Kerrie Reilly v. Marin Housing Authority

The federal Housing Choice Voucher program is a key

program in section 8 of the United States Housing Act of 1937.

(42 U.S.C. § 1437 et seq., as amended by § 201(a) of the Housing

and Community Development Act of 1974.) Commonly referred

to as “Section 8,” the program provides low-income families a

monthly subsidy to pay for a portion of their rent. The amount

of the subsidy depends, in part, on the income Section 8 families

receive. The program, which is funded and regulated by the

United States Department of Housing and Urban Development

(HUD), is administered locally by public housing authorities

(PHAs). In this case, we address whether a Section 8

beneficiary’s compensation for providing in-home care for a

severely disabled adult daughter should be excluded from

income in calculating the rental subsidy. For reasons that

follow, we conclude that it should be excluded and reverse the

Court of Appeal’s judgment.

FACTUAL AND PROCEDURAL BACKGROUND

In 1998, plaintiff Kerrie Reilly and her two daughters

moved into a three-bedroom apartment in Novato and began

receiving Section 8 housing assistance payments to subsidize

their monthly rent. Reilly has an adult daughter, K.R., who is

severely disabled and requires constant supervision. Reilly

receives compensation to provide in-home supportive care for

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Opinion of the Court by Chin, J.

2

K.R. through the state and federally funded In-Home

Supportive Services (IHSS) program.

In 2004, Reilly’s other daughter, R.R., moved out of their

subsidized apartment, but Reilly did not inform the Marin

Housing Authority (MHA), which is responsible for

administering Reilly’s Section 8 voucher. Five years later, when

Reilly told MHA that R.R. no longer lived with her, MHA

advised her that her failure to report her daughter’s leaving

constituted a violation of the program rules. Reilly could only

stay in the government-subsidized apartment if she paid

approximately $16,000 in damages to MHA.

Reilly agreed to pay MHA in monthly installments,

initially starting at $486 and eventually lowered to $150 per

month at Reilly’s request. In 2010, after Reilly missed an

installment payment, MHA warned her that future missed

payments would result in termination of her housing assistance.

Reilly missed multiple payments in 2012, 2014, and 2015.

In 2015, Reilly requested that MHA recalculate her rent

and exclude her IHSS compensation from “income” under the

relevant federal regulation. (See 24 C.F.R. § 5.609(c)(16)

(2020).) MHA did not respond to this request, but instead served

Reilly a notice of termination of her Section 8 voucher. After a

hearing on MHA’s decision to terminate Reilly’s housing

voucher, the hearing officer upheld the agency’s decision, noting

that Reilly’s failure to pay amounts under the settlement

agreement constituted grounds for terminating her housing

assistance. The hearing officer did not address whether the

IHSS compensation counted as income, however.

On October 26, 2015, Reilly filed a petition for writ of

mandate seeking an order requiring MHA to terminate her

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Opinion of the Court by Chin, J.

3

repayment plan and reinstitute her Section 8 voucher; she also

sought an administrative writ ordering MHA to terminate the

repayment plan and exclude Reilly’s IHSS payments in

calculating her income going forward. The trial court rejected

Reilly’s assertion that IHSS payments were excepted from the

meaning of “annual income” (24 C.F.R. § 5.609(c)(16) (2020)). It

sustained MHA’s demurrer without leave to amend, and the CA

affirmed the judgment. (Reilly v. Marin Housing Authority

(2018) 23 Cal.App.5th 425.) Both lower courts ordered “a stay

in the enforcement of the administrative order terminating

Reilly’s Section 8 benefits.” MHA later agreed to an extension

of this stay pending review in this court.

We granted review, limited to the issue whether IHSS

payments should be excluded from “annual income” for purposes

of calculating a Section 8 beneficiary’s home assistance

payment.

DISCUSSION

A. Overview of Section 8 voucher program

In 1974, Congress added the Section 8 housing program to

the United States Housing Act of 1937 “[f]or the purpose of

aiding low-income families in obtaining a decent place to live.”

(42 U.S.C. § 1437f(a); see generally Friedman et al., Cal.

Practice Guide: Landlord-Tenant (The Rutter Group 2019)

¶ 12.) The program gives eligible families either “tenant-based”

or “project-based” rent subsidies administered locally through

PHAs. (See Park Village Apartment Tenants Ass’n v. Mortimer

Howard Trust (9th Cir. 2011) 636 F.3d 1150, 1152–1153

[overview of Section 8 housing assistance].) “ ‘[T]enant-based

assistance’ ” is a rent subsidy that is tied to a specific family

even if the family moves to other suitable housing. (42 U.S.C.

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Opinion of the Court by Chin, J.

4

§ 1437f(f)(7).) “ ‘[P]roject-based assistance,’ ” on the other hand,

is tied to a specific housing development or unit. (42 U.S.C.

§ 1437f(f)(6).) We focus on tenant-based assistance, which is at

issue in this case.

Under the tenant-based assistance program, at least 75%

of all admitted families must be “[e]xtremely low[] income,” i.e.,

their income may not exceed 30% of the median income

calculated by HUD for the relevant area (24 C.F.R. § 5.603(b)

(2020)); and all remaining admitted families must be “[l]ow

income,” i.e., their income may not exceed 50% of the median

income. (Ibid.; id., § 982.201(b)(1), (2)(i) (2020) [eligibility and

targeting].)

After a Section 8 family selects an eligible rental unit

approved by the applicable PHA, the PHA enters into a contract

with the rental property owner. That owner “functions as a

landlord in the private rental market. The owner signs a lease

with the Section 8 tenant (which includes a HUD Lease/Tenancy

Addendum) and also signs a Housing Assistance Payments

(HAP) contract with the Housing Authority.” (Apartment Assn.

of Los Angeles County, Inc. v. City of Los Angeles (2006) 136

Cal.App.4th 119, 123.) The PHA gives the subsidy payments

directly to the property owner. (24 C.F.R. § 982.311(a) (2020).)

As we explain below (see post, at p. 8), the amount of the

housing subsidy depends in large part on the “annual income”

the Section 8 family receives or expects to receive. (See 24

C.F.R. § 5.609(a) (2020); id. § 982.201(a), (b) (2020).) The issue

is whether the IHSS payments Reilly receives to provide

services to keep her developmentally disabled daughter at home

are excluded from income under 24 Code of Federal Regulations

part 5.609(c)(16) (2020).

