[Federal Register Volume 63, Number 250 (Wednesday, December 30, 1998)]
[Rules and Regulations]
[Pages 72092-72096]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-34431]
[[Page 72091]]
_______________________________________________________________________
Part III
Department of the Treasury
_______________________________________________________________________
Fiscal Service
_______________________________________________________________________
31 CFR Part 285
Offset of Tax Refund Payments To Collect Past-Due Support; Final Rule
Federal Register / Vol. 63, No. 250 / Wednesday, December 30, 1998 /
Rules and Regulations
[[Page 72092]]
DEPARTMENT OF THE TREASURY
Fiscal Service
31 CFR Part 285
RIN 1510-AA63
Offset of Tax Refund Payments To Collect Past-Due Support
AGENCY: Financial Management Service, Fiscal Service, Treasury.
ACTION: Final rule.
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SUMMARY: Federal law authorizes the Federal tax refund of a taxpayer
who owes past-due support to be reduced, or offset, by the amounts owed
by the taxpayer. Past-due support includes delinquent child support or
other obligations for the support of a child. The funds offset from a
taxpayer's tax refund are forwarded to the State enforcing the
collection of the past-due support. Effective January 1, 1999, the
Department of the Treasury will conduct the tax refund offset program
as part of the centralized offset program, known as the Treasury Offset
Program, operated by the Financial Management Service (FMS), a bureau
of the Department of the Treasury. This final rule establishes tax
refund offset procedures that supersede the procedures governing the
tax refund offset program established by the Internal Revenue Service
(IRS) and applicable to the collection of past-due support (codified at
26 CFR 301.6402-5). Differences between this rule and the IRS rule
reflect requirements necessitated by the inclusion of the tax refund
offset program as a part of the Treasury Offset Program.
EFFECTIVE DATE: December 30, 1998.
FOR FURTHER INFORMATION CONTACT: Gerry Isenberg, Financial Program
Specialist, at (202) 874-6660; or Ronda Kent or Ellen Neubauer, Senior
Attorneys, at (202) 874-6680. A copy of this rule is being made
available for downloading from the Financial Management Service web
site at the following address: http://www.fms.treas.gov/debt.
SUPPLEMENTARY INFORMATION:
Background
General
Under 26 U.S.C. 6402(c) and 42 U.S.C. 664, Federal tax payments may
be withheld or reduced to collect past-due support on behalf of States.
This process is known as ``offset'' or ``tax refund offset.'' The
Internal Revenue Service (IRS) has been collecting past-due support for
States by tax refund offset since 1982. ``Past-due support'' means the
amount of support, determined under a court order, or an order of an
administrative process established under State law, for support and
maintenance of a child, or of a child and the parent with whom the
child is living, which has not been paid.
The Debt Collection Improvement Act of 1996 (DCIA), Pub. L. 104-
134, 110 Stat. 1321, 1358 (1996), established a centralized process for
offsetting eligible nontax Federal payments to collect delinquent debt
owed to the United States. In addition, the DCIA authorized offset of
such payments to collect past-due support being enforced by States, as
well as other debts owed to States.
The Financial Management Service (FMS), the disbursing agency of
the Department of the Treasury (Treasury), is responsible for the
implementation of centralized offset in accordance with the provisions
of the DCIA. To meet this responsibility, FMS established the
``Treasury Offset Program.'' To improve the efficiency of Treasury's
collection of debts, including past-due support, operation of the tax
refund offset program will be included as part of the Treasury Offset
Program effective January 1, 1999. The provisions and legislative
history of the DCIA clarified that FMS may conduct tax refund offsets
to collect past-due support (see Secs. 31001(v)(2) of the DCIA,
codified at 42 U.S.C. 664(a); 142 Cong. Rec., 104th Cong. 2d Sess.,
H4087, H4090 (Apr. 25, 1996)).
On August 4, 1998, FMS issued a notice of proposed rulemaking
(NPRM) (63 FR 41688, August 4, 1998) proposing changes to the tax
refund offset procedures for the collection of past-due support after
January 1, 1999. For tax refund payments after January 1, 1999, the
revised procedures, as finalized in this rule, supersede the procedures
governing the tax refund offset program established by the IRS and
applicable to the collection of past-due support (codified at 26 CFR
301.6402-5).
