[Federal Register: January 11, 2007 (Volume 72, Number 7)]
[Rules and Regulations]
[Page 1283-1288]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr11ja07-13]
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DEPARTMENT OF THE TREASURY
Fiscal Service
31 CFR Part 285
RIN 1510-AB09
Administrative Offset Under Reciprocal Agreements With States
AGENCY: Financial Management Service, Fiscal Service, Treasury.
ACTION: Interim rule with request for comments.
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SUMMARY: This interim rule describes the rules applicable to the offset
of Federal nontax payments to collect delinquent debts owed to States
pursuant to reciprocal agreements between the Secretary of the Treasury
and the States. In addition to providing for the offset of Federal
nontax payments, the reciprocal agreements will provide for the offset
of State payments to collect delinquent, nontax Federal debts. The
offsets described in this rule will be processed by the Treasury Offset
Program (TOP). The Department of the Treasury's Financial Management
Service (FMS) established TOP in order to centralize the process by
which Federal payments are withheld or reduced (in other words, offset)
to collect delinquent debts. This interim rule specifically applies to
the centralized offset of Federal nontax payments by Federal disbursing
officials to collect delinquent debts owed to States pursuant to
reciprocal agreements. Therefore, this interim rule affects persons who
owe delinquent debts to a State of the United States and who receive
Federal payments. It also affects persons who owe delinquent, nontax
Federal debts and who receive payments from States. This rule does not
apply to collection of past-due support debts (see 31 CFR 285.1), the
offset of Federal tax refund payments, the offset of Federal salary
payments, or the offset of other Federal payments excluded from offset
by law.
DATES: This rule is effective January 11, 2007. Comments must be
received by March 12, 2007.
ADDRESSES: All comments should be addressed to Thomas Dungan, Senior
Policy Analyst, Debt Management Services, Financial Management Service,
Department of the Treasury, 401 14th Street, SW., Room 435B,
Washington, DC 20227. Comments may also be submitted via the internet
as directed on the FMS Web site at the following address: http://www.fms.treas.gov/debt.
A copy of this interim rule is being made
available for downloading from the Web site.
FOR FURTHER INFORMATION CONTACT: Thomas Dungan, Senior Policy Analyst,
at (202) 874-6660, or Tricia Long, Senior Counsel, at (202) 874-6680.
SUPPLEMENTARY INFORMATION:
Background
The Debt Collection Improvement Act of 1996 (DCIA), Pub. L. 104-
134, 110 Stat. 1321-358 et seq. (April 26, 1996), authorized Federal
disbursing officials to withhold or reduce eligible Federal payments to
pay the payee's delinquent debt owed to the United States. See 31
U.S.C. 3716(c). This process is known as ``administrative offset'' or
``offset.'' The DCIA also provided that Federal payments may be offset
to collect delinquent debts owed to States provided that the States
enter into reciprocal agreements with the Secretary of the Treasury and
meet
[[Page 1284]]
certain other qualifications. See 31 U.S.C. 3716(h).
FMS, a bureau of the Department of the Treasury (Treasury), is
responsible for the implementation of centralized administrative offset
of Federal payments for the collection of delinquent debt. FMS has
established TOP to meet this and other debt collection
responsibilities. By centralizing offset through TOP, FMS has
consolidated and simplified debt collection procedures for the Federal
Government. TOP works as follows: Creditor agencies submit information
about delinquent debts to FMS, which maintains the information in its
delinquent debtor database. Payment agencies prepare and certify
payment vouchers to FMS and disbursing officials at certain other
Federal agencies with disbursing authority (such as the Department of
Defense or the United States Postal Service), who then disburse
payments. The payment vouchers contain information about the payment
including the name and taxpayer identifying number (TIN) of the
recipient.
Before an eligible Federal payment is disbursed to a payee, FMS
compares the payment information (including information from payments
disbursed by other Federal agencies) with debtor information in FMS's
delinquent debtor database. If the payee's name and TIN match the name
and TIN of a debtor, the disbursing official offsets the payment, in
whole or in part, to satisfy the debt, to the extent legally allowed.
