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Interim Final Rule: Collection of Past-Due Support from Federal Tax Refunds

AT-82-01

Published: March 1, 1982
Information About:
State/Local Child Support Agencies
Topics:
Federal Systems
Types:
Policy, Action Transmittals (AT)
Tags:
Collection & Enforcement Systems

Interim final regulations on collection of past-due support from Federal tax refunds

ACTION TRANSMITTAL

OCSE-AT-82- 1

March 1, 1982

TO :STATE AGENCIES ADMINISTERING CHILD SUPPORT PROGRAMS UNDER TITLE IV-D OF THE SOCIAL SECURITY ACT AND OTHER INTERESTED INDIVIDUALS

SUBJECT: Interim final regulations on collection of past-due support from Federal tax refunds

ATTACHMENTS: Attached are:

1) Interim final regulations issued by OCSE which require States to make requests for collection of past-due support from Federal tax refunds; these regulations also contain procedures that States must follow in making these requests

2) Regulations issued by the Department of the Treasury which contain procedures and methods of administration relating to the collection of past-due support from Federal tax refunds

REGULATION

REFERENCES: OCSE regulations at 45 CFR 302.60 and 303.72

Treasury regulations at 26 CFR 301.6305-1, 301.6402-1, 301.6402-3, and 304.6402-1

EFFECTIVE

DATES: OCSE regulations - February 19, 1982

Treasury regulations - October 1, 1981

COMMENTS: OCSE will give consideration to comments received on or before April 20, 1982. Comments on the OCSE regulations should be directed to: Director, Office of Child Support Enforcement, Department of Health and Human Services, Room 1010, 6110 Executive Boulevard, Rockville, Maryland 20852.

The Department of the Treasury will consider written comments and requests for a public hearing which are delivered or mailed by April 9, 1982 to: Commissioner of Internal Revenue, 1111 Constitution Avenue, N.W., Washington, D.C. 20224; Attention: CC:LR:T (LR-189-81).

INQUIRIES TO: OCSE Regional Representatives

Deputy Director

Office of Child Support

Enforcement

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Office of Child Support Enforcement

45 CFR Parts 302 and 303

Collection of Past-Due Support From Federal Tax Refunds

AGENCY: Office of Child Support Enforcement (OCSE), HHS.

ACTION: Interim final rule with comment period.

SUMMARY: These regulations implement Section 2331 of Pub. L. 97-35, the Omnibus Budget Reconciliation Act of 1981. Section 2331 amplifies statutory authority for collection of past-due support from Federal tax refunds by making such collection a State plan requirement of the Child Support Enforcement program. Under section 2331, only AFDC cases are eligible for referral to the IRS for collection by tax refund offset. Amounts that may be referred to the IRS under this section are past-due support obligations set by administrative or court order and amounts reflecting support owed on behalf of a child or a child and a spouse (or former spouse) living with the child. Child support agencies must reimburse the IRS for the cost of applying the offset procedure.

DATE: These regulations are effective on publication; however, consideration will be given to comments received by April 20, 1982.

ADDRESSES: Address comments to: Director, Office of Child Support Enforcement, Department of Health and Human Services, Room 1010, 6110 Executive Boulevard, Rockville, Maryland 20852. Comments will be available for public inspection Monday through Friday, 8:30 a.m, to 5 p.m. in the Department's office at the address above,

FOR FURTHER INFORMATION CONTACT: Eileen Brooks, (301) 443-5350

SUPPLEMENTARY INFORMATION:

Statutory Provisions

Effective October 1, 1981, section 2331 of Pub. L. 97-35, the Omnibus Budget Reconciliation Act of 1981, provides for collection of past-due child and spousal support from Federal tax refunds. This section provides separate statutory authority and contains specific procedures for tax refund offset that are distinct from the full IRS collection process authorized by section 452(b) of the Social Security Act (the Act).

Under the IRS full collection process, States may request the IRS to collect delinquent support using any means the IRS has at its disposal, such as garnishment, attachment and sale of property, or Federal tax refund offset. To initiate the IRSfull collection process, States must provide detailed information identifying the case and describing the prior actions taken by the State to enforce the obligation, the reasons why these actions failed, and the reasons why further actions by the State would be unproductive. (See 45 CFR 302.71 for regulations governing the IRS full collection process.) This document, which implements section 2331, contains new procedures that States must use in making requests for IRS collection of support by Federal tax refund offset only. These procedures, which are available in addition to those in 45 CFR 302.71, are considerably less burdensome than those required under the IRS full collection process.

Section 2331 of Pub. L. 97-35 adds a new section 464 and a new paragraph 454(18) to title IV-D of the Act and amends section 6402 of the Internal Revenue Code of 1954.

The new section 464 of the Act provides that, upon receiving notice from a State IV-D agency that an individual owes past-due support that has been assigned to the State, the IRS shall determine whether any tax refund is payable to the individual. Section 464 defines "past-due support" as the amount of a delinquency, 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. If a refund is due, the IRS shall withhold from the refund an amount up to the amount of the past-due support and pay the amount to the State IV-D agency with a notice of the individual's home address. The amount paid to the State is to be distributed in accordance with section 457(b)(3) of the Act.

Section 464 further provides that the Secretary of the Treasury shall issue regulations, approved by the Secretary of Health and Human Services, prescribing the time at which the State must submit notices of past-due support to the IRS and the information that must be contained in or accompany the notices. The IRS regulations shall also specify the minimum amount of past-due support to which the offset procedure may be applied, and the fee that the State must pay the IRS. For each State, the Secretary of the Treasury must report to the Secretary of Health and Human Services at least annually on numbers of cases amounts of support sought, and amounts collected. Section 464, as enacted, places the responsibility for implementing and operating the Federal tax refund offset program with the IRS. Under section 464 it is the responsibility of the IRS to set standards and requirements for child support enforcement agencies to follow in requesting tax refund offsets. In this context, it is OCSE's role to participate in the process by acting as the agent of the IRS.