This rule governs only the offset of one type of payment, tax
refunds, to pay one type of delinquent debt, past-due support. FMS has
promulgated separate rules and procedures governing other types of
offset, such as tax refund offset for the collection of debts owed to
the Federal Government (31 CFR 285.2, 63 FR 46139, August 28, 1998) and
the offset of nontax Federal payments for the collection of past-due
child support (31 CFR 285.1, 63 FR 46141, August 28, 1998). See also,
Offset of Federal Benefit Payments (31 CFR 285.4, 63 FR 44985, August
21, 1998) and Salary Offset (31 CFR 285.7, 63 FR 23354, April 28,
1998). FMS will promulgate other rules governing offset of nontax
Federal payments for the collection of debts (other than child support)
owed to Federal agencies and States. FMS anticipates that Part 285 of
this title ultimately will contain all of the provisions relating to
centralized offset by disbursing officials for the collection of debts
owed to the Federal Government and to State governments, including
past-due child support being enforced by States.
The Treasury Offset Program
The Treasury Offset Program currently works as follows. FMS
maintains a delinquent debtor database. The database contains
delinquent debtor information submitted and updated by Federal agencies
owed debts, and by States collecting debts including any past-due
support being enforced by States. Before a Federal payment is disbursed
to a payee, FMS compares the payee information with debtor information
in the delinquent debtor database operated by FMS. If the payee's name
and taxpayer identifying number (TIN) match the name and TIN of a
debtor, the payment is offset, in whole or part, to satisfy the debt,
to the extent allowed by law. Since FMS issues different payment types
daily, the collection of past-due support can be satisfied by the
offset of a variety of Federal payment types including, but not limited
to, vendor, salary, and retirement payments, as well as tax refund
payments.
FMS transmits amounts collected to the appropriate agencies or
States owed the delinquent debt after deducting a fee charged to cover
the cost of the offset program. Information about a delinquent debt or
past-due support obligation remains in the debtor database for offset
as long as the debt remains past-due and legally collectible by offset,
or until debt collection activity for the debt is terminated because of
full payment, compromise, write-off or other reasons justifying
termination or removal of the debt from the database.
Offset of Tax Refund Payments To Collect Past-Due Child Support Under
the Treasury Offset Program
This rule establishes tax refund offset procedures that supersede
the procedures governing the tax refund offset program established by
the IRS and applicable to the collection of past-due support (codified
at 26 CFR 301.6402-5). Tax refund payments issued after January 1,
1999, will be offset to collect past-due support as part of the
Treasury Offset Program in accordance with the requirements of 26
[[Page 72093]]
U.S.C. 6402(c) and 42 U.S.C. 664. Procedures for processing claims by
non-debtor spouses and for rejecting a taxpayer's election to apply his
or her refund to future tax liabilities remain governed by IRS rules.
In addition, nothing in this rule changes the pre-offset procedures
established by the Department of Health and Human Services (HHS) rules
implementing 42 U.S.C. 664. See 45 CFR 303.72. HHS issued guidance to
all States on July 6, 1998, concerning the procedures for States to
submit past-due support debts for offset purposes, including procedures
pertaining to the debt certification process. See Office of Child
Support Enforcement (OCSE) Action Transmittal No. OCSE-AT-98-17 (OCSE's
AT-98-17).
The preamble to the NPRM explained the proposed process of
offsetting tax refund payments to collect past-due support under the
Treasury Offset Program, as well as the differences between the
proposed procedures and the IRS procedures. The NPRM also contained a
section-by-section analysis of the proposed rule. (See 63 FR 41688-
41691)
FMS developed this final rule in consultation with the IRS and HHS
and appreciates their assistance. As required by 42 U.S.C. 664(b)(1),
HHS has approved this final rule.
Comments to the NPRM
In response to the NPRM, FMS received comments from seven (7) State
child support enforcement agencies which are discussed below.
General Comments
In response to a commenter's request that the regulation clarify
that States cannot submit debts directly to FMS for tax refund offset
purposes unless authorized by HHS rules, Sec. 285.3(c)(3) has been
revised in the final rule by adding the following first sentence:
``States must notify HHS of past-due support in accordance with the
provisions of paragraph (c)(2) of this section unless HHS rules
authorize notification to FMS directly.'' Though this rule provides
States with the flexibility to refer past-due support debts directly to
FMS, current HHS rules governing programs under Chapter 7, Subchapter
IV, Part D, of title 42 of the U.S. Code (Title IV-D of the Social
Security Act), require States to report past-due support debts to HHS
for tax refund offset purposes. This rule does not supersede existing
HHS rules; it merely provides flexibility should HHS decide to amend
its rules in the future to allow States to refer past-due support debts
directly to FMS. States will be notified if HHS amends its rules to
allow direct submission to FMS. At that time, as suggested by one
commenter, HHS and FMS will work with States to review any impact
direct submission may have on the States.