FMS transmits amounts collected through offset to the appropriate
creditor agencies after deducting fees to cover the costs of operating
the offset program, pursuant to 31 U.S.C. 3716(c)(4). If not otherwise
prohibited by law, creditor agencies may add the fees to the debts as
administrative costs, pursuant to 31 U.S.C. 3717(e).
Section 3716(h) authorizes the Secretary of the Treasury to allow
States to participate in administrative offset to collect delinquent
State debts so long as the States meet the requirements of 31 U.S.C.
3716(h), including entering into reciprocal agreements with the
Secretary of the Treasury. Such reciprocal agreements shall contain any
requirements that the Secretary considers appropriate to facilitate
offset and prevent duplicative efforts.
In order to determine if it is in the best interests of the United
States and the States to fully implement reciprocal offsets under this
section, FMS invited the States to participate in the development of a
pilot program. Three States have chosen to work with FMS to develop and
participate in the pilot. The purpose of the pilot is to test systems
and procedures to facilitate offset and to evaluate whether the
benefits of the program outweigh the costs. FMS will consider
information gained from the operation of the pilot, in addition to
comments received on this interim rule, before issuing a final rule.
Section Analysis
(a) Scope. Paragraph (a) describes the scope of this rule, which
governs the administrative offset of Federal nontax payments to collect
delinquent debts owed to States in accordance with the requirements of
31 U.S.C. 3716(h). This rule does not apply to the offset of Federal
tax refund payments, because the authority for this section--31 U.S.C.
3716--does not authorize the offset of Federal tax refunds to collect
debts. This rule also does not apply to the offset of Federal salary
payments. While Federal salary payments may be offset under 31 U.S.C.
3716, there are many statutes and regulations that affect Federal
salary offsets. FMS has chosen not to address those authorities in this
rule. Additionally, this rule does not apply to the collection of past-
due support payments. (See 31 CFR 285.1 for rules applicable to
administrative offset to collect past-due support).
(b) Definitions. Paragraph (b) of this rule sets forth definitions
applicable to this rule. Unless otherwise defined in this rule, all
terms have the meanings set forth in section 285.5(b) of this part. As
defined in this rule, ``administrative offset'' is used to describe the
offset of Federal payments to collect delinquent State debts. The
definition of ``State debt'' expressly excludes debts owed by other
governments. FMS has determined that TOP is not the appropriate tool
for resolving issues of indebtedness between State, local and foreign
governments. Also, the term ``debt'' is limited by statute to exclude
debts owed by agencies of the United States. See 31 U.S.C. 3701(c). The
term ``State payment offset'' means the offset of State payments,
pursuant to State law, to collect delinquent Federal nontax debts. The
term ``reciprocal agreement'' is defined to mean a written agreement
between FMS and a State, which will govern administrative offset to
collect that State's debts and the offset of that State's payments to
collect Federal debts.
(c) General rule. Paragraph (c) sets forth the general rule that
Federal disbursing officials are authorized to offset Federal payments
to collect delinquent State debts as long as the requirements of 31
U.S.C. 3716(h) are met. Among other things, States must enter into
reciprocal agreements with FMS that provide for the offset of State
payments to collect Federal nontax debts.
(d) Reciprocal agreements. Paragraph (d) sets forth the basic
parameters for the reciprocal agreements between FMS and the States. As
required by 31 U.S.C. 3716(h)(1)(B)(i), a State must enter into a
reciprocal agreement before it may collect its debts through
administrative offset under this section. The reciprocal agreement will
contain more detailed provisions consistent with this rule. A
reciprocal agreement will not necessarily require that each party will
offset the exact same types of payments. FMS and the State shall
determine which payments will be part of the offset programs in order
to make the agreements mutually beneficial and, thus, reciprocal.
(e) Requirements for administrative offset. Paragraph (e) sets
forth the requirements for collecting State debts by administrative
offset of Federal payments. State debts must meet the same eligibility
requirements for administrative offset as Federal debts are required to
meet under 31 CFR 285.5(d)(3)(i). States must comply with the same
certification requirements as Federal agencies under 31 CFR 285.5(d)(6)
except for requirements that are clearly inapplicable to administrative
offset under this section. The specific exceptions are establishment of
Federal salary offset procedures and the requirement to assess interest
on Federal debts.
