[Federal Register Volume 76, Number 19 (Friday, January 28, 2011)]
[Rules and Regulations]
[Pages 5070-5072]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-1697]
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DEPARTMENT OF THE TREASURY
Fiscal Service
31 CFR Part 285
RIN 1510-AB29
Offset of Tax Refund Payments To Collect Delinquent State
Unemployment Compensation Debts
AGENCY: Financial Management Service, Fiscal Service, Treasury.
ACTION: Interim rule with request for comments.
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SUMMARY: 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) will incorporate the procedures
necessary to collect State unemployment compensation debts as part of
the Treasury Offset Program (TOP), a centralized offset program
operated by the Financial Management Service (FMS), a Treasury bureau.
FMS has promulgated a rule governing the offset of federal tax refunds
to collect delinquent State income tax obligations. This rule amends
FMS regulations to include unemployment compensation debts among the
types of State debts that may be collected by tax refund offset. This
rule does not affect any of the requirements or procedures for
collecting delinquent State income tax obligations.
DATES: This rule is effective January 28, 2011. Comments must be
received by March 29, 2011.
ADDRESSES: Treasury participates in the U.S. government's eRulemaking
Initiative by publishing rulemaking information on http://www.regulations.gov. Regulations.gov offers the public the ability to
comment on, search, and view publicly available rulemaking materials,
including comments received on rules. Comments on this rule should be
submitted using only the following methods:
Federal eRulemaking Portal: http://www.regulations.gov. Follow the
instructions on the Web site for submitting comments.
Mail: Thomas Dungan, Senior Policy Analyst, U.S. Department of the
Treasury, Financial Management Service, 401 14th St., SW., Washington,
DC 20227.
All submissions received must include the agency name (``Fiscal
Service'') and the title of this rulemaking. In general, comments
received will be published on Regulations.gov without change, including
any business or personal information provided. Comments received,
including attachments and other supporting materials, are part of the
public record and subject to public disclosure. Do not enclose any
information in your comment or supporting materials that you consider
confidential or inappropriate for public disclosure.
FOR FURTHER INFORMATION CONTACT: Thomas Dungan, Senior Policy Analyst,
at (202)874-6660, or Tricia Long, Senior Counsel, at (202) 874-6680.
SUPPLEMENTARY INFORMATION:
I. Background
General. The Internal Revenue Code authorizes the Secretary of the
Treasury to offset Federal tax refund payments to satisfy debts owed to
the United States, past-due support collected by States, and income tax
debts owed to States. The 2008 Act amended section 6402 of the Internal
Revenue Code to authorize tax refund offset to collect an additional
type of debt unemployment compensation debts owed to the States which
were incurred as a result of fraud, and which were not outstanding for
more than ten years. The 2010 Act expanded that authority to include
all unemployment compensation debts incurred as a result of the
debtor's failure to report earnings, whether or not the failure
constituted fraud. The 2010 Act also eliminated the ten-year time
limitation on collection, the requirement that the debtor reside in the
State seeking to collect the debt, and the requirement to use certified
mail with return receipt for pre-offset notices.
This rule governs the offset of one type of payment (i.e., Federal
tax refunds) to pay one type of delinquent debt (i.e., past-due,
legally enforceable State unemployment debts). FMS has promulgated
separate rules and procedures governing other types of offset, such as
tax refund offset to collect nontax debt owed to the United States (see
section 285.2 of this title).
The Treasury Offset Program. FMS operates TOP to carry out offsets
under the Internal Revenue Code and other laws. TOP is a centralized
offset program by which FMS offsets payments to collect delinquent
debts owed to Federal agencies and States. TOP currently works as
follows. FMS maintains a database containing information about
delinquent debts submitted and updated by Federal and State agencies.
Before Federal payments, including Federal tax refund payments, are
disbursed to a payee, FMS compares the payee information with debt
information in the TOP delinquent debt database. If the name and
taxpayer identifying number (TIN) associated with a payment match the
name (or derivative of the name) and TIN associated with a debt, the
payment is offset in whole or part to satisfy the debt. FMS transmits
amounts collected to the appropriate agencies or States owed the
delinquent debts after deducting a fee charged to cover the cost of the
offset program. Information about a delinquent debt or past-due,
legally enforceable debt will remain in the debtor database for offset
as long as the debt remains past due and legally collectible by offset.
Offset of Tax Refund Payments To Collect Debts Owed to States
Through the Treasury Offset Program. TOP will be expanded to include
the collection of past-due, legally enforceable State unemployment
compensation debts. As is done by States for State income tax debts,
before submitting a debt to the database, States will certify to FMS
that the debt is past due, legally enforceable
[[Page 5071]]
and that all due process prerequisites have been met.
This rule establishes procedures for such collection, and amends
section 285.8, which governs tax refund offset to collect State income
tax obligations, because the two types of offset are similar.
II. Procedural Analyses
Administrative Procedure Act
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 authority to offset tax refund payments to collect
delinquent State unemployment debt incurred as a result of fraud was
effective on September 30, 2008, and the authority to collect
unemployment compensation debts not resulting from fraud was effective
December 8, 2010. A comment period is unnecessary because this interim
rule is not required in order to exercise this authority and does not
change the ongoing TOP offset process. It only provides guidance for
State agencies and Federal disbursing officials to facilitate the
addition of State unemployment debts into TOP. Under this interim rule,
State 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 by 26 U.S.C. 6402. 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 delaying the effective date to wait 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.
Request for Comment on Plain Language
Executive Order 12866 requires each agency in the executive branch
to write regulations that are simple and easy to understand. We invite
comment on how to make the proposed rule clearer. For example, you may
wish to discuss: (1) Whether we have organized the material to suit
your needs; (2) whether the requirements of the rule are clear; or (3)
whether there is something else we could do to make this rule easier to
understand.