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Opinion of the Court by Chin, J.

5

B. IHSS

IHSS is a state social welfare program implemented under

The Burton-Moscone-Bagley Citizens’ Income Security Act for

Aged, Blind and Disabled Californians, enacted in 1973. (Welf.

& Inst. Code,1

§ 12000 et seq., added by Stats. 1973, ch. 1216,

§ 37, p. 2904; see County of Sacramento v. State of California

(1982) 134 Cal.App.3d 428, 430–431.) The purpose of the

legislation is to give the aged, blind and disabled the “assistance

and services which will encourage them to make greater efforts

to achieve self-care and self-maintenance, whenever feasible,

and to enlarge their opportunities for independence.” (§ 12002.)

IHSS is specifically “designed to avoid institutionalization of

incapacitated persons.” (Basden v. Wagner (2010) 181

Cal.App.4th 929, 931.) Providers perform nonmedical

supportive services for IHSS recipients, such as domestic

services, personal care services, protective supervision, and

accompaniment to health-related appointments. (§ 12300; see

Miller v. Woods (1983) 148 Cal.App.3d 862, 867, disapproved on

other grounds by Noel v. Thrifty Payless, Inc. (2019) 7 Cal.5th

955, 986, fn. 15.)

“IHSS is actually provided under three programs: the

original IHSS program (the residual program) (§ 12300 et seq.);

the Medi-Cal personal care services program (PCSP) (§

14132.95); and the IHSS Plus waiver program (§ 14132.951).[2]



1 All further statutory references are to Welfare and

Institutions Code unless otherwise noted.

2 Section 14132.951, subdivision (a) provides: “It is the

intent of the Legislature that the State Department of Health

Services seek approval of a Medicaid waiver under the federal

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Opinion of the Court by Chin, J.

6

The latter two programs tap into federal funds, and IHSS

recipients will receive services under the residual program only

if they do not qualify under the other two programs. (§§ 12300,

subd. (g); 14132.95, subd. (b); 14132.951, subd. (d).)” (Basden v.

Wagner, supra, 181 Cal.App.4th at p. 933, fn. 4; see 2 Dayton et

al., Advising the Elderly Client (2019) § 22:40 (Advising the

Elderly Client); Calderon v. Anderson (1996) 45 Cal.App.4th

607, 609–610.)

The State Department of Social Services (Department)

administers the IHSS program in compliance with state and

federal law. The Department promulgates regulations to

implement the relevant statutes, which are set out in its Manual

of Policies and Procedures: Social Services Standards (July

2019) (MPP). (MPP, §§ 30-700 to 30-785; see Norasingh v.

Lightbourne (2014) 229 Cal.App.4th 740, 744–745.) County

welfare departments administer the IHSS program with the

Department’s supervision, and determine an applicant’s

individual needs to authorize necessary services. (Norasingh v.

Lightbourne, at pp. 744–745; see MPP, § 30-761 [needs

assessment standards].)

A county welfare department may either obtain and pay

directly a provider of the supportive services, or pay the

recipient who hires one. (Basden v. Wagner, supra, 181

Cal.App.4th at p. 940 [when state pays provider or recipient

directly, it assumes certain “ ‘employer’ duties”]; MPP, § 30-



Social Security Act in order that the services available under

Article 7 (commencing with Section 12300) of Chapter 3, known

as the In-Home Supportive Services program, may be provided

as a Medi-Cal benefit under this chapter to the extent federal

financial participation is available. The waiver shall be known

as the ‘IHSS Plus waiver.’ ”

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Opinion of the Court by Chin, J.

7

763.44.) Or, as in this case, it may compensate the parent who

provides in-home care to her disabled child. (See § 12300, subd.

(e); MPP, § 30-763.45 et seq.; see also Fam. Code, § 3910, subd.

(a) [parent’s responsibility extends to a “child of whatever age

who is incapacitated from earning a living and without

sufficient means”].) It bears noting that “[t]he vast majority of

home care is provided by family and friends.” (Advising the

Elderly Client, supra, § 22:17.)

Reilly’s daughter suffers from a severe developmental

disorder and obtained authorization for protective supervision,

i.e., 24-hours-a-day supervision that allows her to remain at

home safely. (§ 12301.21; MPP, § 30-757.173.) Protective

supervision involves “observing recipient behavior and

intervening as appropriate in order to safeguard the recipient

against injury, hazard, or accident.” (MPP, § 30-757.17; see

Marshall v. McMahon (1993) 17 Cal.App.4th 1841, 1847

[“ ‘Protective supervision’ appears to be similar to care given

small children, that is, anticipating everyday hazards and

intervening to avert harm”].) Such supervision is available for

“nonself-directing, confused, mentally impaired, or mentally ill

persons only.” (MPP, § 30.757.171; see Marshall v. McMahon,

at p. 1847; Calderon v. Anderson, supra, 45 Cal.App.4th at

p. 616.) There is no dispute that Reilly’s adult daughter was

entitled to IHSS services, or that Reilly was authorized to

receive IHSS compensation for providing those services to her.

C. HUD regulation on “Annual Income” and its

exclusions

The applicable federal regulation defines “annual income”

broadly, as “all amounts, monetary or not.” (24 C.F.R. § 5.609(a)

(2020).) For example, income includes “compensation for

personal services” (id., § 5.609(b)(1) (2020)) and “[p]ayments in

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Opinion of the Court by Chin, J.

8

lieu of earnings, such as unemployment and disability

compensation, worker’s compensation, and severance pay” (id.,

§ 5.609(b)(5) (2020)). However, income does not include such

amounts as “specifically excluded” under the regulation. (Id.,

§ 5.609(a)(3) (2020).) There are 16 such exclusions. (Id.,

§ 5.609(c)(1)–(17) (2020).)

“An extensive set of statutory provisions and regulations

governs the calculations of the subsidy that must be paid on

behalf of each tenant.” (Nozzi v. Housing Authority of City of

Los Angeles (9th Cir. 2015) 806 F.3d 1178, 1184.) In general,

Section 8 tenants must contribute 30% of their monthly adjusted

income or 10% of their gross monthly income, whichever is

greater, towards each month’s rent. (42 U.S.C. § 1437f(o)(2)(A).)