Additionally, with respect to paragraph (d)(6)(ii) of section 285.5
of this part, States will only be required to certify that they have
complied with the requirements of 31 U.S.C. 3716 and this section;
States are not required to certify compliance with 31 U.S.C. 3720A or
26 U.S.C. 6402, both of which apply to Federal tax refund offsets.
States shall also certify that they have complied with any requirements
imposed by State law or procedure that may be applicable to
administrative offset under this section.
(f) Debts previously submitted by States for tax refund offset.
Pursuant to 31 CFR 285.8, States have submitted delinquent State income
tax obligations to FMS for collection by Federal tax refund offset. At
the time of submission, States certified the debts in substantially the
same manner as required under this rule, including that the State has
given the debtor notice of the State's intention to collect the debt
through offset of Federal tax refunds. State income tax obligations may
also be collected by administrative offset under this rule. FMS has
determined that it is unnecessary to require the States to
[[Page 1285]]
certify those debts again as a condition to eligibility for
administrative offset under this rule. However, with respect to these
debts, within 30 days of an administrative offset under this section,
the State must notify the debtor in writing that the debtor may
exercise the due process rights set forth in paragraph (e) of this
rule, if the State has not previously notified the debtor that Federal
payments other than tax refunds are subject to administrative offset,
and the debtor has not exercised his or her due process rights prior to
the submission of the debt to FMS. This paragraph also notes that
nothing in this rule requires the State to duplicate any notice or any
opportunity for a hearing or review previously provided to the debtor.
(g) Federal Payments subject to administrative offset under this
section. Paragraph (g) states that the types of Federal payments that
will be offset to collect a State's debts shall be set forth in the
reciprocal agreement. A number of payment types are expressly excluded
from administrative offset under this rule. In accordance with the
statutory prohibitions contained in 31 U.S.C. 3716(h), disbursing
officials may not offset the following payments to collect debts under
this rule: (a) Any payments exempted from offset as set forth in 31 CFR
285.5(e)(2); (b) payments due to an individual under the Social
Security Act; (c) payments due an individual pursuant to part B of the
Black Lung Benefits Act; and (d) payments due an individual pursuant to
any law administered by the Railroad Retirement Board. Additionally, as
explained above, offset of Federal tax refunds and salary payments are
not authorized by this rule.
(h) Conducting the administrative offset. Paragraph (h) instructs
Federal disbursing officials to conduct administrative offset under
this rule in the same manner as under 31 CFR 285.5. This paragraph also
specifies the priority for applying offset funds when a payment matches
with multiple debts in TOP. FMS uses TOP to collect many types of
delinquent debts under various legal authorities. If a payment matches
with multiple debts, the disbursing official shall apply offset amounts
to all other types of debts collected by offset under subpart A of 31
CFR part 285 (i.e., debts owed to Federal agencies and past due support
debts) before applying any available amounts to a debt under this rule.
Additionally, in accordance with 31 U.S.C. 3716(c)(8), a levy pursuant
to the Internal Revenue Code has precedence over offsets under this
section. Disbursing officials, therefore, will satisfy a levy to
collect tax debts prior to offsetting funds under this section.
(i) Liability of disbursing officials and payment agencies.
Paragraph (i) restates the statutory provision that disbursing
officials and payment agencies shall not be liable to the payee for
nonpayment of any amounts offset under this rule.
(j) Notification to a State of Federal debt. Paragraph (j)
addresses the requirements for offsetting a State payment to collect a
Federal debt. State payment offset is governed by the law of the State
conducting the offset. This paragraph provides that all State law
requirements that Federal creditor agencies must meet for State payment
offset shall be set forth in the reciprocal agreement. Such
requirements shall not exceed the requirements for collecting Federal
debts by administrative offset under 31 CFR 285.5(d). This paragraph
also provides that FMS will certify to the State conducting the offset
that the Federal debts FMS submits to the State have been certified as
valid and legally enforceable in accordance with 31 U.S.C. 3716(a).