Another commenter asked whether FMS would require States to use
administrative offset if HHS rules allowed States to submit debts
directly to FMS. FMS has no plans to implement such a requirement. In
response to another commenter's question regarding submission of debts
to FMS, FMS will allow States to increase balances on debts and to
submit debts on an on-going basis throughout the year for debts
submitted through HHS or directly to FMS.
Section 285.3(a)--Definitions
State. The public was specifically invited to comment on the impact
of including or excluding legal subdivisions of States in the
definition of State. Based on two comments received and discussions
with HHS regarding current procedures for county reporting, FMS
determined that the definition of State in the NPRM would not create an
impediment to the collection of past-due support. Counties seeking to
participate in the offset program may do so by reporting through the
State's IV-D program. Therefore, the definition of ``State'' was not
changed to include legal subdivisions.
The public also was invited to comment about whether tribal
governments operating child support enforcement programs should be
treated in the same manner as States for purposes of this rule. One
commenter noted that treating tribal governments operating child
support enforcement programs in the same manner as States is consistent
with the definition of State as defined in section 101, paragraph (19)
of the Uniform Interstate Family Support Act. For the time being, it is
anticipated that States will continue to submit past-due support debts
to the tax refund offset program pursuant to cooperative agreements
with tribal governments. Therefore, the final rule has not been
changed. OCSE is in consultation with the tribes and States and will
formulate policy on this issue as it becomes appropriate. OCSE will
keep the public advised.
Section 285.3(c)--Notification of Past-Due Support
One commenter questioned why the minimum debt referral amount in
Sec. 285.3(c)(1) was different for debts assigned to a State ($25) than
for debts not assigned to a State ($500). Federal law prohibits the use
of tax refund offset for non-assigned past-due support debts less than
$500. See 42 U.S.C. 664(b)(2)(A). There is no similar statutory minimum
dollar threshold for past-due support debts assigned to a State.
Another State questioned whether the $25 minimum for assigned debts
would create confusion since HHS rules currently set a minimum
threshold of $150. FMS has set minimum thresholds as low as possible in
order to maximize the collection of past-due support debts through
offset. Until States are authorized by HHS to submit debts in Title IV-
D cases at a lower threshold, the current minimum threshold set by HHS
is applicable. Section 285.3(c)(1)(i)(A) has been revised to allow
referral of assigned debts not less than $25, or such higher amount as
HHS rules may allow, whichever is greater.
FMS received several comments related to the advance notice
requirements described in paragraphs (c)(4) and (c)(5) of Sec. 285.3.
HHS rules (see 45 CFR 303.72(e) and OCSE's AT-98-17) describe the
requirements pertaining to providing advance notice to the debtors of
the State's intent to submit a debt for offset. Since HHS rules govern
advance notice requirements, the final rule does not incorporate one
commenter's suggestion that the regulation be revised to clarify that a
one-time notice to a debtor, rather than an annual notice, is
sufficient in all cases. HHS' rules allow States to determine
specifically how frequently advance notice will be provided.
Additionally, OCSE's AT-98-17 indicates that because the amount of the
debt may exceed the amount originally indicated in the notice, States
are encouraged to send periodic notices, especially where there are
significant increases in the amount of the debt. In response to other
comments, the first sentence of Sec. 285.3(c)(4) in the final rule has
been changed to clarify that, as authorized by 45 CFR 303.72(e), HHS
may send advance notice to the debtor on behalf of a State. Currently,
FMS has no plans to send advance notices to debtors on behalf of a
State.
With respect to the collection of past-due support enforced by
multiple States as described in Sec. 285.3(c)(6), one commenter
suggested that FMS and/or HHS inform States via reports when multiple
States are enforcing the same debt. When a debt is being enforced by
multiple States, the rule requires notification to the other enforcing
State only if a State has knowledge of such multiple enforcement. HHS
and FMS will work with States to resolve multiple enforcement issues as
they arise. Although at this time there are no plans for providing
systematic
[[Page 72094]]
notification to States to alert them to multiple enforcement issues,
HHS and FMS will review whether such notification is desirable.