The new paragraph 454(18) of the Act specifies that the State plan for child support enforcement must provide that the State has in effect procedures necessary to obtain payment of past-due support from Federal tax refunds as set forth in the new section 464 of the Act and that the State will take all steps necessary to implement and use the procedures.

The amended section 6402 of the Internal Revenue code of1954 contains procedures for the IRS to follow in reducing a tax refund by the amount of past-due support an individual owes. It also requires the IRS to notify an individual that an offset has occurred.

Statutory Effective Date

The provisions being implemented by these regulations have a statutory effective date of October 1, 1981, unless a State effectively demonstrates to the Secretary of Health and Human Services that the effective date should be postponed for the State. Section 2331 of Pub. L. 97-35 added an IV-D State plan requirement that a State have and use procedures to obtain payment of past-due support by Federal tax refund offset. Under the Child Support Enforcement program, failure to meet a State plan requirement may lead to imposition of a financial penalty on the State for noncompliance with the provisions of the plan. These regulations, based on IRS regulations which contain the procedures States must follow in making requests for refund offset, could not be published before October 1, 1981. Therefore, it would be unreasonable to require a State to have and use procedures for making a submittal to the IRS by that date, and it would be unreasonable to consider imposition of a penalty for noncompliance as of that date. With the publication of these regulations in the Federal Register, however, all States must now have and use procedures for collection of past-due support by tax refund offset, unless a postponement is approved for a State.

Under section 2336(b) of Pub. L. 97-35, the Secretary may postpone the effective date of the provisions covered by these regulations if the State IV-D agency demonstrates to the Secretary's satisfaction "that it cannot, by reason of State law, comply with the requirements" by October 1, 1981. Section 2336(b) further provides that, if the Secretary approves a postponement, the provisions covered by these regulations will be effective in a State with the first month after the close of the first session of the State's legislature ending on or after October 1, 1981. The term "session of a State's legislature" is defined by the statute to include any regular, special, budget, or other session of a State legislature.

We have issued OCSE-AT-81-32, dated December 4, 1981 containing a State plan preprint that enables a State to specify that existing State law prohibits it from implementing these provisions as of October 1, 1981. It also requires an attachment to be submitted which provides documentation in support of the State's position that it could not implement as of October 1, 1981. The documentation needed is either a copy of the State law containing the specific prohibition, or an opinion from the State's Attorney General indicating how State law precludes implementing the provisions as of October 1, 1981. The preprint also requires that the State provide the date on which the provisions will become effective in the State; that is, no later than the first month after the close of the first session of the State's legislature ending on or after October 1, 1981.

The information collection requirement contained in this regulation (§ 302.60) has been approved by the Office of Management and Budget under the provisions of 44 U.S.C. Chapter 35 and has been assigned OMB No. 0960-0253.

State Plan Requirement

We are adding a new 45 CFR 302.60 to IV-D regulations that contains the State plan requirement for tax refund offset as specified in the new paragraph 454(18) of the Act. Under this new regulation section, the State plan must provide that the IV-D agency has in effect procedures to obtain payment of past-due support from Federal tax refunds, and that the IV-D agency shall take the steps necessary to implement and use the procedures. The proposed § 302.60 cross-references the requirements of section 464 of the Act, the new 45 CFR 303.72 which is discussed below, and IRS regulations at 26 CFR 304.6402-1.

Standards for Requesting Collections From Federal Tax Refunds

We are adding a new 45 CFR 303.72 to our regulations entitled Requests for Collection of Past-Due Support From Federal Tax Refunds. Its purpose is to set forth procedures which States must follow in making requests to IRS. By agreement with IRS, OCSE is acting as its agent in processing State requests. These procedures, therefore, represent the views of both IRS and OCSE as to what is the most efficient and cost effective manner of handling them. This new section begins with a definition of past-due support at paragraph (a) which is the same as the one which appears in the IRS regulation. This definition is taken directly from the new section 464 of the Act. The definition of past-due support provides important specifications concerning amounts that may be referred to the IRS for collection by Federal tax refund offset. First, past-due support is defined as "the amount of a delinquency * * *". This rules out requesting that current support be collected by refund offset Secondly, the definition refers to a delinquency "determined under a court order or an order of an administrative process established under State law * * *". This introduces authorization for requesting the IRS to collect past-due support owed under court or administrative order. Third, the definition refers to a delinquency "for support and maintenance of a child or of a child and the parent with whom the child is living." Under this part of the definition, collection by refund offset is available not only for support owed on behalf of a child, but also on behalf of the parent with whom the child is living.

Paragraph (b) of § 303.72 specifies which past-due support qualifies for offset. Under this paragraph, the support must be assigned under 45 CFR 232.11 to the State making the request for offset. Under the statute, collection by refund offset is not available on behalf of individuals who are not receiving AFDC. Cases may be submitted only by the State that has taken an assignment in order to avoid the possibility of more than one State submitting a request for IRS collection of the same debt when interstate procedures are being used. This provision should eliminate confusion on the part of States and the IRS in handling interstate cases. We discussed this situation with many of the States at meetings held in July 1981. The majority of States preferred having the State that secures the assignment process the IRS collection request, since that State has the ultimate responsibility for managing the case and because that State is where distribution of the collection will be made under section 457 of the Act.

The remaining criteria in paragraph (b) that qualify past-due support for offset are that the State has made reasonable efforts to collect the amount of the obligation, the amount of past-due support is not less than $150, the past-due support has been delinquent for three months or longer, and a notification of liability for past-due support has been received by the IRS as prescribed by paragraph (c) of § 303.72 as discussed below. These criteria are specified by the IRS in their regulations at 26 CFR 304.6402-1 as requirements of the offset process. The purpose of the $150 minimum is to avoid inundating the IRS with requests for collection of very small amounts. The purpose of the three month delinquency period is to ensure that enough time has elapsed to account for late payments. The purpose of requiring the State to make reasonable efforts to collect prior to making a submittal for IRS collection is to avoid treating IRS collection as the primary method of enforcement when, in fact, other effective means are readily available for the State to use.