The housing assistance payment covers the balance of the rent,

up to a statutorily capped amount. (Nozzi v. Housing Authority

of City of Los Angeles, at pp. 1184–1185.)

We do not examine the underlying method used to

calculate the rental subsidy, however, but focus on whether

Reilly’s IHSS compensation for care of her disabled daughter is

“specifically excluded” (24 C.F.R. § 5.609(a)(3) (2020)) from

income as “[a]mounts paid by a State agency to a family with a

member who has a developmental disability and is living at

home to offset the cost of services and equipment needed to keep

the developmentally disabled family member at home” (id.,

§ 5.609(c)(16) (2020), italics added). The parties do not dispute

that if Reilly’s daughter received IHSS care from a third party

rather than a family member, such amounts paid would qualify

under the exclusion. MHA argues that for the exclusion to

apply, however, a family must incur costs for hiring someone

because only then would the “[a]mounts paid” by the state to a

family truly “offset” those “cost[s].” (24 C.F.R. § 5.609(c)(16)

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Opinion of the Court by Chin, J.

9

(2020); see In re Ali (Minn. 2020) 938 N.W.2d 835, 840 (Ali)

[“Cost means an actual monetary expense . . . incurred by the

family to keep the disabled family member living at home”].)

Because the state pays Reilly to provide care for her own

daughter and not to hire a third party provider, MHA maintains

there is no actual “cost” to Reilly for such services, and

consequently, there is nothing to “offset.”

1. Meaning of “Offset” & “Cost”

MHA’s interpretation is based in part on the dictionary

definition of “offset,” which generally means to counterbalance

or compensate for something. (See Steinmeyer v. Warner Cons.

Corp. (1974) 42 Cal.App.3d 515, 518.) Echoing the Court of

Appeal, MHA asserts that payments by the state must offset

costs the family itself incurs to keep a developmentally disabled

member at home; “[o]therwise the payment does not

counterbalance or compensate for the costs of services.” As

MHA puts it, “the payment must go to the same entity that

incurs the cost of those services.” MHA further insists that

“cost” is a monetary term that does not encompass emotional

costs Reilly bears in caring for her daughter, nor any lost

opportunity costs when Reilly forgoes outside employment to be

her daughter’s IHSS provider.

We disagree with MHA’s interpretation. Unlike the word

“reimburse,” which means to “pay back or compensate (another

party) for money spent or losses incurred” (American Heritage

Dict. (5th ed. 2020) p. 1214, italics added), “offset” is not

similarly restrictive. (See Briggs v. Eden Council for Hope &

Opportunity (1999) 19 Cal.4th 1106, 1117 [“Where different

words or phrases are used in the same connection in different

parts of a statute, it is presumed the Legislature intended a

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Opinion of the Court by Chin, J.

10

different meaning”].) For example, the term “reimbursement”

is used in two other exclusions. (24 C.F.R. § 5.609(c)(4), (8)(iii)

(2020).) Consistent with the meaning of “reimburse,” those

exclusions refer to compensation of specific, discrete amounts,

e.g., “the cost of medical expenses” (id., § 5.609(c)(4) (2020)) and

“out-of-pocket expenses” to participate in a publicly assisted

program (id., § 5.609(c)(8)(iii)).

While the term “reimburse” suggests there may be full

recompense for any out-of-pocket expenses a family incurs

under those exclusions, “offset” as used here does not necessarily

reflect that same meaning. (See Briggs v. Eden Council for Hope

& Opportunity, supra, 19 Cal.4th at p. 1117.) Here, what is

“offset” is the “cost of services and equipment needed to keep the

developmentally disabled family member at home.” (24 C.F.R.

§ 5.609(c)(16) (2020).) “[C]ost,” in turn, is defined to include both

“an amount paid or required in payment for a purchase; a price”

and “the expenditure of something, such as time or labor,

necessary for the attainment of a goal.” (American Heritage

Dict., supra, at p. 454.) Whether a family uses homecare

payments to support itself so that it may care for a

developmentally disabled member at home, or instead uses the

funds to pay a third party to provide care for some of the time,

these payments do no more than “offset” the “cost” of services

and equipment needed to avoid institutionalization, costs that

are not otherwise specified or limited. (24 C.F.R. § 5.609(c)(16)

(2020).)

Further, contrary to MHA’s suggestion, “cost” in this

exclusion (24 C.F.R. § 5.609(c)(16) (2020)) does not have the

same meaning as “cost” used in other provisions of the

regulation. For instance, “actual cost of shelter and utilities” (24

C.F.R. § 5.609(b)(6)(ii) (2020)) and “cost of medical expenses for

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Opinion of the Court by Chin, J.

11

any family member” (id., § 5.609(c)(4) (2020)) both refer to

discrete, monetary amounts. “[T]he presumption that ‘identical

words used in different parts of the same act are intended to

have the same meaning . . . readily yields whenever there is such

variation in the connection in which the words are used as

reasonably to warrant the conclusion that they were employed

in different parts of the act with different intent.’ ” (Roberts v.

Sea-Land Services, Inc. (2012) 566 U.S. 93, 108.)

2. Rulemaking history of 24 Code of Federal

Regulations par 5.609(c)(16) (2020)

This interpretation of the terms “offset” and “cost” is also

consistent with the rulemaking history of 24 Code of Federal

Regulations part 5.609(c)(16) (2020). (See 60 Fed.Reg. 17388–

17395 (Apr. 5, 1995) [“Combined Income and Rent”; interim rule

as precursor to 24 C.F.R. § 5.609(c)(16) (2020)]; 61 Fed.Reg.

54492–54504 (Oct. 18, 1996) [final rule]). Though the Court of

Appeal found this history to be unhelpful and not illuminating,

we do not share that view. (See Thomas Jefferson Univ. v.

Shalala (1994) 512 U.S. 504, 512 [relevance of agency’s “ ‘intent

at the time of the regulation’s promulgation’ ”].)