Section 285.3(d)--Priorities for Offset
The public was invited to comment on how a tax refund payment
should be applied to a taxpayer's multiple debts within the same
category. Two commenters suggested that any refund be applied
proportionately to the taxpayer's multiple public assistance debts owed
to two or more States, using the total past-due amount as 100%. Another
commenter requested that the debts be paid in the order in which they
were submitted for offset. OCSE's AT-98-17 indicates that OCSE and FMS
have agreed to continue preexisting processing procedures during the
transition of the tax refund offset program from IRS to FMS, thus
processing and giving priority on a first-in-first-processed basis. In
the future, recommendations for alternate processing procedures will be
reviewed by OCSE and FMS.
The final rule has been changed to reflect recently enacted
legislation (Pub. L. 105-206, July 22, 1998) authorizing Treasury to
offset tax refunds to collect delinquent State income tax obligations.
Section 285.3(d) has been changed to reflect the provisions of the new
law under which such State income tax obligations will be paid from a
taxpayer's tax refund only after the tax refund has been applied to
satisfy the taxpayer's delinquent child support obligations and debts
owed to the Federal Government. See 26 U.S.C. 6402(e).
Section 285.3(e)--Post-Offset Notice
One commenter suggested that Sec. 285.3(e)(2) include a reporting
period regarding FMS' offset report to HHS or the States. As in the
NPRM, the final rule does not include a reporting period because FMS
will establish mutually agreed upon periods with HHS or affected
States.
With respect to Sec. 285.3(e)(4), the commenter questioned whether
FMS' report to HHS regarding States' participation in offset
(submissions of debts and offset collections) would include cases
submitted to FMS directly and those submitted through HHS. Pursuant to
the provisions of Sec. 285.3(e)(4), the details and requirements of
such reports will be developed by HHS and FMS but will not be included
in the rule. It is anticipated that reports will include information
about cases submitted to FMS directly and through HHS. Contrary to the
commenter's concern, if, for some reason, the reporting period is
limited to annually, the provisions of this regulation allowing States
to submit cases on an ongoing, rather than annual, basis will not be
affected.
Section 285.3(h)--Fees
The final rule does not incorporate a commenter's suggestion that
Sec. 285.3(h) specify a time frame within which States would be
notified of fee changes prior to any change. FMS will work with HHS and
States to ensure that States have sufficient advance notification of
any fee changes.
Another commenter recommended that the fee structure be identified
in the regulation and remain at a level that will allow for the offset
program to be successful. Under 42 U.S.C. 664, Treasury is authorized
to charge fees to recover the full cost of applying the offset
procedure. This rule requires that the fee be established annually in
such amount as FMS and HHS agree. The fee will be no more than $25 per
case submitted per year. FMS will work with HHS to ensure that States
are provided with information concerning the fee structure, and that
the amount of the fee does not negatively impact the success of the
program.
Regulatory Analyses
This final rule is not a significant regulatory action as defined
in Executive Order 12866. It is hereby certified that this rule will
not have a significant economic impact on a substantial number of small
entities. The basis for this certification is that this rule impacts
only individuals who receive tax refunds and who owe past-due support.
Therefore, a regulatory flexibility analysis is not required.
FMS has determined that this rule may affect family well-being. It
is hereby certified that this rule has been assessed in accordance with
Section 654 of the Treasury Department Appropriations Act, 1999,
enacted as part of the Omnibus Consolidated and Emergency Supplemental
Appropriations Act, 1999 (Pub. L. 105-277). This rule will not have a
negative impact on family well-being because it strengthens the
financial well-being of families by assisting in the collection of
past-due child support.
Special Analysis
FMS has determined that good cause exists to make this final rule
effective upon publication without providing the 30 day period between
publication and the effective date contemplated by 5 U.S.C. 553(d). The
purpose of a delayed effective date is to afford persons affected by a
rule a reasonable time to prepare for compliance. However, in this
case, Treasury has been collecting past-due support for States by tax
refund offset since 1982. Procedures affecting States submitting
delinquent child support obligations for collection and persons owing
delinquent child support obligations remain substantially unchanged.