(k) Conducting State payment offset. Paragraph (k) provides that
States shall conduct State payment offset pursuant to the State's laws
and regulations. The paragraph sets forth two requirements regarding
State payment offset that parallel requirements for conducting
administrative offset. First, in the case of a State payment that is
payable to two or more joint payees, the entire payment shall be
subject to offset to collect the debt of any one of the payees, unless
prohibited by State law. Such prohibition must be set forth in the
reciprocal agreements. Because the Treasury Offset Program only matches
one debtor at a time per payment, FMS will generally not enter into
reciprocal agreements that prohibit offsetting a payment to collect a
debt owed by only one of the joint payees. Second, if a payment is made
to a person solely in that person's capacity as a representative payee
for another person having the beneficial interest in the payment, the
State disbursing official shall only offset such payments for the debts
of the person having the beneficial interest. For example, if a State
makes a payment to a minor child, and the payment is made payable to
that child's parent as the representative payee for that child, the
State shall not offset the payment to collect a debt that the parent
owes to the United States.
Paragraph (k) also sets forth the requirement that the State notify
the payee of any State payment offset. While the reciprocal agreement
may set forth additional requirements, this rule requires, at a
minimum, that the notice inform the payee of the type and amount of the
payment that was offset, the identity of the Federal agency that
requested the offset, and a contact point within the Federal agency
that will handle concerns regarding the offset. Operationally, FMS will
provide this information to the State at the time FMS requests the
State payment offset.
(l) Limitations. Paragraph (l) sets forth limitations on the
collectibility of both Federal and State debts. Debts shall remain
eligible for State payment offset or administrative offset, as
applicable, so long as the debts remain valid and legally enforceable
for purposes of offset. Among other things, this means that, unless
otherwise provided by law, the debt has not been outstanding for more
than 10 years. See 31 U.S.C. 3716(e). The 10-year limitation, however,
does not apply to collecting debts reduced to judgment by
administrative offset. See the Federal Claims Collection Standards at
31 CFR 901.3(a)(4). There are no time limitations on collecting Federal
judgments. Many State judgments are also not subject to time
limitations. Therefore, this rule states that a Federal or State debt
that has been reduced to judgment shall remain enforceable for purposes
of administrative offset for as long as the judgment remains
enforceable against the debtor under the laws applicable to the
judgment.
(m) Fees. Paragraph (m) states that FMS will deduct a fee from
amounts offset pursuant to this rule. As required by 31 U.S.C.
3716(c)(4), the fee will be in an amount that FMS has determined to be
sufficient to reimburse FMS for the full cost of conducting offsets
under this section. FMS will notify States and Federal agencies of the
amount of the fee in advance.
Special Analysis
FMS is promulgating this interim rule without opportunity for prior
public comment pursuant to the Administrative Procedure Act, 5 U.S.C.
553 (the ``APA''), because FMS has determined, for the following
reasons, that a comment period would be unnecessary and contrary to the
public interest. The DCIA provision authorizing the offset of Federal
payments to collect delinquent debt owed to the States pursuant to
reciprocal agreements was effective on August 26, 1996. A comment
period is unnecessary because this interim rule does not change the
ongoing offset process under the TOP, but rather provides guidance for
State agencies and Federal disbursing officials to facilitate the
addition of State debts into TOP. Under this interim rule, State
[[Page 1286]]
agencies are required to provide to the debtor the same pre-offset
notice, opportunities, and rights to dispute the debt and seek waiver
as currently required under 31 U.S.C. 3716 and 3720A and implementing
regulations. Since this interim rule provides important guidance
ensuring that debtors receive appropriate notices and opportunities
from States that elect to participate, FMS believes that it is in the
public interest to issue this interim rule without opportunity for
prior public comment.
For the same reasons, FMS has determined that good cause exists to
make this interim rule effective upon publication without providing the
30-day period between publication and the effective date contemplated
by 5 U.S.C. 553(d)(3). The public is invited to submit comments on the
interim rule, which will be taken into account before a final rule is
issued.