In 1995, HUD published an interim rule proposing eight

new income exclusions — among them the homecare payments

exclusion — to the definition of annual income under Section 8

and other assisted housing programs. (See 60 Fed.Reg. 17388–

17395 (Apr. 5, 1995); 24 C.F.R. § 5.609(c) (2020).) It determined

that the new exclusions “are essential for achieving its goals of

ensuring economic opportunity, empowering the poor and

expanding affordable housing opportunities. Moreover, HUD

believes that the costs of additional exclusions will be offset by

long-term future savings because the exclusions will increase

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Opinion of the Court by Chin, J.

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the number of economically self-sufficient families residing in

assisted housing.” (60 Fed.Reg. 17388, italics added.)

Regarding the “homecare payments” exclusion in

particular, HUD explained that the “exclusion exempts amounts

paid by a State agency to families that have developmentally

disabled children or adult family members living at home.

States that provide families with homecare payments do so to

offset the cost of services and equipment needed to keep a

developmentally disabled family member at home, rather than

placing the family member in an institution. Since families that

strive to avoid institutionalization should be encouraged, and

not punished, the Department is adding this additional

exclusion to income. The Department wishes to point out that

today’s interim rule does not define ‘developmentally disabled’

since whether a family member qualifies as developmentally

disabled, and is therefore eligible for homecare assistance, is

determined by each individual State.” (60 Fed.Reg. 17388,

17389 (Apr. 5, 1995), italics added.)

In finalizing the rule and responding to public comment

that “ ‘developmentally disabled children’ ” and “ ‘adult family

members’ ” should be expressly defined, HUD rejected the

suggestion as unnecessary: “There is no need for HUD to define

these terms, as they are defined by the State program providing

the payments. If the family is receiving such a payment from the

State because a family meets the criteria of the definition, the

[public housing authority] should consider the family eligible for

the exclusion.” (61 Fed.Reg. 54492, 54497 (Oct. 18, 1996), italics

added.)

We find several points from this rulemaking history to be

significant. As to the meaning of “offset,” HUD recognized that

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Opinion of the Court by Chin, J.

13

states that make payments for in-home services “do so to offset

the cost” to the family keeping the developmentally disabled

member at home “rather than placing the family member in an

institution.” (60 Fed.Reg. 17388, 17389 (Apr. 5, 1995).)

Significantly, HUD here did not use “cost” and “offset” in terms

of a specific monetary expense or amount a Section 8 family

incurs, but in a broad sense with respect to describing the

overall objective of the exclusion. HUD regarded homecare

payments as reducing or offsetting costs to families caring for

developmentally disabled individuals, costs that would be borne

by state and federal governments if the family member were

institutionalized. (See Perkins & Boyle, Addressing Long Waits

for Home and Community-Based Care Through Medicaid and

the ADA (2001) 45 St. Louis U. L.J. 117, 119 [“Most states have

reduced costly institutional care by shifting some public funding

to home and community settings”].)

This background clearly informs the interpretation of 24

Code of Federal Regulations part 5.609(c)(16) (2020). The

language of the regulation (“amounts paid by a State agency . . .

to offset the costs of services and equipment needed to keep the

developmentally disabled family member at home” [italics

added]) closely tracks this rulemaking language (“States that

provide families with homecare payments do so to offset the costs

of services and equipment needed to keep a developmentally

disabled family member at home, rather than placing the family

member in an institution”) (60 Fed.Reg. 17388, 17389, italics

added), and the italicized phrases at issue here are identical.

The only express limitation HUD has placed on this

exclusion is that the in-home care payments must be for services

and equipment needed to keep the “developmentally disabled”

family member at home. (See post, at pp. 15–16.) Even then,

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Opinion of the Court by Chin, J.

14

HUD found “no need” to define what “developmentally disabled”

meant, and instead left this up to the states to decide. (61

Fed.Reg. 54492, 54497 (Oct. 18, 1996; see 60 Fed.Reg. 17389

(Apr. 5, 1995) [“whether a family member qualifies as

developmentally disabled, and is therefore eligible for homecare

assistance, is determined by each individual State”].) From

HUD’s perspective, “If the family is receiving such a payment

from the State because a family member meets the criteria of

the definition, the [public housing authority] should consider the

family eligible for the exclusion.” (61 Fed.Reg. 54492, 54497,

italics added.)

Notwithstanding the general rule that exclusions from

income should be construed narrowly (see Commissioner v.

Schleier (1995) 515 U.S. 323, 328), we find no indication that

HUD intended a narrow construction of the homecare payments

exclusion. We perceive no reasoned basis — including any basis

informed by the regulation’s language — why HUD would single

out a parent provider’s compensation as unworthy for income

exclusion. Rather, we find HUD’s stated goals of encouraging

families to avoid the institutionalization of developmentally

disabled individuals through the addition of this exclusion (60

Fed.Reg. 17388, 17389 (April 5, 1995)), and more globally of

“ensuring economic opportunity, empowering the poor and

expanding affordable housing opportunities” (60 Fed.Reg.

17388), would be furthered by permitting all homecare

payments for services to keep developmentally disabled family

members at home — whether the provider is a family member

or third party — to be excluded from the meaning of “annual

income.” (24 C.F.R. § 5.609(c)(16) (2020).) By allowing these

families to realize the full benefit of the homecare payments

without facing a corresponding increase in rent, the exclusion

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Opinion of the Court by Chin, J.

15

would operate as intended by not penalizing families who take

on the onus of caring for a developmentally disabled family

member at home.

To that end, it is helpful to remember that “[t]he United

States Housing Act is a program of ‘cooperative federalism.’ ”

(James v. New York City Housing Authority (S.D.N.Y. 1985) 622

F.Supp. 1356, 1359; see 42 U.S.C. § 1437; see also Hodel v.

Virginia Surface Mining & Recl. Assn. (1981) 452 U.S. 264,

289.) “HUD’s delegation of eligibility requirements to local

public housing authorities is intended to effectuate the

underlying policy of the United States Housing Act by

promoting efficient management of the programs . . . .” (James

v. New York City Housing Authority, at pp. 1361–1362.) With

respect to the exclusion for homecare payments specifically (24

C.F.R. § 5.609(c)(16)) (2020)), HUD expressly left it to the states

to define “developmentally disabled,” which in part determines

a family’s eligibility for the income exclusion. (See ante, at p.

12.)