Regulatory Analysis Planning and Review
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
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 TOP 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.
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, Unemployment compensation, Veterans' benefits, Wages.
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, 37203, 3720D; 42 U.S.C. 664; E.O. 13019, 61
FR 51763, 3 CFR, 1996 Comp., P. 216.
0
2. Amend Sec. 285.8 as follows:
0
a. Revise the section heading.
0
b. In paragraph (a), revise the definition of ``Debt'', revise the
definition of ``Debtor'', and add a definition of ``Unemployment
compensation debt'' in alphabetical order.
0
c. Revise paragraph (b).
0
d. In paragraph (c), revise the heading, paragraphs (c)(1), (c)(3)(i),
and (c)(3)(ii).
0
e. In paragraph (d)(2), remove the words ``6402(a), (c), (d) and (e)''
wherever they appear, and add, in their place, ``6402(a), (c), (d), (e)
and (f)''.
0
f. In paragraph (i), revise the first sentence.
0
g. In paragraph (j), remove the word ``6402(e)'' and add, in its place,
``6402(e) or (f)'' wherever it occurs.
0
h. Remove paragraph (k).
0
i. In paragraphs (c)(4), (e)(1)(i), and (f), remove the words ``State
income tax obligation'' and add, in their place, ``State income tax
obligation or unemployment compensation debt'' wherever they occur.
0
j. In paragraphs (e)(3), (e)(4), and (h), remove the words ``State
income tax obligations'' and add, in their place, ``State income tax
obligations or unemployment compensation debts'' wherever they occur.
The revision and additions read as follows:
Sec. 285.8 Offset of tax refund payments to collect certain debts
owed to States.
(a) * * *
Debt means past-due, legally enforceable State income tax
obligation or unemployment compensation debt unless otherwise
indicated.
Debtor means a person who owes a debt.
* * * * *
Unemployment compensation debt has the same meaning as the term
``covered unemployment debt'' as defined in 26 U.S.C. 6402(f)(4), and
means
(1) A past-due debt for erroneous payment of unemployment
compensation due to fraud or the person's failure to report earnings
which has become final under the law of a State certified by the
Secretary of Labor pursuant to 26 U.S.C. 3304 and which remains
uncollected;
(2) Contributions due to the unemployment fund of a State for which
the State has determined the person to be liable and which remain
uncollected; and
(3) Any penalties and interest assessed on such debt.
[[Page 5072]]
(b) General rule. (1) FMS will offset tax refunds to collect debt
under this section in accordance with 26 U.S.C. 6402(e) and (f) and
this section.
(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 on a payment certification record are the same as the
taxpayer identifying number and name (or derivative of the name) on a
delinquent debt 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,
legally enforceable State income tax obligation or unemployment
compensation debt owed by the debtor. Any amounts not offset will be
paid to the payee(s) listed in the payment certification record.
(3) FMS will only offset a tax refund payment for a State income
tax obligation if the address shown on the Federal tax return for the
taxable year of the overpayment is an address within the State seeking
the offset.
(c) Notification of past-due, legally enforceable State income tax
obligations or unemployment compensation debts. (1) Notification.
States shall notify FMS of debts in the manner and format prescribed by
FMS. The notification of liability must be accompanied by a
certification that the debt is past due and legally enforceable and
that the State has complied with the requirements contained in
paragraph (c)(3) of this section and with all Federal or State
requirements applicable to the collection of debts under this section.
With respect to State income tax obligations only, the certification
must specifically state that none of the debts submitted for collection
by offset are debts owed by an individual who has claimed immunity from
State taxation by reason of being an enrolled member of an Indian tribe
who lives on a reservation and derives all of his or her income from
that reservation unless such claim has been adjudicated de novo on its
merits in accordance with paragraph (c)(3). FMS may reject a
notification that 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.
* * * * *
(3)(i) Advance notification to the debtor of the State's intent to
collect by Federal tax refund offset. The State is required to provide
a written notification to the debtor informing the debtor that the
State intends to refer the debt for collection by tax refund offset.
The notice must give the debtor at least 60 days to present evidence,
in accordance with procedures established by the State, that all or
part of the debt is not past due or not legally enforceable, or, in the
case of a covered unemployment compensation debt, the debt is not due
to fraud or the debtor's failure to report earnings. In the case of a
State income tax obligation, the notice must be sent certified mail,
return receipt requested.
(ii) Determination. The State must, in accordance with procedures
established by the State, consider any evidence presented by a debtor
in response to the notice described in paragraph (c)(3)(i) of this
section and determine whether an amount of such debt is past due and
legally enforceable and, in the case of a covered unemployment
compensation debt, the debt is due to fraud or the debtor's failure to
report earnings. With respect to State income tax obligations only,
where the debtor claims that he or she is immune from State taxation by
reason of being an enrolled member of an Indian tribe who lives on a
reservation and derives all of his or her income from that reservation,
State procedures shall include de novo review on the merits, unless
such claims have been previously adjudicated by a court of competent
jurisdiction. States shall, upon request from the Secretary of the
Treasury, make such procedures available to the Secretary of the
Treasury for review.
* * * * *
(i) * * * In accordance with 26 U.S.C. 6402(g), any reduction of a
taxpayer's refund made pursuant to 26 U.S.C. 6402(e) or (f) 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.
* * *
Dated: January 20, 2011.
Richard L. Gregg,
Fiscal Assistant Secretary.
[FR Doc. 2011-1697 Filed 1-27-11; 8:45 am]
BILLING CODE 4810-35-M