Regulatory Analysis
This interim rule is not a significant regulatory action as defined
in Executive Order 12866. Because no notice of proposed rulemaking is
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 the
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, and this rule only sets forth
the general procedures for State participation. Additionally, as
described above, FMS has worked closely with States in the development
of a pilot program that will operate pursuant to this interim rule. As
part of that collaborative process, FMS has consulted with the States
participating in the pilot regarding the provisions of this rule and
the operational requirements for participation. 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.
List of Subjects in 31 CFR Part 285
Administrative practice and procedure, Black lung benefits, Child
support, Claims, Credit, Debts, Disability benefits, Federal employees,
Garnishment of wages, Hearing and appeal procedures, Loan programs,
Privacy, Railroad retirement, Railroad unemployment insurance,
Salaries, Social Security benefits, Supplemental Security Income (SSI),
Taxes, Veteran's benefits, Wages.
Authority and Issuance
0
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
0
1. The authority citation for part 285 continues to read as follows:
Authority: 5 U.S.C. 5514; 26 U.S.C. 6402; 31 U.S.C. 321, 3701,
3711, 3716, 3719, 3720A, 3720B, 3720D; 42 U.S.C. 664; E.O. 13019, 61
FR 51763, 3 CFR, 1996 Comp., p. 216.
0
2. Section 285.6 is added to part 285, subpart A, to read as follows:
Sec. 285.6 Administrative offset under reciprocal agreements with
states.
(a) Scope. (1) This section sets forth the rules that apply to the
administrative offset of Federal nontax payments to collect delinquent
debts owed to States. As set forth in 31 U.S.C. 3716(h), States may
participate in administrative offset so long as they meet certain
requirements, including entering into reciprocal agreements with the
Secretary of the Treasury. Such reciprocal agreements may contain any
requirements that the Secretary considers appropriate to facilitate
offset. Participation in offset under this section is voluntary for
both FMS and the States. This section prescribes the minimum
requirements for such reciprocal agreements, including provisions
applicable to the offset of State payments, pursuant to State law, to
collect delinquent Federal debts. Such offsets are defined in this
section as ``State payment offsets.''
(2) This section does not apply to the offset of Federal salary
payments, Federal tax refunds (see 31 CFR 285.8), or the collection of
past-due support debts (see 31 CFR 285.1 and 285.3).
(b) Definitions. (1) Unless otherwise defined in paragraph Sec.
285.5(b) of this subpart.
(2) For purposes of this section:
Administrative offset has the meaning set forth in 31 U.S.C.
3701(a) and means withholding funds payable by the United States to, or
held by the United States for, a person to satisfy a debt owed by the
payee. The term debt in this definition means a State debt.
Debtor means a person who owes a debt to the United States or a
State.
Federal debt means any amount of money, funds or property that has
been determined by an appropriate official of the Federal government to
be owed to the United States by a person, organization, or entity,
except another Federal agency. The term includes debt administered by a
third party acting as an agent for the Federal Government. For purposes
of this section, the term ``Federal debt'' does not include debts
arising under the Internal Revenue Code of 1986 (26 U.S.C. 1 et seq.),
the tariff laws of the United States, or the Social Security Act (42
U.S.C. 301 et seq.), except to the extent provided in sections 204(f)
and 1631(b)(4) of such Act (42 U.S.C. 404(f) and 1383(b)(4)(A),
respectively) and 31 U.S.C. 3716(c).
Offset means withholding funds payable to a person to satisfy a
debt owed by the payee.
Participating State means a State that has entered into a
reciprocal agreement under this section.
Reciprocal agreement means a written agreement between FMS and a
State, entered into pursuant to 31 U.S.C. Sec. 3716(h), which provides
for administrative offset and State payment offset.
State has the meaning set forth in 31 U.S.C. 3701(b)(2) and
includes the several states of the United States, 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.
State debt means any amount of money, funds or property that has
been determined by an appropriate State official to be owed to that
State by a person, organization, or entity, except the United States, a
foreign sovereign, or another State (including local governments within
a State). For purposes of this rule, the term includes debt
administered by a third party acting as an agent for the State.