Paragraph (c) of the regulations contains criteria for acceptable notification to OCSE of liability for past-due support. These criteria specify that the IV-D agency (defined for purpose of the refund offset process as the State IV-D agency) shall submit, by October 1 of each year, a notification of liability for past-due support on magnetic tape to OCSE as specified in instructions. The reason we have not included detailed instructions in the regulation itself is that it is too cumbersome to incorporate items such as computer tape specifications in a regulation. In addition, these items are subject to change if the IRS implements a system change or a procedural change affecting the refund offset process. In order to be responsive to any changes that the IRS may require, we believe these procedural and technical items are best discussed via instructions. (The submittal of the magnetic tape is required by IRS regulations published in the Federal Register at 47 FR 5712 on February 8, 1982.)

The statutory and regulatory requirement that only State IV-D agencies may submit requests for refund offset has two purposes. First, we believe that it is important for the State to maintain strict controls over the process to insure that the information provided is accurate and that requests are properly prepared. It is our contention that the State is in the best position to assume this responsibility under the State plan. Secondly, permitting only State submissions will greatly facilitate project management at the Federal level which we believe will enhance the utility of the project by keeping costs to a minimum.

States are to submit requests to OCSE because the, IRS believes that editing of the requests by OCSE will provide a second level of control that will maximize the ease with which the IRS can implement this procedure.

Paragraph (c) further requires that requests be submitted on magnetic tape and that specified information be provided for each debtor. The required information is the minimum needed by the IRS and OCSE to process a refund offset case. It consists of the individual's name and social security number, the amount of the arrearage, and the State code. In addition, the State IV-D agency may submit the county code where the case originated and the individual's case number if the agency wants this information to accompany any collection sent to the State.

Paragraph (d) of § 303.72 specifies that the Deputy Director, OCSE will review each request to determine whether it meets all of the requirements of § 303.72. Requests that do not meet all requirements will be forwarded to the IRS only if they can be corrected in consultation with the State. Requests that cannot be corrected will be returned to the State with a written explanation of why the request could not be transmitted to the IRS for processing.

Paragraphs (e), (f) and (g) of § 303.72 contain provisions intended to protect the State in case of an error in a submittal or the individual debtor in case of a payment that lowers the arrearage after a request for refund offset is made.

Paragraph (e) stipulates that the State IV-D agency shall notify OCSE in writing of any decrease in, or elimination of, an amount referred for collection by Federal tax refund offset. The notification must contain the individual's name, social security number, the reduced arrearage amount (which may be zero), and the State code.

Paragraph (f) specifies that the IRS will provide a notice to an individual upon offset of his or her tax refund. The notice will inform the individual of the amount and date of the offset for past-due support and of the State to which the amount has been paid.

Paragraph (g) contains procedures that States must follow in the event of a complaint from an individual concerning a tax refund offset. Upon receipt of a complaint, the IV-D agency must insure that the individual's concerns are investigated to determine if an error has been made. After investigation, no further action is necessary if a correct amount was offset. If the amount offset is found to exceed the past-due support owed, the child support agency must refund the excess to the individual under the requirements of paragraph (h).

Paragraph (h) of § 303.72 specifies how amounts collected by refund offset are to be distributed by the child support agency. In accordance with the new section 464 of the Act, we have specified that these collections are to be distributed as past-due support under 45 CFR 302.5(b)(4). That regulation provides for amounts to be retained by the State to reimburse past assistance payments made to the family. Paragraph (h) further requires that any amounts collected which exceed past-due support owed must be repaid to the individual whose refund was offset within a reasonable period in accordance with State law. We included this provision in the regulations because the statute provides for collection and distribution of past-due support only. We believe, therefore, that any collections in excess of past-due support must be returned to the individual taxpayer. This excess may not be applied toward any remaining unreimbursed assistance provided to the family under the AFDC program, nor may it be used to satisfy a current month support obligation or a future obligation since the statute does not authorize these uses of a collection made via Federal tax refund offset. Paragraph (i) of § 303.72 specifies that a refund offset fee will be billed and collected by the Secretary of Health and Human Services, or designee, and credited to the IRS appropriation accounts that bore the costs involved in making the collection. The amount of the fee will be agreed to by the Secretary of the Treasury and the Secretary of Health and Human Services and will be sufficient to reimburse the IRS for the full cost of the offset procedure. For offsets occurring in 1982, the fee will be $7 per offset.

Waiver of Proposed Rulemaking

These regulations are being published in final form with a comment period. The Administrative Procedure Act, 5 U.S.C. 553(b)(B), provides that, if the Department for good cause finds that a notice of proposed rulemaking is unnecessary, impracticable or contrary to the public interest, it may dispense with the notice if it incorporates a brief statement in the final regulations of the reasons for doing so.

The Department finds that there is good cause to dispense with proposed rulemaking procedures with respect to these changes for the following reasons. First, section 2331 of Pub. L. 97-35 was effective on October 1, 1981 leaving insufficient time for the Department of Treasury (IRS) which has the responsibility to administer this provision, to publish a proposed rule, receive public comments, consider the comments and publish final regulations on or near October 1, 1981. These regulations add two new provisions to the regulations published by IRS. A new 45 CFR 302.60 implements the State plan requirement in section 454(18) of the Act, which was enacted as part of section 2331 of Pub. L. 97-35. This new statutory provision is non-discretionary in nature and the regulation merely follows the statute. Since OCSE is only assisting the IRS in administering section 2331. the other regulatory provision, 45 CFR 303.72, merely repeats the Federal policy set forth in the IRS regulation and contains no additional information of a substantive nature. Rather, this provision is purely technical, i.e., setting forth routine administrative procedures which are to be applied in order to permit IRS to effectively process requests for tax refund offsets. Since these regulations are non-discretionary we believe they can be published as an interim final rule. Furthermore, in order for States to be able to voluntarily implement as of October 1, 1981 it was necessary for OCSE to issue, in conjunction with and as the agent of the IRS, an Action Transmittal (OCSE-AT-81-19, dated September 11, 1981) containing temporary OCSE and the IRS procedures for submittal of requests for offset. Forty eight States voluntarily submitted requests under the instructions on October 1, 1981, although it was made clear that submittal in 1981 was not required. In these regulations, we have made few changes to the instructions in the Action Transmittal. The overwhelmingly positive response to the offset program as introduced in the Action Transmittal instructions leads us to conclude that it is unnecessary and contrary to the public interest to issue proposed regulations when the program has already been voluntarily implemented by a majority of States under the same basic criteria as are contained in these regulations.