Effective January 1, 1999, the tax refund offset program will be part
of the centralized offset program operated by FMS. This final rule
provides important guidance that is expected to facilitate States'
participation in the tax refund offset program. Therefore, FMS believes
that good cause exists to make the rule effective upon publication.
List of Subjects in 31 CFR Part 285
Administrative practice and procedure, Child support, Child
welfare, Claims, Debts, Privacy, Taxes.
Authority and Issuance
For the reasons set forth in the preamble, 31 CFR Part 285 is
amended as follows:
PART 285--DEBT COLLECTION AUTHORITIES UNDER THE DEBT COLLECTION
IMPROVEMENT ACT OF 1996
1. The authority citation for part 285 is revised to read as
follows:
Authority: 26 U.S.C. 6402; 31 U.S.C. 321, 3701, 3711, 3716,
3720A, 3720B, 3720D; 42 U.S.C. 664; E.O. 13019; 3 CFR, 1996 Comp.,
p. 216.
2. Section 285.3 is added to subpart A to read as follows:
Sec. 285.3 Offset of tax refund payments to collect past-due support.
(a) Definitions. For purposes of this section:
Debt as used in this section is synonymous with the term past-due
support unless otherwise indicated.
Debtor as used in this section means a person who owes past-due
support.
FMS means the Financial Management Service, a bureau of the
Department of the Treasury.
HHS means the Department of Health and Human Services, Office of
Child Support Enforcement.
IRS means the Internal Revenue Service, a bureau of the Department
of the Treasury.
Past-due support means the amount of support, determined under a
court order, or an order of an administrative process established under
State law, for support and maintenance of a child, or of a child and
the parent with whom the child is living, which has not been paid, as
defined in 42 U.S.C. 664(c).
[[Page 72095]]
Qualified child means a child:
(i) Who is a minor, or
(ii) Who, while a minor, was determined to be disabled under
subchapters II or XVI, Chapter 7, Title 42, United States Code, and for
whom an order of support is in force.
State means the several States of the United States. The term
``State'' also includes the District of Columbia, American Samoa, Guam,
the United States Virgin Islands, the Commonwealth of the Northern
Mariana Islands, and the Commonwealth of Puerto Rico.
Tax refund offset means withholding or reducing a tax refund
payment by an amount necessary to satisfy a debt owed by the payee(s)
of a tax refund payment.
Tax refund payment means any overpayment of Federal taxes to be
refunded to the person making the overpayment after the IRS makes the
appropriate credits as provided in 26 U.S.C. 6402(a) and 26 CFR 6402-
3(a)(6)(i) for any liabilities for any Federal tax on the part of the
person who made the overpayment.
(b) General rule. (1) Past-due support will be collected by tax
refund offset upon notification to FMS in accordance with 26 U.S.C.
6402(c), 42 U.S.C. 664 and this section. Collection by offset under 26
U.S.C. 6402(c) is a collection procedure separate from the collection
procedures provided by 26 U.S.C. 6305 and 26 CFR 301.6305-1, relating
to the assessment and collection of certain child and spousal support
liabilities. Tax refund offset may be used separately or in conjunction
with the collection procedures provided in 26 U.S.C. 6305, as well as
other collection procedures.
(2) FMS will compare tax refund payment records, as certified by
the IRS, with records of debts submitted to FMS. A match will occur
when the taxpayer identifying number (as that term is used in 26 U.S.C.
6109) and name of a payment certification record are the same as the
taxpayer identifying number and name of a delinquent debtor record.
When a match occurs and all other requirements for tax refund offset
have been met, FMS will reduce the amount of any tax refund payment
payable to a debtor by the amount of any past-due support debt owed by
the debtor. Any amounts not offset will be paid to the payee(s) listed
in the payment certification record.
(c) Notification of past-due support. (1) Past-due support eligible
for tax refund offset. Past-due support qualifies for tax refund offset
if:
(i)(A) There has been an assignment of the support obligation to a
State and the amount of past-due support is not less than $25.00, or
such higher amount as HHS rules may allow, whichever is greater; or
(B) A State agency is providing support collection services under
42 U.S.C. 654(4), the amount of past-due support is not less than
$500.00, and the past-due support is owed to or on behalf of a
qualified child (or a qualified child and the parent with whom the
child is living if the same support order includes support for the
child and the parent); and
(ii) A notification of liability for past-due support has been
received by FMS as prescribed by paragraphs (c)(2) or (c)(3) of this
section.