Along these lines, HUD did not limit the income exclusion

based on whether a state allows a family to use a family member

or a third party to provide the necessary care; the exclusion

covers “[a]mounts paid by a State agency to a family” with a

developmentally disabled member (24 C.F.R. § 5.609(c)(16)

(2020)). Indeed, acknowledging such a distinction would do

little to advance the complementary purposes of the federal and

state statutes. Congress established Section 8 with “the

purpose of aiding low-income families in obtaining a decent

place to live.” (42 U.S.C § 1437f(a).) And our Legislature

created IHSS with the goal of providing “supportive services . . .

to aged, blind, or disabled persons . . . who are unable to perform

the services themselves and who cannot safely remain in their

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Opinion of the Court by Chin, J.

16

homes or abodes of their own choosing unless these services are

provided.” (§ 12300, subd. (a).) Like the purpose of the federal

exclusion (see ante, at pp. 12–13), the IHSS program’s purpose

is to enable “ ‘disabled poor persons to avoid institutionalization

by remaining in their homes with proper supportive services.’ ”

(Basden v. Wagner, supra, 181 Cal.App.4th at p. 939.)

Nevertheless, MHA would have us read in the words “from third

parties” after the phrase “cost of services” (24 C.F.R. §

5.609(c)(16) (2020)) thereby making it correspondingly harder

for certain families to provide necessary in-home care. Given

this cooperative federalism regime, we ought to be reticent to

interpret the HUD regulation in a way that would foreclose or

hinder the objectives of the state IHSS program.

The dissent overstates the import of the authority it cites

(see dis. opn., post, at pp. 1–2, 16–19). (See Anthony v. Poteet

Housing Authority (5th Cir. 2009) 306 Fed. Appx. 98, 101

(Anthony) [“One must incur costs before they can be offset”]; Ali,

supra, 931 N.W.2d 835.) In Anthony, an unpublished Fifth

Circuit decision that first addressed the issue, plaintiff Brenda

Anthony provided in-home care for her severely disabled son in

their Section 8 subsidized apartment. Unlike California, the

State of Texas does not pay families directly for in-home care;

such care is provided by third party intermediaries, who in turn

employ in-home attendants and pay them wages partially

funded by the state. Through her employment as a personal

care attendant with two private for-profit companies, Anthony

provided care not only for her son but also for other clients under

the terms of her employment.

In determining Anthony’s annual income for purposes of

calculating her subsidized rent, the PHA refused to exclude

Anthony’s wages under 24 Code of Federal Regulations part

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Opinion of the Court by Chin, J.

17

5.609(c)(16) (2020)). The Fifth Circuit agreed with the PHA’s

decision: “[T]he fact that Anthony’s employment income

coincides with state funds that are set aside for her son’s care

does not make that income a form of reimbursement.” (Anthony,

supra, 306 Fed. Appx. at pp. 101–102.) The court further

rejected Anthony’s claim that the services she provided her son

were at a cost and were not free: “[F]or Anthony, they are free.

She has no out-of-pocket expenses — ‘costs’ — that must be

reimbursed or ‘offset’ by the state.” (Id. at p. 102.)

We are not persuaded by Anthony’s reasoning on several

grounds. Fundamentally, Texas’s program is distinct from the

IHSS scheme in that “all state-funded in-home attendant-care

services in Texas are provided by private intermediaries, and

Texas does not provide any amounts directly to families to offset

costs incurred to keep a disabled family member at home.”

(Anthony, supra, 306 Fed. Appx. at p. 101.) Next, although

Anthony’s private employers paid her to provide in-home care to

her son “with money partially provided by the state” (id. at p.

101), it is unclear what portion of her wages truly constituted

“pass-through” state funds. Her employers paid Anthony not

just to care for her disabled son, but also to care for other clients.

(Id. at p. 100.) Thus, Anthony’s compensation as an in-home

attendant was arguably indistinguishable from wages a parent

earns from outside employment, and therefore properly not

excluded from income under 24 Code of Federal Regulations

part 5.609(c)(16) (2020)). Finally, we do not agree with the Fifth

Circuit’s narrow interpretation of the exclusion as limited to outof-pocket expenses that a state directly reimburses. (See

Anthony, supra, 306 Fed. Appx. at pp. 101–102; see ante, at pp.

9–11.)

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Opinion of the Court by Chin, J.

18

Nor are we persuaded by the Minnesota Supreme Court’s

recent decision in Ali, supra, 938 N.W.2d 835, which relied in

part on both Anthony and the Court of Appeal opinion below to

reach a similar conclusion. (See Reilly v. Marin Housing

Authority, supra, 23 Cal.App.5th 425.) Under Minnesota’s

Consumer Directed Community Support option for home and

community-based services, a family receives a budget for

specific services and equipment needed to keep a

developmentally disabled member at home. (Ali, supra, 938

N.W.2d at p. 837.) The plaintiff, whose autistic son was eligible

for the program, “chose to allocate a portion of the budget to

herself as a paid parent to provide to her son some of the

necessary services.” (Ibid.) Following Anthony and Reilly, the

Ali court adopted a narrow view of “cost” to mean out-of-pocket

expenses, and concluded that the mother incurred no actual

monetary expenses to “offset.” (Id. at p. 840.)

As with the Texas program, the Minnesota program —

which allowed the mother to “allocate her budget as she saw fit

to keep her son living at home” — is structured differently from

the IHSS program in a way that makes Ali distinguishable.

(Ali, supra, 938 N.W.2d at p. 837.) Moreover, as with Anthony,

we disagree with the Ali court’s narrow interpretation of “cost”

and “offset.”

D. MHA’s policy arguments

Notwithstanding this reading of the HUD regulation,

MHA asserts that including a parent’s IHSS compensation as

income is necessary to achieve a measure of parity between

families in similar circumstances. An expansive reading of the

exclusion (24 C.F.R. § 5.609(c)(16) (2020)), MHA argues, would

unfairly advantage families who provide in-home care to a

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Opinion of the Court by Chin, J.

19

developmentally disabled member because their compensation

is not counted as income for purposes of calculating their rent

subsidy, whereas no comparable income exclusion is available

for a family with a medically disabled member or for a family

who hires a third party provider.