For these reasons, OCSE believes that there is sufficient cause to dispense with proposed rulemaking. Nonetheless, we wish to have the advantage of the information and opinions we may receive through public comments. We will consider any comments received and revise the regulations if necessary.

PART 302-STATE PLAN REQUIREMENTS

1. 45 CFR Part 302 is amended by adding a new § 302.60 to read as follows:

§ 302.60 Collection of past-due support from Federal tax refunds.

The State plan shall provide that:

(a) The IV-D agency has in effect procedures necessary to obtain payment of past-due support from Federal tax refunds as set forth in section 464 of the Act, § 303.72 of this chapter, and regulations of the Internal Revenue Service at 26 CFR 304.6402-1; and

(b) The IV-D agency shall take the steps necessary, to implement and use these procedures.

(Approved by the Office of Management and Budget under OMB No. 0960-0253.)

PART 303-STANDARDS FOR PROGRAM OPERATIONS

2. 45 CFR Part 303 is amended by adding a new § 303.72 to read as follows:

§ 303.72 Requests for collection of past-due support by Federal tax refund offset.

(a) Definition. "Past-due support" means the amount of a delinquency, 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.

(b) Past-due support qualifying for offset. Past-due support qualifies for offset if:

(1) There has been an assignment of the support obligation under 45 CFR 232.11 of this title to the State making the request for offset and that State has made reasonable efforts to collect the amount of the obligation;

(2) The amount of the past-due support is not less than $150,

(3) The support has been delinquent for three months or longer, and

(4) A notification of liability for past-due support has been received by the Secretary of the Treasury as prescribed by paragraph (c) of this section.

(c) Notification to OCSE of liability for past-due support. (1) A State IV-D agency shall, by October 1 of each year, submit a notification (or notifications) of liability for past-due support on magnetic tape to the Office.

(2) The notification of liability for past-due support shall contain with respect to each delinquency:

(i) The name of the taxpayer who owes the past-due support;

(ii) The social security number of that taxpayer,

(iii) The amount of past-due support owed;

(iv) The State codes as contained in the Federal Information Processing Standards (FIPS) publication of the National Bureau of Standards and also promulgated by the General Services Administration in Worldwide Geographical Location Codes.

(3) The notification of liability for past-due support may contain with respect to each delinquency the taxpayer's IV-D case number and the FIPS code for the local IV-D agency where the case originated.

(d) Review of Requests by the Office. (1) The Deputy Director will review each request to determine whether it meets the requirements of this section.

(2) If a request meets all requirements, the Deputy Director will transmit the request to the Secretary of the Treasury by December 1 of each year and will notify the IV-D agency in writing of the transmittal.

(3) If a request does not meet all requirements, the Deputy Director will attempt to correct the request in consultation with the State IV-D agency.

(4) If a request cannot be corrected through consultation, the Deputy Director will return it to the State IV-D agency with a written explanation of why the request could not be transmitted to the Secretary of the Treasury.

(e) Notification of changes in case status. The State IV-D agency shall notify the Deputy Director in writing of any decrease in, or elimination of, an amount referred for collection by Federal tax offset. The notification shall contain the information specified in paragraph (c) of this section, as well as the amount originally referred for collection by Federal tax refund offset.

(f) Notice to taxpayer of offset. The Internal Revenue Service shall notify the taxpayer in writing of the amount and date of the offset for past-due support and of the State to which this amount of past-due support has been paid.

(g) Complaint procedure. (1) Upon receipt of a complaint from an individual concerning a tax refund which has been offset, the State IV-D agency shall take steps to investigate the complaint to determine its validity.

(2) If the offset is found to exceed the amount of the past-due support owed, the State IV-D agency shall take steps to refund the excess amount to the individual as specified in paragraph (h) of this section

(h) Distribution of collections. (1) Collections received by the IV-D agency as a result of refund offset shall be distributed as past-due support as required under § 302.51(b)(4) of this chapter.

(2) If the amount collected is in excess of the amounts required to be distributed under § 302.51(b)(4) of this chapter, the IV-D agency must repay the excess to the individual whose refund was offset within a reasonable period in accordance with, State law.

(i) Payment of fee. A refund offset fee, in such amount as the Secretary of the Treasury and the Secretary of Health and Human Services have agreed to be sufficient to reimburse the Internal Revenue Service for the full cost of the offset procedure, shall be billed and collected from the IV-D agency by the Secretary of Health and Human Services or designee and credited to the appropriation accounts of the Internal Revenue Service which bore all or part of the costs involved in making the collection.

Note. -The Secretary has determined that this document is not a major rule as described by Executive Order 12291, because it does not meet any of the criteria set forth in Section 1 of the Executive Order. The Secretary certifies that because these regulations apply to States and will not have significant economic impact on a substantial number of small entities, they do not require a regulatory flexibility analysis as provided in Pub. L. 96-354, the Regulatory Flexibility Act of 1980.

(Sec. 1102, Social Security Act (42 U.S.C. 1302)), Sec. 464, Social Security Act (42 U.S.C. 664), and Sec. 454(18), Social Security Act (42 U.S.C. 654(18))

(Catalog of Federal Domestic Assistance Program No. 13.679, Child Support Enforcement Program)

Dated: January 4, 1982.

John A. Svahn,

Director, Office of Child Support Enforcement.

Approved: January 27, 1982.

Richard S. Schweiker,

Secretary

(FR Doc. 82-4595 Filed 2-18-82: 8:45am)

BILLING CODE 4190-11-M

DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Parts 301 and 304

[T.D. 7808]

Collection of Past-Due Support From Federal Tax Refunds

AGENCY: Internal Revenue Service, Treasury.

ACTION: Temporary regulations: final regulations.