(2) Notification of liability for past-due support and transmission
of information to FMS by HHS. States notifying HHS of past-due support
shall do so in the manner and format prescribed by HHS. The
notification of liability shall be accompanied by a certification that
the State has complied with the requirements contained in paragraph
(c)(4) of this section and with any requirements applicable to the
offset of Federal tax refunds to collect past-due support imposed by
State law or procedures. HHS shall consolidate and transmit to FMS the
information contained in the notifications of liability for past-due
support submitted by the States provided that the State has certified
that the requirements of paragraph (c)(4) of this section have been
met.
(3) Notification of liability for past-due support transmitted
directly to FMS by States. States must notify HHS of past-due support
in accordance with the provisions of paragraph (c)(2) of this section
unless HHS rules authorize notification to FMS directly. If authorized
by HHS rules, States may notify FMS directly of past-due support.
States notifying FMS directly of past-due support shall do so in the
manner and format prescribed by FMS. The notification of liability
shall be accompanied by a certification that the State has complied
with the requirements contained in paragraph (c)(4) of this section and
with any requirements applicable to the offset of Federal tax refunds
to collect past-due support imposed by State law or procedures. FMS may
reject a notification of past-due support which does not comply with
the requirements of this section. Upon notification of the rejection
and the reason for rejection, the State may resubmit a corrected
notification.
(4) Advance notification to debtor of intent to collect by tax
refund offset. The State, or HHS if the State requests and HHS agrees,
is required to provide a written notification to the debtor, pursuant
to the provisions of 42 U.S.C. 664(a)(3) and 45 CFR 303.72(e),
informing the debtor that the State intends to refer the debt for
collection by tax refund offset. The notice also shall:
(i) Instruct the debtor of the steps which may be taken to contest
the State's determination that past-due support is owed or the amount
of the past-due support;
(ii) Advise any non-debtor who may file a joint tax return with the
debtor of the steps which a non-debtor spouse may take in order to
secure his or her proper share of the tax refund; and
(iii) In cases when a debt is being enforced by more than one
State, advise the debtor of his or her opportunities to request a
review with the State enforcing collection or the State issuing the
support order as prescribed by the provisions of 45 CFR 303.72(g).
(5) Correcting and updating notification. The State shall, in the
manner and in the time frames provided by FMS or HHS, notify FMS or HHS
of any deletion or net decrease in the amount of past-due support
referred to FMS, or HHS as the case may be, for collection by tax
refund offset. The State may notify FMS or HHS of any increases in the
amount of the debt referred to FMS for collection by tax refund offset
provided that the State has complied with the requirements of paragraph
(c)(4) of this section with regard to those debts.
(6) Collection of past-due support enforced by multiple States.
When a State has knowledge that the debt is being enforced by more than
one State, the State notifying FMS, or HHS as the case may be, of the
debt shall inform any such other State involved in enforcing the debt
when it receives the offset amount.
(d) Priorities for offset. (1) As provided in 26 U.S.C. 6402 as
amended, a tax refund payment shall be reduced in the following order
of priority:
(i) First by the amount of any past-due support assigned to a State
(welfare cases) which is to be offset under 26 U.S.C. 6402(c), 42
U.S.C. 664 and this section;
(ii) Second, by the amount of any past-due, legally enforceable
debt owed to a Federal agency which is to be offset under 26 U.S.C.
6402(d), 31 U.S.C. 3720A and Sec. 285.2 of this part;
(iii) Third, by the amount of any qualifying past-due support not
assigned to a State (non-welfare cases) which is to be offset under 26
U.S.C. 6402(c), 42 U.S.C. 664 and this section; and
[[Page 72096]]
(iv) Fourth, by the amount of any past-due, legally enforceable
State income tax obligation which is to be offset under 26 U.S.C.
6402(e).
(2) Reduction of the tax refund payment pursuant to 26 U.S.C.
6402(a), (c), (d), and (e) shall occur prior to crediting the
overpayment to any future liability for an internal revenue tax. Any
amount remaining after tax refund offset under 26 U.S.C. 6402(a), (c),
(d), and (e) shall be refunded to the taxpayer, or applied to estimated
tax, if elected by the taxpayer pursuant to IRS regulations.