State payment offset means withholding funds payable by a State to,
or held by a State for, a person to satisfy a debt owed by the payee to
the United States.
(c) General rule. FMS and other disbursing officials of the Federal
Government will conduct administrative offset to collect past-due State
debts certified to FMS, and participating States will conduct State
payment offset to collect delinquent Federal debts in accordance with
the terms of reciprocal agreements entered into between the States and
FMS, acting on behalf of the Secretary. Upon notification of a
delinquent State debt
[[Page 1287]]
from a participating State to FMS, disbursing officials of the United
States shall offset the Federal payments specified in the reciprocal
agreement to collect the State debt. The amount offset, minus an offset
fee, shall be forwarded to the State to be distributed in accordance
with applicable laws and procedures. Upon notification of a delinquent
Federal debt from FMS to a participating State, authorized officials of
the participating State shall conduct State payment offset as specified
in the applicable reciprocal agreement to collect the Federal debt.
(d) Reciprocal agreements. (1) FMS may enter into reciprocal
agreements with States for administrative offset and State payment
offset. The agreements shall contain any requirements which FMS
considers appropriate to facilitate the offset and prevent duplicative
efforts, and shall require States to prescribe procedures governing the
collection of delinquent State debts which are substantially similar to
requirements imposed on Federal agencies pursuant to 31 U.S.C. Sec.
3716(b). States may prescribe such procedures through legislation or
regulations, as deemed appropriate by State officials. States which
have entered into a reciprocal agreement with FMS pursuant to this
section may thereafter request, in the manner prescribed in the
reciprocal agreement, that administrative offsets be performed. Such
requests shall be made by the appropriate State disbursing official,
which, for purposes of this section, means an appropriate official of
the State agency that is responsible for collecting the State debt.
Reciprocal agreements must be signed by a State official authorized to
enter into such agreements.
(2) Once FMS has entered into a reciprocal agreement with a State
pursuant to this section, FMS may request that the State perform State
payment offsets to collect delinquent Federal debts in accordance with
the terms of the reciprocal agreement.
(3) A duly executed reciprocal agreement is required before a State
may request an administrative offset pursuant to 31 U.S.C. 3716(h).
(e) Requirements for submitting State debts for administrative
offset--(1) Debt eligibility. A State debt submitted to FMS for
collection by administrative offset must meet the debt eligibility
requirements of 31 CFR 285.5(d)(3)(i).
(2) Certification. At the time a participating State notifies FMS
of a State debt for purposes of collection by administrative offset
under this section, the State shall comply with the certification
requirements set forth in paragraph 31 CFR 285.5(d)(6) with the
following two exceptions:
(i) Paragraph (d)(6)(ii)(E)--Federal salary offset; and
(ii) Paragraph (d)(6)(iii)--Federal requirements for the assessment
of interest and penalties to Federal debts. Additionally, with respect
to paragraph (d)(6)(ii) of Sec. 285.5, States shall only be required
to certify that they have complied with the requirements of 31 U.S.C.
3716 (not 31 U.S.C. 3720A or 26 U.S.C. 6402) and this section 285.6.
States shall also certify that they have complied with any requirements
imposed by State law or procedure that may be applicable to
administrative offset.
(f) State debts submitted to FMS for tax refund offset prior to the
effective date of this section. A State shall be deemed to have
complied with the requirements of paragraph (e)(2) of this section with
respect to any State debt that the State certified to Treasury prior to
the effective date of this section for collection pursuant to 31 CFR
285.8, Offset of tax refund payments to collect state income tax
obligations. However, within 30 days of an administrative offset under
this section, the State shall notify the debtor in writing that the
debtor may exercise the rights set forth in the applicable sections of
31 CFR 285.5(d) as set forth in paragraph (e) of this section, only if
the State has not previously informed the debtor in writing that
Federal payments other than tax refunds may be offset to collect the
State debt, and the debtor has not exercised such rights previously
with respect to the State debt that was collected by the offset.
Nothing in this section requires any State to duplicate any notice or
any opportunity for a hearing or review provided to the debtor prior to
administrative offset.