SUMMARY: This document contains temporary regulations and certain final regulations on procedure and administration relating to the collection of past-due support from Federal tax refunds. Changes to the law were made by the Omnibus Budget Reconciliation Act of 1981. These regulations affect all taxpayers who are owed refunds for a taxable year and who are liable for past-due support. In addition, the text of the temporary regulations set forth in this document serves as the text of the proposed regulations cross-referenced in the notice of proposed rulemaking in the Proposed Rules section of this issue of the Federal Register.

DATE: These temporary and final regulations are effective October 1, 1981.

FOR FURTHER INFORMATION CONTACT: Susan K. Thompson of the Legislation and Regulations Division, Office of the Chief Counsel, Internal Revenue Service, 1111 Constitution, NW,, Washington, D.C. 20224 (Attention: CC:LR:T), 202-566-3294.

SUPPLEMENTARY INFORMATION:

Background

This document contains temporary regulations on procedure and administration relating to the collection of past-due support from Federal tax refunds under section 464 of Part D of Title IV of the Social Security Act and section 6402(c) of the Internal Revenue Code of 1954, as added by section 2331(a) of Title 13 of the Omnibus Budget Reconciliation Act of 1981 (Pub. L. 97-35, 95 Stat. 357). Also contained in this document are final regulations on procedure and administration conforming the regulations to certain changes made to section 6305 of the Internal Revenue Code of 1954. Section 6305 incorporates reference section 452(b) of the Social Security Act. That Act was amended by section 2332(b) and (g) of the Omnibus Budget Reconciliation Act of 1981 to include within the collection procedures provided for in section 6305 child and spousal support obligations and obligations for support fixed by order of a State administrative process (as well as those determined by court order). Further, a new Part 304, Temporary Regulations under Title 13 of the Omnibus BudgetReconciliation Act of 1981, is added by this document to Title 26 of the Code of Federal Regulations. The temporary regulations provided by this document will remain in effect until superseded by final regulations on this subject.

Explanation of Provisions

Under new section 6402(c), the Secretary of the Treasury is required to offset amounts of past-due support from the amount of any overpayment to be refunded to a taxpayer who owes this support.

The term "past-due support" is defined in the regulations as the amount of a delinquency, 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 parents with whom the child is living. Only amounts of support that are $150.OO or greater, that are at least three months delinquent, and that have been assigned to a State under section 402(a)(26) of the Social Security Act (as a condition for eligibility for aid and service to needy families with children) are eligible for this new offset procedure.

The regulations provide that a State to which this support has been assigned under the Social Security Act shall notify the Department of Health and Human Services, Office of Child Support Enforcement of the amount of past-due support, the name and social security number of the parent owing the support, and the alphabetical designation of the State submitting the notification. The Office of Child Support Enforcement will consolidate this information and transmit it to the Internal Revenue Service on behalf of the participating States.

The Internal Revenue Service will determine whether an overpayment exists against which the past-due support may be offset and will make the offset after a crediting of the overpayment to any outstanding existing liability for any tax owed by the person making the overpayment. The Internal Revenue Service will notify the taxpayer of the amount and date of the offset, and of the State which submitted the notification of liability for past-due support.

Monies collected by offset will be transferred to a special account maintained by the Bureau of Government Financial Operations and, after authorization of the Division of Finance of the Social Security Administration, will be transmitted to the States. The Office of Child Support Enforcement will be notified of the name and social security number of the taxpayer from whom the past-due support was collected, the amount and date of the offset, and the State which submitted the notification of liability for past-due support for that taxpayer. Although section 464(a) of the Social Security Act also requires the Internal Revenue Service to notify the participating States of the home addresses of the taxpayers from whom the past-due support was collected, the Office of Child Support Enforcement has agreed to obtain these addresses on behalf of the States through its Parent Locator Service. Thus, the regulations do not make separate provision for the transmittal of these addresses.

Evaluation of the effectiveness of these regulations will be based on comments received from officers within the Treasury and the Internal Revenue Service, other governmental agencies, and the public.

Waiver of Procedural Requirements of Treasury Directive

There is need for expeditious adoption of the provisions contained in this document because of the need for immediate guidance to States submitting notifications of liability for past-due support by October 1, 1981. For this reason, Roscoe L. Egger, Jr., Commissioner of Internal Revenue, has determined that the provisions of paragraphs 8 through 14 of Treasury Directive 50.04F for improving government regulations must be waived,

Drafting Information

The principal author of these regulations is Susan K. Thompson of the Legislation and Regulations Division of the Office of Chief Counsel, Internal Revenue Service. However, personnel from other offices of the Internal Revenue Service and Treasury Department participated in developing the regulations, on matters of both substance and style.

Adoption of Amendments to the Regulations

Accordingly, a new Part 304, Temporary Regulations under Title 13 of the Omnibus Budget Reconciliation Act of 1981 is added to Title 26 of the Code of Federal Regulations, and the following changes to Part 301 are adopted:

PART 301-PROCEDURE AND ADMINISTRATION

Paragraph 1. Section 301.6305-1 is amended by revising paragraphs (a), (b) (1) and (2), (b)(6) and (c)(4) and by adding paragraph (b)(4)(iii) to read as follows:

§ 301.6305-1 Assessment and collection of certain liability.