In advancing this argument, MHA asserts the state pays

Reilly “wages” under the IHSS program. Describing an

employment relationship between Reilly and the State of

California, MHA relies in part on the Court of Appeal’s

reasoning that “IHSS payments substitute in the family’s

budget for the money the parent would have earned outside the

home.” Such wages, MHA continues, should be considered part

of her annual income just like the outside income of a parent

who instead hires an in-home provider. We address these points

in turn.

1. Disparity based on individuals’ different

disabilities

First, we reject MHA’s and the dissent’s assertion that

excluding Reilly’s IHSS payments from annual income under 24

Code of Federal Regulations part 5.609(c)(16) (2020) would

create an unfair disparity by extending the exclusion to families

with a developmentally disabled member but not to families

with a medically disabled member. To the extent there is any

disparity, it is inherent in the federal regulation itself, which

specifically limits the exclusion to payments made to families

caring for a “developmentally disabled family member.” (24

C.F.R. § 5.609(c)(16) (2020).) Put another way, even assuming

MHA’s position is correct that the exclusion is limited to

payments made to third party providers, it would still treat

developmental disabilities more favorably than physical

disabilities because whatever its scope, the exclusion by its

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Opinion of the Court by Chin, J.

20

terms applies only to “[a]mounts paid by a State agency to a

family with a member who has a developmental disability.”

(Ibid., italics added.)

The regulation, moreover, does not require that an

individual meet a particular definition of “developmentally

disabled” for the income exclusion to apply. As previously

discussed (see ante, at p. 15), HUD has not defined

“developmental disability” in the regulation, but instead left it

up to states to determine its meaning. Specifically, if a state

program authorizes a family to receive in-home care for a family

member, in HUD’s view that family member “meets the criteria

of the definition” of developmentally disabled, and the PHA

“should consider the family eligible for the exclusion.” (61

Fed.Reg. 54492, 54497 (Oct. 18, 1996), italics added.) This

expansive view in favor of applying the exclusion is consistent

with HUD’s expressed concern that families of developmentally

disabled members in particular would receive unfair treatment

if this income exclusion were not made available to them. HUD

added the relevant exclusion for families with a developmentally

disabled member “[s]ince families that strive to avoid

institutionalization should be encouraged, and not punished.”

(60 Fed.Reg. 17388, 17389 (Apr. 5, 1995), italics added.)

The dissent, however, asserts that precluding Reilly from

utilizing this income exclusion would not amount to punishment

because no other group, besides foster parents, enjoys the

benefit of the income exclusion. (See dis. opn., post, at p. 34, fn.

18.) This critically misapprehends the nature of the penalty

involved. The punishment here is not merely withholding a

benefit to a family that is not otherwise given to similarly

situated families; in other words, the dilemma a family faces is

not choosing between enjoying or forgoing a “preferential

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Opinion of the Court by Chin, J.

21

benefit,” as the dissent seems to suggest. (Dis. opn., post, at

p. 23.) Rather, if a family cannot utilize the income exclusion to

exclude compensation for a parent’s in-home care, this may

cause the family to lose its Section 8 housing altogether because

it is unable to pay an increased portion of rent. Without such

housing, a family may face having to institutionalize a

developmentally disabled member, a result the exclusion seeks

to prevent in the first place.

Further, despite no expressed preference for family

providers per se, “[r]ecipients needing 24-hour protective

supervision — and other services — are more likely to receive

better continuous care from relatives living with them whose

care is more than contractual.” (Miller v. Woods, supra, 148

Cal.App.3d at p. 870.) This continuity of care is particularly

salient here because of the nature of need-based tasks under the

IHSS program. Because an IHSS recipient may only receive

specific services based on an assessed need — i.e., where

“[p]erformance of the service by the recipient would constitute

such a threat to his/her health/safety that he/she would be

unable to remain in his/her own home” (MPP, § 30.761.14) —

not all time that a provider spends with a recipient would be

compensable. (See § 12300, subd. (a); MPP, § 30.761.12.) Many

tasks are discrete and not clustered together throughout the day

(such as feeding, dressing, bowel and bladder care), and a

provider may not be compensated for time spent waiting in

between those tasks. It would no doubt prove challenging to find

many providers — other than family members — willing to work

that intermittently during the day.

Family members may also make particularly good

providers because IHSS services “involve a most intimate and

personal aspect of an individual’s life” and family providers

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Opinion of the Court by Chin, J.

22

often “insure the least intrusion upon the recipient’s privacy.”

(Miller v. Woods, supra, 148 Cal.App.3d at p. 878; see § 12304.1

[“preference shall be given to any qualified individual provider

who is chosen by any recipient”].) Also recognizing that familyprovided care is often the best type of care for individuals with

disabilities, Congress has included it as one of the “goals of the

Nation” to provide families of children with disabilities the

services necessary to “enable families of children with

disabilities to nurture and enjoy their children at home”; and

“support family caregivers of adults with disabilities.” (42

U.S.C. § 15091(a)(6)(B), (D) [congressional findings of Families

of Children with Disabilities Support Act of 2000]; id.,

§ 15091(a)(1) [“It is in the best interest of our Nation to preserve,

strengthen, and maintain the family”].) Congress further

emphasized the important cost savings when family members

are themselves providers for their disabled children: “Families

of children with disabilities provide support, care, and training

to their children that can save States millions of dollars.

Without the efforts of family caregivers, many persons with

disabilities would receive care through State-supported out-ofhome placements.” (Id., § 15091(a)(2); see 60 Fed.Reg. 17388,

17389 (Apr. 5, 1995).) These expressed goals fully align with

HUD’s objective to have developmentally disabled individuals

avoid institutionalization and instead live with their families at

home.

3



3 Contrary to the dissent’s suggestion, nothing in our

opinion should be construed as implying that third party

caregivers as a whole will provide “substandard” care compared

to family members. (Dis. opn., post, at p. 31.) We merely

confirm what Congress has expressly recognized about the

benefits of having family caregivers.

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Opinion of the Court by Chin, J.

23

This leads us to the inescapable conclusion that parents

who keep their disabled child at home instead of in an

institution — while also providing care as their child’s IHSS

provider — are different from other caregivers. That difference,

however, cuts in favor of allowing a parent’s IHSS compensation

under the exclusion. Unlike third party caregivers whose job it

is to take care of someone on an hourly basis, for these parent

providers, caring for their child “is not a day job; it is their life.”

