[Federal Register Volume 80, Number 180 (Thursday, September 17, 2015)]
[Rules and Regulations]
[Pages 55751-55752]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-23305]


=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF THE TREASURY

Fiscal Service

31 CFR Part 285

RIN 1530-AA02


Offset of Tax Refund Payments To Collect Certain Debts Owed to 
States

AGENCY: Bureau of the Fiscal Service, Fiscal Service, Treasury.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: This final rule adopts the interim rule, published in the 
Federal Register on January 28, 2011, concerning the collection of 
delinquent State unemployment compensation debts through the offset of 
overpayments of Federal taxes.

DATES: This rule is effective September 17, 2015.

ADDRESSES: In accordance with the U.S. government's eRulemaking 
Initiative, the Bureau of the Fiscal Service publishes rulemaking 
information on http://www.regulations.gov.

FOR FURTHER INFORMATION CONTACT: Thomas Kobielus, Manager, Treasury 
Offset Program Debt Policy Branch, Treasury Offset Program Division, 
Debt Collection Program Management Directorate, Debt Management 
Services, Bureau of the Fiscal Service, at (202) 874-6810, or Michelle 
M. Cordeiro, Attorney, Office of Chief Counsel, Bureau of the Fiscal 
Service, at (202) 874-6680.

SUPPLEMENTARY INFORMATION:

I. Background

    This rule implements the authority added by the SSI Extension for 
Elderly and Disabled Refugees Act of 2008 (``2008 Act''), as amended by 
the Claims Resolution Act of 2010 (``2010 Act''), to offset 
overpayments of Federal taxes (referred to as ``tax refund offset'') to 
collect delinquent state unemployment compensation debts. The 
Department of the Treasury (``Treasury'') has incorporated the 
procedures necessary to collect state unemployment compensation debts 
as part of the Treasury Offset Program, a centralized offset program 
operated by Treasury's Bureau of the Fiscal Service (``Fiscal 
Service'').
    On January 28, 2011, Fiscal Service (then, the Financial Management 
Service) published an interim rule with request for comments at 76 FR 
5070, implementing this new authority. Specifically, this rule amended 
Fiscal Service regulations to include unemployment compensation debts 
among the types of state debts that may be collected by tax refund 
offset.

II. Summary of Comments Received and Treasury's Responses

    Treasury sought comments on all aspects of the proposed rule. 
Treasury received comments from one private company that provides 
worldwide tax services. The following is a discussion of the 
substantive issues raised in the comments.

1. Notice

    The commenter suggested that the rule provide guidelines to the 
states regarding how to notify debtor populations who may be affected 
by this rule. While this comment is outside the scope of this rule, 
Fiscal Service notes that this rule requires debtor-specific pre-offset 
notification (see 31 CFR 285.8(c)(3)(i)). The commenter also suggested 
that Fiscal Service mandate that states provide a pre-offset notice by 
certified mail, return receipt requested. In the 2010 Act, Congress 
explicitly removed this requirement in the case of unemployment 
compensation debt. Fiscal Service is unaware of any evidence that 
certified mail is more likely to reach the debtor than is regular first 
class mail, and notes that the cost of sending a notice by certified 
mail, return receipt requested, is high relative to sending a notice by 
regular first class mail. Therefore, Fiscal Service has not adopted 
this suggestion. As required by statute, however, notice must be sent 
by certified mail, return receipt requested prior to pursuing Federal 
tax refund offset to collect delinquent state income tax obligations.
    The commenter also suggested that Fiscal Service mandate that the 
notice to the debtor include certain details about the debt. Fiscal 
Service notes that, prior to submitting a debt to the Treasury Offset 
Program for tax refund offset purposes, a state is required to certify 
to Fiscal Service that it has provided the debtor with sufficient due 
process, including identification of the debt the state seeks to 
collect by offset. The information that must be provided may differ 
with the specific circumstances, and states may provide notice beyond 
what is specifically required by statute and regulation. Because 
identification of the debt is already required, Fiscal Service has not 
incorporated this suggestion.

