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Qualifying and Nonqualifying Withdrawals
Qualifying Withdrawal
[EAS 42-213(g)]
The AU is allowed 30 calendar days from the date of a withdrawal to spend funds for one or more of the following expenses:
- Purchase of a home.
- Education or vocational training for the account holder or any person who is or could be claimed by the account holder as a dependent for federal income tax purposes.
- Start up of a new business.
- Securing permanent rental housing.
- Payment of rent arrearages to avoid homelessness.
It is at the time of the first withdrawal that an AU must declare the intended purpose for their restricted account.
Service charges are considered an allowable withdrawal on a restricted account. There is no penalty when this occurs.
Refer to Interest Exemption [EAS 42-213(f)] and Exception for Restricted Accounts.
Purchase of a Home
Expenses associated with the purchase of a home which will be the principle residence of the AU are considered a qualifying withdrawal.
These expenses include, but are not limited to:
- Deposits, fees.
- Down payment.
- Principle payment.
- Repairs.
- Fixtures.
- Closing costs.
Expenses for furniture and household goods are NOT allowable expenses.
Education or Training
Expenses associated with the education or vocational training for the account holder or any person who is or could be claimed by the account holder as a dependent for federal income tax purposes on or after the date of the written agreement are considered a qualifying withdrawal.
These expenses include, but are not limited to:
- Fees, tuition.
- Books, school supplies.
- Equipment.
- Special clothing needs.
- Student housing.
- Meals.
- Transportation costs to and from school.
- Child care services necessary for school attendance.
Start Up a New Business
Business expenses that are directly related to the start-up costs of a new business, for a member of the AU, are considered a qualifying withdrawal.
These expenses include, but are not limited to:
- Purchase and maintenance of capital equipment.
- Uniforms or other protective or required clothing and shoes.
- Tools, inventory.
- Payments on loan principle (business-related).
- Interest for capital assets or durable goods.
- Rent for office or floor space and associated utilities.
- Shipping and delivery costs.
- Employee salary.
- Fees, business taxes.
- Insurance.
- Bookkeeping or other professional services.
Current CalWORKs regulations do not require that a net profit from self-employment be realized in order to exempt business-related property. If the plan of employment is later disapproved, the equity value of the business-related property is added to the property limit.
There is no limit to the number of self-employment businesses or restrictions to the kind of business venture the AU may start up.
Securing Permanent Rental Housing
Costs associated with securing permanent rental housing are considered a qualifying withdrawal and include but are not limited to:
- Deposits, fees.
- Down payment.
- First months rent.
Rent Arrearages to Prevent Homelessness
Payments for rent arrearages are considered a qualifying withdrawal and include up to two months of back rent to prevent eviction. Each month of the rent arrearage payment must not exceed 80 percent of the TMHI. Refer to Permanent Homeless Assistance for details.
Verification
The AU must provide verification of the following items within 30-calendar days from the date of expenditure:
- Balance prior to the withdrawal,
- Date and amount of withdrawal, and
- Receipt, canceled check, or signed statement from the provider of goods or services verifying the type and the amount of expenses paid.
No Expense Incurred
Funds which are withdrawn in anticipation of an expense that does not occur or is less than anticipated must be redeposited into the restricted account within 30-calendar days from the date of the withdrawal.
Failure to timely redeposit the funds results in a determination that a nonqualifying withdrawal has occurred, unless good cause exists.
Nonqualifying Withdrawal
[EAS 42-213(i)]
A nonqualifying withdrawal occurs when any of the following happen:
- Noncooperation — The AU fails to expend funds or to provide verification of a withdrawal or expenditure within the required time limit, unless good cause exists for exceeding the time limit.
- Nonallowable Purpose — The AU withdraws or spends the funds for purposes or expenses other than those allowed.
- Receipt of Interest Income — The interest payment was not deposited directly into the account by the financial institution. Refer to Interest Exemption [EAS 42-213(f)] and Exception for Restricted Accounts for further information.
If one of the persons listed on the restricted account withdraws funds from the restricted account without the knowledge of the AU, the AU is still subject to a period of ineligibility.
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