(In re Hite (Bankr. W.D.Va. 2016) 557 B.R. 451, 458 [holding

parents’ in-home care payments excluded from monthly income

and consequently not deemed disposable income subject to

creditors].) If in-home care payments are not excluded from her

income, the benefits Reilly receives — the in-home care for her

disabled daughter K.R. and the Section 8 housing assistance —

would be at cross-purposes. A family should not be forced to

make an impossible choice between these two critical benefits.

We perceive no plausible reason why Reilly should not realize

the full benefit of what each program has to offer her family.4



2. IHSS payments as wages

Next, we reject MHA’s underlying assumption that a

parent provider’s compensation under the IHSS program seeks

to replicate the wages and hours of a parent who is employed

outside the home. A parent’s employment is relevant only to the

extent it relates to the parent’s suitability or availability to

provide IHSS services to a child. (MPP, § 30-763.451; Dept. AllCounty Letter No. 19-02 (January 9, 2019) (All-County Letter



4 This conclusion focuses on Reilly’s general entitlement to

benefits under the Section 8 voucher and IHSS programs, and

does not consider any other basis for terminating these benefits

such as the failure to comply with any program requirements.

REILLY v. MARIN HOUSING AUTHORITY

Opinion of the Court by Chin, J.

24

19-02).) As section 12300, subdivision (e) explains, the predicate

for a paid parent provider is that “no other suitable provider is

available.” (§ 12300, subd. (e); see MPP, § 30-763.451.) In

providing the necessary in-home care to a disabled child, a

parent forgoes any outside employment — not to displace

otherwise competent professional caregivers — but to prevent a

third party caregiver’s “inappropriate placement or inadequate

care” for their child. (§ 12300, subd. (e).)

For instance, in its 2019 All-County Letter 19-02, the

Department clarified the paid parent provider requirements:

“The paid parent IHSS provider requirements, set forth in MPP

Section 30-763.451, do not require or imply that a parent must

have marketable job skills or a work history to be their child’s

paid IHSS provider, as long as it is the recipient child’s needs

which prevent the parent from maintaining or obtaining fulltime employment.” (All-County Letter 19-02, supra, at p. 4,

italics added.) Likewise, parents who retire or are laid off may

also serve as their child’s provider only if their retirement or

layoff is due to the child’s need for IHSS services. (Id. at p. 6.)

In short, “if a parent is not employed full-time for a reason other

than the recipient child’s IHSS needs . . . that parent would not

qualify as a paid parent IHSS provider.” (Id. at p. 4.)

Second, even assuming Reilly’s IHSS compensation

represents her wages, this does not mean that providing inhome care to her child is “an employment for all purposes.”

(Basden v. Wagner, supra, 181 Cal.App.4th at p. 940.) In Basden

v. Wagner, the Court of Appeal recognized certain duties — such

as the state being responsible for the provider’s unemployment

compensation, workers’ compensation, federal and state income

tax and the like — that would suggest providing IHSS full-time

could be considered an employment. The court, however,

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Opinion of the Court by Chin, J.

25

pointed out that “the Legislature defined IHSS providers as

employees for limited circumstances, but undisputedly not for

all circumstances. More significantly, nothing in the statutes

even remotely suggests the Legislature defined the provision of

in-home, full-time, IHSS funded care by a parent to a child as

full-time employment . . . .” (Ibid., italics omitted.) The question

here is whether a parent’s compensation for providing in-home

care is “specifically excluded” from the definition of annual

income for purposes of the HUD regulation. (24 C.F.R.

§ 5.609(a)(3), (c)(16) (2020).) As explained above, we conclude

that IHSS compensation to a parent provider is excluded from

income. (See ante, at pp. 14–15.)

Nevertheless, the dissent maintains that “[u]nlike funds

that reimburse a family’s expenditures, funds provided by the

state to compensate for the family’s caregiving activities are

available to meet the family’s daily needs. That is their

purpose.” (Dis. opn., post, at p. 25, italics added.) This

characterization gravely misconstrues the nature and scope of

IHSS services.

Under the IHSS program, the main focus is on assessing

the disabled individual’s “service needs and authorizing service

hours to meet those needs.” (§ 12301.2, subd. (a)(1).) A

caregiver will be compensated only for those authorized service

hours and nothing more. As previously explained (see ante, at

p. 21), because many tasks are discrete and completed

throughout the day, a provider might not be compensated for

time spent waiting in between those tasks. Contrary to the

dissent’s suggestion, excluding a parent’s IHSS compensation

from income would not artificially reduce a family’s income and

thereby increase any resulting rent subsidy. At best, a parent’s

IHSS compensation will offset a portion of the costs of keeping

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Opinion of the Court by Chin, J.

26

a developmentally disabled family member at home, and would

not go far in meeting the family’s daily needs.

The dissent’s related assertion — i.e., family providers

“are effectively selling their labor to the state, and the resulting

income is indistinguishable, in its impact on the family’s

standard of living, from money earned working outside the

home” (dis. opn., post, at p. 25) — is likewise long on conclusion

but short on facts. (See ibid. [“to receive funds from IHSS a

parent must accept their disabled child’s care as, in effect, their

job”].) In the case of Reilly’s daughter, K.R., for example, she

required protective supervision that is “only available” if “a need

exists for twenty-four-hours-a-day of supervision in order for the

recipient to remain at home safely.” (MPP, § 30-757.173(a).) A

person needing 24-hour supervision would require a provider’s

services for 720 hours in a 30-day month. However, an IHSS

provider is limited to a statutory cap of 283 hours of

compensation. (§§ 12303.4, 14132.95, subd. (g).) The

discrepancy between a parent provider’s actual hours of service

and compensation belies any assertion that IHSS payments, at

least with respect to protective supervision, are intended to

represent wages the parent would have earned outside the

home, where compensation would be based on every hour

worked.

Finally, we find it significant that the IRS also treats inhome care payments — whether the provider is related or

unrelated to the disabled individual — as excludable from a

provider’s income under Internal Revenue Code section 131. (26

U.S.C. § 131; see Rev. Proc. 2014-7, 2014-4 I.R.B. 445.) In 2014,

the IRS explained that Medicaid waiver payments to states,

which are used to fund IHSS payments through the state MediCal program (see ante, at pp. 5–6 & fn. 2), should be excluded

REILLY v. MARIN HOUSING AUTHORITY

Opinion of the Court by Chin, J.