2. Reasonable Efforts

    The commenter suggested that this rule provide specific actions 
that states should take and state what documentation they should retain 
to demonstrate that they have made reasonable efforts to collect a debt 
prior to pursuing Federal tax refund offset. The rule provides detail 
on what a reasonable effort includes--namely, making written demand on 
the debtor for payment and following state law and procedure. In 
addition, the rule was designed to provide flexibility because what 
constitutes a reasonable effort may differ based on the specific 
circumstances. Therefore, Fiscal Service believes that providing 
specific actions that states should take is unnecessary and not 
practicable and has not adopted this suggestion.

3. Central Repository for Information

    The commenter suggested that debtors be able to obtain information 
through a centralized location within the Treasury Offset Program Web 
site and through an automated telephone system on why their payment was 
offset and on state appeals processes. While this suggestion is outside 
the scope of this rule, Fiscal Service notes that debtors currently may 
access certain offset information through an automated telephone 
system. Fiscal Service further notes that it is exploring other self-
service options that would permit debtors to obtain information about 
their own debts.

4. Other Concerns

    The commenter suggested that the description of the required appeal 
process contain more detail. Fiscal Service is not aware of any 
additional detail that needs to be included and, therefore, has not 
made any changes to the rule based on this suggestion.
    The commenter also suggested that Fiscal Service consider extending 
the period of dispute to 90 days because debtors are unlikely to have 
retained records for long periods of time. Fiscal Service notes that 
several other delinquent debt collection tools provide a due process 
period of 60 days or fewer, including the offset of Federal nontax 
payments to collect Federal nontax debts (31 CFR 285.5(d)(6)(ii)(A)); 
the offset of Federal nontax payments to collect state debts (31 CFR 
285.6(e)(2)); the offset of Federal tax payments to collect Federal 
nontax debts (31 CFR 285.2(d)(1)(ii)(B)); and the

[[Page 55752]]

administrative garnishment of wages to collect Federal nontax debts (31 
U.S.C. 3720D(b)(2)). Moreover, Fiscal Service believes that an 
additional 30 days is not likely to help debtors locate and produce 
such records, and is not aware of any evidence that 60 days is 
insufficient. Given the time period for other debt collection tools, 
Fiscal Service believes it would be best to leave the interim rule 
unchanged.
    The commenter also expressed concern that lifting the 10-year time 
limitation will create burdens for Treasury's Internal Revenue Service, 
due to an increase in injured spouse claims. Fiscal Service is unaware 
of any evidence to support this concern. Fiscal Service further notes 
that the 10-year limitation was removed by statute.
Procedural Matters
    This rule is not a significant regulatory action as defined in 
Executive Order 12866. Because no notice of proposed rulemaking was 
required for this rule, the provisions of the Regulatory Flexibility 
Act (5 U.S.C. 601 et seq.) do not apply.
Federalism
    This rule has been reviewed under Executive Order 13132, 
federalism. This rule will not have substantial direct effects on 
states, on the relationship between the national government and the 
states, or on distribution of power and responsibilities among the 
various levels of government. Participation in the program governed by 
this rule is voluntary for the states; this rule only sets forth the 
general procedures for state participation. States already participate 
in offset of tax refunds to collect delinquent state income tax 
obligations pursuant to 31 CFR 285.8. This rule merely updates the 
regulations to reflect the statutory change authorizing states to 
submit additional debts to Treasury Offset Program for collection by 
tax refund offset. Therefore, in accordance with Executive Order 13132, 
it is determined that this rule does not have sufficient federalism 
implications to warrant the preparation of a federalism summary impact 
statement.
    For the reasons stated above, the interim rule amending 31 CFR 
285.8, published at 76 FR 5070, January 28, 2011, is adopted as final 
without change.

David A. Lebryk,
Fiscal Assistant Secretary.
[FR Doc. 2015-23305 Filed 9-16-15; 8:45 am]
BILLING CODE 4810-AS-P