(a) Scope. Section 6305(a) requires the Secretary of the Treasury or his delegate to assess and collect amounts which have been certified by the Secretary of Health and Human Services as the amount of a delinquency 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. These amounts, referred to as "child and spousal support", are to be collected in the same manner and with the same powers exercised by the Secretary of the Treasury or his delegate in the collection of an employment tax which would be jeopardized by delay. However, where the assessment is the first assessment against an individual for a delinquency described in this paragraph for a particular individual or individuals, the collection is to be stayed for a period of 60 days following notice and demand. In addition, no interest or penalties (with the exception of the penalties imposed by sections 6332(c)(2) and 6657) shall be assessed or collected on the amounts, paragraphs (4), (6) and (8) of section 6334(a) (relating to property exempt from levy) shall not apply; and, there shall be exempt from levy so much of the salary, wages, or other income of the individual which is subject to garnishment pursuant to a judgment entered by a court for the support of his or her minor children. Section 6305(b) provides that sole jurisdiction for any action brought to restrain or review assessment and collection of the certified amounts shall be in a State court or a State administrative agency,

(b) Assessment and collection--(l) General rule. Upon receipt of a certification or recertification from the Secretary of Health and Human Services or his delegate under section 452(b) of Title IV of the Social Security Act as amended (relating to collection of child and spousal support obligations with respect to an individual), the district director or his delegate shall assess and collect the certified amount (or recertified amount). Except as provided in paragraph (c) of this section, the amount so certified shall be assessed and collected in the same manner, with the same powers, and subject to the same limitations as if the amount were an employment tax the collection of which would be jeopardized by delay, However, the provisions of subtitle F with respect to assessment and collection of taxes shall not apply with respect to assessment and collection of a certified amount where such provisions are clearly inappropriate to, and incompatible with, the collection of certified amounts generally. For example, section 6861(g) which allows the Secretary or his delegate to abate a jeopardy assessment if he finds a jeopardy does not exist will not apply,

(2) Method of assessment. An assessment officer appointed by the district director pursuant to § 301.6203-1 to make assessments of tax shall also make assessments of certified amounts. The assessment of a certified amount shall be made by the assessment officer signing the summary record of assessment. The date of assessment is the date the summary record is signed by the assessment officer. The summary record, through supporting records as necessary, shall provide.

(i) The assessed amount;

(ii) The name, social security number, and last known address of the individual owing the assessed amount;

(iii) A designation of the assessed amount as a certified amount, together with the date on which the amount was certified and the name, position, and governmental address of the officer of the Department of Health and Human Services who certified the amount;

(iv) The period to which the child and spousal support obligation represented by the certified amount relates;

(v) The State in which was entered the court or administrative order giving rise to the child and spousal support obligation represented by the certified amount;

(vi) The name of the person or persons to whom the child and spousal support obligation represented by the certified amount is owed; and

(vii) The name of the child or children or the parent of the child or children for whose benefit the child and spousal support obligation exists.

Upon request, the individual assessed shall be furnished a copy of pertinent parts of this assessment which set forth the information listed in subdivision (i) through (vii) of this paragraph (b)(2).

* * * * *

(4) Method of collection. * * *

(iii) The district director or his delegate may offset the amount of any overpayment of any internal revenue tax (as described in section 301.6401-1) to be refunded to the person making the overpayment by the amount of any past-due support (as defined in the regulations under section 6402) owed by the person making the overpayment. The amounts offset under section 6402(c) may be amounts of child and spousal support certified (or recertified) for collection under section 6305 and this section or they may be amounts of past-due support of which the Secretary of the Treasury has been notified under section 6402(c) and the regulations under that section.

* * * * *

(6) Disposition of certified amounts collected. Any certified amount collected shall be deposited in the general fund of the United States, and the officer of the Department of Health and Human Services who certified the amount shall be promptly notified of its collection. There shall be established in the Treasury, pursuant to section 452 of Title IV of the Social Security Act as amended, a revolving fund which shall be available to the Secretary of Health and Human Services or his delegate, without fiscal year limitation, for distribution to the States in accordance with the provisions of section 457 of the Act. Section 452(c)(2) of the Act appropriates to this revolving fund out of any monies not otherwise appropriated, amounts equal to the certified amounts collected under this paragraph reduced by the amounts credited or refunded as overpayments of the certified amounts so collected. The certified amounts deposited shall be transferred at least quarterly from the general fund of the Treasury to the revolving fund on the basis of estimates made by the Secretary of the Treasury or his delegate. Proper adjustments shall be made in the amounts subsequently transferred to the extent prior estimates were in excess of or less than the amounts requested to be transferred. See, however, paragraph (c)(1) of this section for the special rule requiring retention of the general fund of certain penalties which may be collected.

(c) Additional limitations and conditions.* * *

(4) First assessment. In the case of a first assessment against an individual for a certified amount in whole or in part for the benefit of a particular child or children or the child or children and their parent, the collection of the certified amount shall be stayed for the period of 60 days immediately following notice and demand as described in section 6303. However, no other stay of the collection of a certified amount may be granted. Thus, the provisions of section 6863(a); relating to bonds to stay collection of jeopardy assessments, shall not apply to the collection of certified amounts.

* * * * *

Par. 2. Section 301.6402-1 is revised to read as follows:

§ 301.6402-1 Authority to make credits or refunds.

The Commissioner, within the applicable period of limitations, may credit any overpayment of tax, including interest thereon, against any outstanding liability for any tax (or for any interest, additional amount, addition to the tax, or assessable penalty) owed by the person making the overpayment and the balance, if any, shall be refunded, subject to section 6402(c) and the regulations there under, to that person by the Commissioner.

Par. 3. Section 301.6402-3(a)(6) is revised to read as follows:

§ 301.6402-3 Special rules applicable to income tax.

(a)* * *

(6) Notwithstanding paragraph (a)(5) of this section, the Commissioner, within the applicable period of limitations, may credit any overpayment of individual, fiduciary, or corporation income tax, against any outstanding liability for any tax (or for any interest, additional amount, additions to the tax, or assessable penalty) owed by the taxpayer making the overpayment. After crediting an overpayment of tax by an individual taxpayer against any outstanding liability for any tax or other amount described in the preceding sentence, the Commissioner shall offset the balance, if any, of the overpayment by amounts of past-due support under procedures set forth in the regulations under section 6402(c). Only the balance, if any, of the overpayment remaining after crediting against outstanding liability for tax or other amount and offset of past-due support shall be treated in the manner so elected.

* * * * *

Par. 4. A new Part 304 consisting of § 304.6402-1 is added to Title 26 of the Code of Federal Regulations:

PART 304-TEMPORARY REGULATIONS UNDER TITLE 13 OF THE OMNIBUS BUDGET RECONCILIATION ACT OF 1981

SEC.

304.6402-1 Offset of past-due support against overpayments.

Authority: 28 U.S.C. 7805, unless otherwise noted.