27

from a provider’s gross income. (Rev. Proc. 2014-7, 2014-4 I.R.B.

445.) It equated these payments to foster care payments, which

are considered “difficulty of care” payments excludable from a

provider’s income under Internal Revenue Code section 131.

(26 U.S.C. § 131(a) [“Gross income shall not include amounts

received by a foster care provider . . . as qualified foster care

payments”].) “The programs share the objective of enabling

individuals who otherwise would be institutionalized to live in a

family home setting rather than in an institution, and both

difficulty of care payments and Medicaid waiver payments

compensate for the additional care required.” (Rev. Proc. 2014-

7, 2014-4 I.R.B. 445 [these foster parents “ ‘are saving the

taxpayers’ money by preventing institutionalization of these

children’ ”].) As relevant here, the IRS makes no distinction

between care provided by a parent or by a third party — the

exclusion for Medicaid waiver payments “will apply whether the

care provider is related or unrelated to the eligible individual.”

(Ibid., italics added.)

Seeking to downplay any impact an IRS interpretation has

on a HUD regulation, MHA notes that HUD has indicated that

the “tax rules are different from the HUD program rules.”

(HUD, HUD Handbook 4350.3: Occupancy Requirements of

Subsidized Multifamily Housing Programs (Nov. 2013) ¶ 5-1.)

Be that as it may, we do not conclude that the IRS’s

interpretation is dispositive or compels the outcome in this case.

We do, however, acknowledge that it provides persuasive

insight, one that is consistent with the rulemaking record of the

HUD regulation (24 C.F.R. § 5.609(c)(16) (2020)). (See ante, at

pp. 11–13)

For example, though payments to foster parents and inhome care payments are both considered “difficulty of care”

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Opinion of the Court by Chin, J.

28

payments excludable from a provider’s taxable income, these

payments would receive unequal treatment under MHA’s

interpretation of the regulation. Under 24 Code of Federal

Regulations part 5.609(c)(2) (2020), “[p]ayments received for the

care of foster children or foster adults (usually persons with

disabilities, unrelated to the tenant family, who are unable to

live alone)” are excluded from income for purposes of Section 8

housing. If a family takes into their home an unrelated disabled

adult who is unable to live alone, and receives payment from the

State for providing care to that adult, such payments are

excluded from the family’s income. However, if that same family

receives payment for providing the same care but to a

developmentally disabled family member, those payments

would not be excluded from income. To ascribe this

interpretation to HUD, which would impose a financial penalty

on a family simply because the care is given to a disabled family

member rather than a disabled stranger, would not only be

inconsistent with the IRS’s treatment of both payments, there is

no evidence in the regulation’s rulemaking record that HUD

intended different treatment.

E. HUD’s position

At our request, HUD filed an amicus brief in this matter.

We first note that at oral argument HUD’s counsel indicated

that the agency did not request we give deference to its

interpretation of the regulation because it believed the plain

language controlled. (See Kisor v. Wilkie (2019) 588 U.S. ___

[139 S. Ct. 2400, 2415] [“If uncertainty does not exist, there is

no plausible reason for deference. The regulation then just

means what it means — and the court must give it effect”].)

Urging us to affirm the Court of Appeal’s judgment, HUD opines

that the IHSS payments Reilly receives must be treated as

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Opinion of the Court by Chin, J.

29

income under the regulation because that “compensation

substitutes for income Reilly would otherwise earn for working

outside the home.” HUD essentially echoes the reasoning of the

Court of Appeal below.

Though deference is generally accorded an agency’s

interpretation of its own regulation in the face of ambiguity (see

Auer v. Robbins (1997) 519 U.S. 452; Skidmore v. Swift & Co.

(1944) 323 U.S. 134, 140), we conclude that such deference is not

compelled here. (See United States v. Mead Corp. (2001) 533

U.S. 218, 228 [“[t]he fair measure of deference to an agency

administering its own statute has been understood to vary with

circumstances”].) Courts should defer to an agency’s

interpretation unless an “ ‘alternative reading is compelled by

the regulation’s plain language or by other indications of the

[agency’s] intent at the time of the regulation’s promulgation.’ ”

(Thomas Jefferson Univ. v. Shalala, supra, 512 U.S. at p. 512,

italics added.)

As explained above (see ante, at pp. 12–13), we conclude

that HUD’s clearly expressed intent at the time it added the

exclusion for homecare payments (24 C.F.R. § 5.609(c)(16)

(2020)) was to encourage families to provide in-home care to, and

avoid institutionalization of, developmentally disabled family

members. This contemporaneous intent is fully realized only

when in-home payments for services needed to keep the

developmentally disabled member at home — are excluded from

income for purposes of the Section 8 program, i.e., whether those

payments are ultimately made to a family member or to a third

party provider. This interpretation is consistent with

exclusion’s language, which places no restrictions on who the

provider of services can be. (24 C.F.R. § 5.609(c)(16) (2020).)

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Opinion of the Court by Chin, J.

30

Contrary to MHA’s suggestion, we do not perceive any

intent by HUD to treat families with a developmentally disabled

member and families with a medically disabled member the

same, or to consider a parent’s outside income the same as a

parent’s IHSS compensation. We will not pursue parity for

parity’s sake, especially if such pursuit runs counter to the

language and purpose of the exclusion. Including a parent’s inhome care payments as income to determine a family’s Section

8 eligibility will have the perverse effect of making it harder for

a family to maintain a home in which to care for the child.

In the end, we refuse to adopt a crabbed interpretation

that does little to advance the tandem goals of offering

affordable housing to low income families and of supporting

families who themselves provide in-home care for

developmentally disabled members. We cannot endorse a

construction that yields a result antithetical to our nation’s “goal

of providing families of children with disabilities with the

support they need to raise their children at home.” (42 U.S.C.

§ 15091(c).) We conclude a parent’s IHSS compensation to

provide care to keep a developmentally disabled child at home

is excluded from income under 24 Code of Federal Regulations

part 5.609(c)(16) (2020).

We reverse the Court of Appeal’s judgment and remand the matter for further proceedings consistent with this opinion.