by a State agency under this paragraph to the extent that the average monthly number of exemptions in effect in the State for the preceding fiscal year under this paragraph is lesser or greater than the average monthly number of exemptions estimated for the State agency for such preceding fiscal year under this paragraph. “(G) Reporting requirement.—A State agency shall submit such reports to the Secretary as the Secretary determines are necessary to ensure compliance with this paragraph.”.