§ 304.6402-1 Offset of past-due support against overpayments.

(a) Introduction--(1) Scope. Section 6402(c) requires the Secretary of the Treasury or his delegate to reduce the amount of any overpayment to be refunded to a person making an overpayment by the amount of past-due support owed by that person of which the secretary has been notified in accordance with section 464 of the social Security Act. Past-due support shall be collected by offset under section 6402(c) and this section in the same manner as if it were a liability for tax imposed by the Internal Revenue Code of 1954 (except that a liability of tax shall be given priority with respect to offset arising under section 6402(a). Collection by offset under section 6402(c) of this section is a collection procedure separate from the collection procedures provided by section 6305 and § 301.6305-1, relating to assessment and collection of certain child and spousal support liabilities. The sole collection procedures provided by section 6402(c) and this section is that of offset against overpayment. Section 6305 and § 301.6305-1, by contrast, provide for other collection procedures in addition to collection by offset against overpayment. Sections 6305 and 6402(c) have differing procedural requirements and may be used separately or in conjunction with each other.

(2) General rule. An amount of past-due support qualifies for offset under this section if it satisfies the requirements of paragraph (b) of this section. A State shall submit to the Department of Health and Human Services a notification of liability for qualifying past-due support containing the information described in paragraph (c) of this section. A qualifying amount of past-due support owed by a taxpayer who has made an overpayment shall be collected in accordance with the procedures set forth in paragraph (d) of this section. Under paragraph (d), the balance of any overpayment remaining after crediting of the overpayment under section 6402(a) to any liability for an internal revenue tax on the part of the taxpayer shall be offset by the amount of past-due support of which the Internal Revenue Service has been notified. The amount of the overpayment not subject to offset for any liability for an internal revenue tax or for past-due support shall be promptly refunded to the taxpayer. Paragraph (e) of this section requires that the Internal Revenue Service notify the taxpayer of the amount of the offset and of the State to which it has been paid. Under procedures set forth in paragraph (f) of this section, amounts collected by offset shall be transferred to a special account maintained by the Bureau of Government Financial Operations for distribution to the States. The Internal Revenue Service shall make monthly collection reports to the Secretary of Health and Human Services or his delegate. The States shall reimburse the Secretary of the Treasury for the full cost of the refund offset under paragraph (g) of this section.

(b) Past-due support-(1) Definition. For purposes of this section, the term "past-due support" means the amount of a delinquency, determined under a court order, or an order pursuant to 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.

(2) Past-due support qualifying for offset. Past-due support qualifies for offset under section 6402(c) and this section if-

(i) There has been an assignment of the support obligation to a State pursuant to section 402(a)(26) of the Social Security Act (relating to aid and service to needy families with children and that State has made reasonable efforts to collect the amount of the obligation;

(ii) The amount of past-due support is not less than $150.00,

(iii) The past-due support has been delinquent for three months or longer, and

(iv) A notification of liability for past-due support has been received by the Secretary of the Treasury as prescribed by paragraph (c) of this section.

(c) Notification of Liability for Past-due support-(1) Form, A State shall, by October 1 of each year, submit a notification (or notifications) of liability for past-due support on magnetic tape to the Special Collection Activities Unit, Office of Child Support Enforcement, Department of Health and Human Services, 6110 Executive Boulevard, Suite 900, Rockville, Maryland 20852, Attention: Tax Refund Offset-Tape Processing.

(2) Content. The notification of liability for past-due support shall contain with respect to each taxpayer-

(i) The name of the taxpayer who owes the past-due support;

(ii) The social security number of that taxpayer;

(iii) The amount of past-due support owed; and

(iv) The alphabetical designation of the State submitting the notification of liability for past-due support.

The Secretary of Health and Human Services may also require such other information from the State submitting the notification as is necessary for his orderly consolidation of data for transmittal to the Internal Revenue Service.

(3) Transmittal of Notification to Internal Revenue Service. The Secretary of Health and Human Services shall, by December 1 of each year, consolidate and transmit to the Internal Revenue Service on magnetic tape the data contained in the notifications of liability for past-due support submitted by the participating States.

(4) Correction of notification. If, after submitting a notification of liability for past-due support, a State determines that an error has been made with respect to the information contained in the notification, or if a State receives a payment or credits a payment to the account of a taxpayer named in this notification, the State shall promptly notify the Internal Revenue Service and the Internal Revenue Service shall make the appropriate correction of the notification of liability for past-due support. However, in no case shall a State notify the Internal Revenue Service under this paragraph (c)(4) of an increased amount of past-due support owed by a taxpayer named in its notification of liability for past-due support. The correction notification described in this paragraph (c)(4) is to be submitted only for the purpose of completing or correcting the information contained in the notification of liability for past-due support.

(d) Collection-(1) Priority of offset for outstanding tax liability. Under section 6402(a) and § 301.6402-1, the Commissioner may credit any overpayment of tax against any outstanding liability for any tax owed by the person making the overpayment. Only the balance remaining after such crediting is available for offset under section 6402(c) of this section. Thus, if a taxpayer making an overpayment has both an outstanding tax liability and a liability for past-due support subject to this section, then the entire amount of the overpayment shall be credited first against the outstanding tax liability under section § 6402(a) and § 301.6402-1 and only the remainder, if any, of the overpayment will be offset by the amount of past-due support. However, an overpayment shall be offset by an amount of past-due support under section 6402(c) before any crediting of the overpayment to any future liability for an internal revenue tax. Thus, for example, if no outstanding tax liability is owed and the amount of an overpayment is equal to or less than the amount of past-due support, the Internal Revenue Service shall offset the overpayment by the amount of past-due support before crediting the overpayment against the taxpayer's estimated income tax for the succeeding taxable year under section 6402(b).

(2) Amounts subject to offset. The balance of any overpayment remaining after a crediting of the overpayment under section 6402(a) to any outstanding liability for tax on the part of the taxpayer shall be offset by the amount of past-due support of which the Internal Revenue Service has been notified under this section.

(3) Amounts not subject to offset. The amount of an overpayment not subject to offset for any liability for tax or for past-due support shall be promptly refunded to the taxpayer.

