TN 48 (11-08)

Citations:

Social Security Act – Section 1612(a)(1)(D)
;

Regulations, 20 CFR 416.1110(e), 20 CFR 416.1111(e)

A. Definitions

1. Royalties — General

Royalties include compensation paid to the owner for the use of property, usually copyrighted material (e.g., books, music, or art) or natural resources (e.g., minerals, oil, gravel, or timber). Royalty compensation may be expressed as a percentage of receipts from using the property or as an amount per unit produced.

To be considered royalties, payments for the use of natural resources also must be received:

• under a formal or informal agreement whereby the owner authorizes another individual to manage and extract a product (e.g., timber or oil); and

• in an amount that is dependent on the amount of the product actually extracted.

NOTE: An outright sale of natural resources by the owner of the land or by the owner of rights to use the land constitutes conversion of a resource. Proceeds from the conversion of a resource are not income.

2. Honoraria — General

An honorarium is an honorary or free gift, reward, or donation usually provided gratuitously for services rendered (e.g., guest speaker), for which no compensation can be collected by law. An honorarium may include a free gift of lodging, or payment of an individual's expenses.

B. Policy

1. Royalties — When royalties are earned income

Royalties are earned income when they are:

• received as part of a trade or business (see SI 00820.200 for information regarding net earnings from self-employment (NESE); or

• received by an individual in connection with any publication of his/ her work (e.g., publication of a manuscript, magazine article, or artwork).

2. Honoraria — When honoraria are earned income

For SSI income purposes, payment received for a service as described in SI 00820.450A.2. is earned income. Any other payment received in cash or in-kind connected with the service is unearned income to the extent it exceeds the individual's expenses. (See SI 00830.100B for information on expenses of obtaining income.)

NOTE: Absent evidence to the contrary, assume that the amount of any honorarium received is in consideration of the actual services provided by the individual.

C. Procedure

1. Verification

1. Verify these payments by examining documents in the individual's possession which reflect:

   • the nature of the payment;

   • the amount;

   • the date(s) received; and

   • the frequency of payment, if appropriate.

2. If the individual has no such evidence in his or her possession, contact the source of the payment.

3. If verification cannot be obtained by the above means, accept any evidence permitted by either SI 00820.130A or SI 00820.220.

2. Expenses of obtaining income

Do not deduct any expenses of obtaining income (SI 00830.100B) from royalties or honoraria that are earned income. Such expenses are deductible from royalties/honoraria that are unearned income.

3. Documentation

Document the information provided by the claimant/recipient or the payment source which indicates the amount, date, and, if appropriate, the frequency of the payment using EVID or a MSSICS DROC screen and lock it, or in non-MSSICS situations, fax the information into NDRED or Certified Electronic Folder (CEF), as appropriate.” Once the documentation is stored and viewed for content in either eView or through the NDRED by using CFUI, there is no need to retain the documentation.

4. System input

Input earned income royalties and honoraria as wages (SM 01005.170C and SM 01305.105), unless they are NESE (SI 00820.200).

5. Suspected fraud cases

In any suspected fraud case, obtain written verification of wages (SSA-L4201-BK) from the employer(s) (GN 04115.005).

D. References

• Royalties as unearned income, SI 00830.510

• Deductible IRWE/BWE, SI 00820.530

• Conversion or sale of a resource, SI 00815.200

• Exhibit of form SSA-L4201-BK, SI 00820.145

• Military pay and allowances, SI 00830.540

• Income summary worksheets, SI 00820.131

• Periodic reporting income summary worksheets, SI 00820.132