(g) Federal Payments subject to administrative offset under this
section. (1) The Federal payments that will be offset to collect a
participating State's debts shall be set forth in the reciprocal
agreement. Federal payments that are excluded from administrative
offset under this section include:
(i) Any payments described in 31 CFR 285.5(e)(2) ``Payments
excluded from offset'';
(ii) Payments due to an individual under the Social Security Act;
(iii) Payments due an individual pursuant to part B of the Black
Lung Benefits Act;
(iv) Payments due an individual pursuant to any law administered by
the Railroad Retirement Board;
(v) Federal tax refunds; and
(vi) Federal salary payments.
(h) Conducting the administrative offset. (1) Disbursing officials
shall conduct administrative offset under this section in the same
manner as set forth in 31 CFR 285.5(f) through (i).
(2) When a payee owes more than one delinquent State debt which has
been referred to FMS for collection, amounts will be applied to
delinquent State debts under this section after any amounts offset
pursuant to any other section of this subpart A and any amounts levied
pursuant 26 U.S.C. 6331.
(i) Liability of disbursing officials and payment agencies. Neither
the Federal disbursing official nor the agency authorizing the Federal
payment shall be liable to a debtor for the amount of the
administrative offset on the basis that the underlying obligation,
represented by the payment before the administrative offset was taken,
was not satisfied.
(j) Notification to a State of Federal debt. (1) A State may set
forth in the reciprocal agreement the requirements for FMS to follow
when submitting a Federal debt for collection by State payment offset.
Such agreements shall set forth all requirements contained in State law
for the State payment offset. Such requirements, however, may not
exceed the requirements for collecting Federal debts by administrative
offset as set forth in Sec. 285.5(d) of this subpart.
(2) FMS shall certify to a participating State that each debt FMS
submits for State payment offset has been certified by the Federal
creditor agency to be delinquent, valid, and legally enforceable in the
amount stated, and that the Federal creditor agency owed the debt has
complied with the requirements of 31 U.S.C. 3716(a) prior to submitting
the debt for offset.
(k) Conducting State payment offset. (1) An official of a
participating State shall conduct State payment offset pursuant to the
laws and regulations of the participating State; provided that:
(i) If a payment is owed jointly to more than one payee, the entire
payment shall be offset for a debt of either payee, unless otherwise
prohibited by law or regulation; and
(ii) If a payment is made to a person solely in that person's
capacity as a representative payee for another person having the
beneficial interest in the payment, the disbursing official shall
offset that payment only to collect debts owed by the person having the
beneficial interest in the payment.
(2) Any prohibitions on offsetting a joint payment described in
paragraph (k)(1)(i) of this section shall be set forth in the
reciprocal agreement.
(3) An official of the participating State shall notify the payee
of the State
[[Page 1288]]
payment offset. The reciprocal agreement may contain detailed guidance
and procedures regarding sending such notice, but shall, at a minimum
require that the notice inform the payee of:
(i) The type and amount of the payment that was offset;
(ii) The identity of the Federal agency that requested the offset;
and
(iii) A contact point within the Federal agency that will handle
concerns regarding the offset.
(l) Limitations. A debt properly submitted to FMS or the State for
administrative offset or State payment offset shall remain subject to
collection until withdrawn by the entity that submitted the debt for
collection, provided the debt remains past-due and legally enforceable
for purposes of administrative offset or State payment offset, as
applicable. A debt which has been reduced to a judgment shall remain
legally enforceable for purposes of administrative offset and State
payment offset for as long as the judgment remains enforceable against
the debtor.
(m) Fees. FMS shall deduct a fee from each administrative offset
and State payment offset amount before transferring the balance of the
offset funds to the State or Federal agency owed the debt. Pursuant to
31 U.S.C. 3716(c)(4), the fee will be in an amount that FMS has
determined to be sufficient to reimburse FMS for the full cost of the
offset procedure. FMS will notify the States and creditor agencies,
annually and in advance, of the amount of the fee FMS will charge for
each offset.
Dated: January 4, 2007.
Kenneth R. Papaj,
Commissioner.
[FR Doc. E7-127 Filed 1-10-07; 8:45 am]
BILLING CODE 4810-35-P