(e) Notice of offset. The Internal Revenue Service shall notify the taxpayer in writing of the amount and date of the offset for past-due support and of the State to which this amount of past-due support has been paid.

(f) Disposition of amounts collected. Amounts collected under this section shall be transferred to a special account maintained by the Bureau of Government Financial Operations. The Internal Revenue Service shall advise the Secretary of Health and Human Services or his delegate on a monthly basis of the names and social security numbers of the taxpayers from whom the amounts of past-due support were collected, of the amounts collected from each taxpayer, and of the State on whose behalf each collection was made. After authorization by the Division of Finance of the Social Security Administration, the Bureau of Government Financial Operations of the Department of the Treasury shall pay to the participating States amounts equal to the amounts collected under this section.

(g) Fee. A refund offset fee in the amount of $17.00 per offset for taxable year 1981, or such greater or smaller amount as the Secretary of the Treasury and the Secretary of Health and Human Services have agreed to be sufficient to reimburse the Internal Revenue Service for the full cost of the offset procedure, shall be billed and collected from the participating States by the Secretary of Health and Human Services or his delegate and deposited in the United States Treasury and credited to the appropriation accounts of the Internal Revenue Service which bore all or part of the costs involved in making the collection.

There is need for immediate guidance with respect to the provisions contained in this Treasury decision because the States must submit notifications of liability for past-due support to the Department of Health and Human Services by October 1, 1981. For this reason, it is found impracticable to issue it with notice and public procedure under subsection (b) of section 553 of Title 5 of the United States Code or subject to the effective date limitation of subsection (d) of that section.

(sec. 7805. Internal Revenue Code of 1954 (68A Stat. 917; 26 U.S.C. 7805); sec. 2332(a) of the Omnibus Budget Reconciliation Act of 1981 (95 Stat. 357), amending sec. 464(a) of the Social Security Act (88 Stat. 2351))

Joseph T. Davis,

Acting Commissioner of Internal Revenue.

Approved: November 9, 1981.

John E. Chapoton,

Assistant Secretary of the Treasury.

The Secretary of Health and Human Services, Washington, D.C., January 27, 1982. Honorable Donald T. Regan,

Secretary of the Treasury,

Department of the Treasury.

Washington, D.C.

Dear Mr. Regan: I have reviewed the Internal Revenue Service regulations entitled "Collection of past-due support from Federal tax refunds". This letter constitutes my approval of those regulations as required by section 2331 of P.L. 97-35, the Omnibus Budget Reconciliation Act of 1981.

Sincerely,

Richard S. Schweiker,

Secretary.

[FR Doc. 82-3229 Filed 2-3-82; 5:02 p.m.]

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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 301

[LR-189-81]

Collection of Past-Due Support From Federal Tax Refunds

AGENCY: Internal Revenue Service, Treasury.

ACTION: Notice of proposed rulemaking by cross-reference to temporary regulations..

SUMMARY: In the Rules and Regulations portion of the Federal Register, the Internal Revenue Service is issuing temporary regulations on procedure and administration relating to the collection of past-due support from Federal tax refunds. The text of those temporary regulations also serves as the comment document for the proposed rulemaking.

DATES: Written comments and requests for a public hearing must be delivered or mailed by April 9, 1982. The amendments are proposed to be effective as final regulations 30 days after their publication as final regulations in the Federal Register.

ADDRESS: Send comments and requests for a public hearing to: Commissioner of Internal Revenue, 1111 Constitution Avenue, NW., Washington, D.C. 20224, Attention: CC:LR:T (LR-189-81).

FOR FURTHER INFORMATION CONTACT:

Susan K. Thompson of the Legislation and Regulations Division, Office of the Chief Counsel, Internal Revenue Service, 1111 Constitution Avenue, NW. 20224 (Attention: CC:LR:T) (202-566- 3294).

SUPPLEMENTARY INFORMATION:

Explanation

The temporary regulations in the Rules and Regulations portion of this issue of the Federal Register and a new Part 304 to Title 26 of the Code of Federal Regulations. The final regulations, which this document proposes to be based on the text of those temporary regulations, would be added to Part 301 of Title 26 of the Code of Federal Regulations as final regulations under section 6402 of the Internal Revenue Code of 1954. The temporary regulations implement section 6402(c) of the Internal Revenue Code of 1954 which provides for the collection of past-due support by offset against Federal tax refunds. For the text of the temporary regulations, see FR Doc. 82-3299 published in the Rules and Regulations portion of this issue of the Federal Register. The preamble to the temporary regulations explains their provisions.

These regulations are proposed to be issued under the authority contained in section 7805 of the Internal Revenue Code of 1954 (26 U.S.C. 7805 68A Stat. 917) and section 2331(a) of the Omnibus Budget Reconciliation Act of 1981 (Pub. L. 97-35, 95 Stat. 357) amending section 464 (a) of the Social Security Act (88 Stat. 2351).

Regulatory Flexibility Act

Pursuant to 5 U.S.C. 605(b), the Secretary of the Treasury has certified that the requirements of the Regulatory Flexibility Act do not apply to this Notice of Proposed Rulemaking as it will not have a significant economic impact on a substantial number of small entities. The regulations impose recordkeeping duties only upon State agencies responsible for child and spousal support enforcement.

Comments and Requests for a Public Hearing

Before the adoption of these proposed regulations, consideration will be given to any written comments that are submitted (preferably six copies) to the Commissioner of Internal Revenue. All comments will be available for public inspection and copying. A public hearing will be held upon written request to the Commissioner by any person who has submitted written comments. If a public hearing is held, notice of the time and place will be published in the Federal Register.

Drafting Information

The principal author of these regulations is Susan K. Thompson of the Legislation and Regulations Division of the Office of Chief Counsel, Internal Revenue Service. However, personnel from other offices of the Internal Revenue Service and Treasury Department participated in developing the regulations, on matters of both substance and style.

Joseph T. Davis,

Acting Commissioner of Internal Revenue,

[FR Doc. 82-3300 Filed 2-3-82; 5:03 pm]

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