(e) Post-offset notice. (1) (i) FMS shall notify the debtor in
writing of:
(A) The amount and date of the offset to satisfy past-due support;
(B) The State to which this amount has been paid or credited; and
(C) A contact point within the State that will handle concerns or
questions regarding the offset.
(ii) The notice in paragraph (e)(1)(i) of this section also will
advise any non-debtor who may have filed a joint tax return with the
debtor of the steps which a non-debtor spouse may take in order to
secure his or her proper share of the tax refund. See paragraph (f) of
this section.
(2) FMS will advise HHS of the names, mailing addresses, and
identifying numbers of the debtors from whom amounts of past-due
support were collected, of the amounts collected from each debtor
through tax refund offset, the names of any non-debtor spouses who may
have filed a joint return with the debtor, and of the State on whose
behalf each collection was made. Alternatively, FMS will provide such
information to each State that refers debts directly to FMS. FMS will
inform HHS and each State that the payment source is a tax refund
payment.
(3) At least weekly, FMS will notify the IRS of the names and
taxpayer identifying numbers of the debtors from whom amounts owed for
past-due support were collected from tax refund offsets and the amounts
collected from each debtor.
(4) At such time and in such manner as FMS and HHS agree, but no
less than annually, FMS will advise HHS of the States which have
furnished notices of past-due support, the number of cases in each
State with respect to which such notices have been furnished, the
amount of past-due support sought to be collected by each State, and
the amount of such tax refund offset collections actually made in the
case of each State. As FMS and HHS may agree, FMS may provide
additional offset-related information about States which have furnished
notices of past-due support.
(f) Offset made with regard to a tax refund payment based upon
joint return. If the person filing a joint return with a debtor owing
the past-due support takes appropriate action to secure his or her
proper share of a tax refund from which an offset was made, the IRS
will pay the person his or her share of the refund and request that FMS
deduct that amount from amounts payable to HHS or the State, as the
case may be. FMS and HHS, or the appropriate State, will adjust their
debtor records accordingly.
(g) Disposition of amounts collected. FMS will transmit amounts
collected for debts, less fees charged under paragraph (h) of this
section, to HHS or to the appropriate State. If FMS learns that an
erroneous offset payment is made to HHS or any State, FMS will notify
HHS or the appropriate State that an erroneous offset payment has been
made. FMS may deduct the amount of the erroneous offset payment from
amounts payable to HHS or the State, as the case may be. Alternatively,
upon FMS' request, the State shall return promptly to the affected
taxpayer or FMS an amount equal to the amount of the erroneous payment
(unless the State previously has paid such amounts, or any portion of
such amounts, to the affected taxpayer). HHS and States shall notify
FMS any time HHS or a State returns an erroneous offset payment to an
affected taxpayer. FMS and HHS, or the appropriate State, will adjust
their debtor records accordingly.
(h) Fees. The State will pay a fee to FMS for the full cost of
administering the tax refund offset program. The fee (not to exceed $25
per case submitted) will be established annually in such amount as FMS
and HHS agree to be sufficient to reimburse FMS for the full cost of
the offset procedure. FMS will deduct the fees from amounts collected
prior to disposition and transmit a portion of the fees deducted to
reimburse the IRS for its share of the cost of administering the tax
refund offset program. Fees will be charged only for actual tax refund
offsets completed.
(i) Review of tax refund offsets. In accordance with 26 U.S.C.
6402(f), any reduction of a taxpayer's refund made pursuant to 26
U.S.C. 6402(c), (d), or (e) shall not be subject to review by any court
of the United States or by the Secretary of the Treasury, FMS or IRS in
an administrative proceeding. No action brought against the United
States to recover the amount of this reduction shall be considered to
be a suit for refund of tax.
(j) Access to and use of confidential tax information. Access to
and use of confidential tax information in connection with the tax
refund offset program is permitted to the extent necessary in
establishing appropriate agency records, locating any person with
respect to whom a reduction under 26 U.S.C. 6402(c) is sought for
purposes of collecting the debt, and in the defense of any litigation
or administrative procedure ensuing from a reduction made under section
6402(c).
(k) Effective date. This section applies to tax refund payments
payable under 26 U.S.C. 6402 after January 1, 1999.
Dated: December 16, 1998.
Richard L. Gregg,
Commissioner.
[FR Doc. 98-34431 Filed 12-30-98; 8:45 am]
BILLING CODE 4810-35-P