Federal claims collection: State income tax obligations; tax refund payments offset, 3616-3617 [05-1421]


[Federal Register: January 26, 2005 (Volume 70, Number 16)]
[Rules and Regulations]               
[Page 3616-3617]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]



Fiscal Service

31 CFR Part 285

RIN 1510-AA78

Offset of Tax Refund Payments To Collect State Income Tax 

AGENCY: Financial Management Service, Fiscal Service, Treasury.

ACTION: Final rule.


[[Page 3617]]

SUMMARY: Under provisions of the Internal Revenue Service Restructuring 
and Reform Act of 1998, the Federal tax refund of a taxpayer who owes a 
past-due, legally enforceable State income tax obligation may be 
reduced, or offset, by the amount owed by the taxpayer. The funds 
offset from the taxpayer's Federal tax refund are forwarded to the 
State that reported the past-due State income tax obligation. On 
December 20, 1999, the U.S. Department of the Treasury's Financial 
Management Service (FMS) published a notice of proposed rulemaking in 
the Federal Register by cross-reference to an interim rule published in 
the Federal Register on the same day. This final rule adopts the 
interim rule without change.

DATES: This rule is effective January 26, 2005.

FOR FURTHER INFORMATION CONTACT: Gerry Isenberg, Financial Program 
Specialist, at (202) 874-6660; Ellen Neubauer or Ronda Kent, Senior 
Attorneys, at (202) 874-6680. A copy of this final rule is being made 
available for downloading from the Financial Management Service Web 
site at the following address: https://www.fms.treas.gov/debt.



    The Internal Revenue Code authorizes the Secretary of the Treasury 
to offset Federal tax refund payments to satisfy debts owed to the 
United States and to collect past-due support for States. Under the 
Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 
105-206, 112 Stat. 685, 779 (1998), the authority to offset tax refund 
payments was amended to allow for the offset of Federal tax refund 
payments to collect past-due, legally enforceable State income tax 
obligations reported to the Secretary of the Treasury by States. The 
amendments authorizing such offsets were effective January 1, 2000.
    Offsets to collect delinquent State income tax debts from Federal 
tax refunds are processed through the Treasury Offset Program (TOP), 
which is operated by FMS, the disbursing office for the Treasury 
Department. TOP is a centralized offset program through which FMS 
offsets tax refund payments, as well as other nontax Federal payments, 
to collect delinquent debts owed to Federal agencies and States. This 
rule governs only the offset of one type of payment (i.e., tax refunds) 
to pay one type of delinquent debt (i.e., past-due, legally enforceable 
State income tax obligations).
    On December 20, 1999, FMS published a notice of proposed 
rulemaking, 64 FR 71233 (NPRM), concerning the offset of tax refunds to 
collect delinquent income tax obligations owed to States. On the same 
day, FMS published an interim rule with request for comments, 64 FR 
71228, which contained the text for the NPRM. The closing date for 
comments regarding the proposed and interim rules was January 19, 2000.

Comments on the Proposed and Interim Rules

    FMS did not receive any comments on the NPRM by the close of the 
comment period. Likewise, FMS did not receive any comments on the 
interim rule, which served as the text for the NPRM. Therefore, the 
interim rule is adopted, without change, as a final rule.

Regulatory Analysis

    This final rule is not a significant regulatory action as defined 
in Executive Order 12866. Pursuant to the Regulatory Flexibility Act (5 
U.S.C. chapter 6), it is hereby certified that this rule will not have 
a significant economic impact on a substantial number of small 
entities. The basis for this certification is that this rule only 
assists States in the collection of past-due legally enforceable State 
income tax debt. Therefore, a regulatory flexibility analysis is not 

Special Analysis

    FMS has determined that good cause exists to make this final rule 
effective upon publication without providing the 30-day period between 
publication and the effective date contemplated by 5 U.S.C. 553(d). The 
purpose of a delayed effective date is to afford persons affected by a 
rule a reasonable time to prepare for compliance. However, in this 
case, FMS has been collecting past-due income tax obligations owed to 
States by tax refund offset since January 2000. Procedures affecting 
States submitting delinquent income tax obligations for collection and 
persons owing delinquent income tax obligations to States remain 
substantially unchanged. This final rule provides important guidance 
that is expected to facilitate States' participation in the tax refund 
offset program. Therefore, FMS believes that good cause exists to make 
the rule effective upon publication.

List of Subjects in 31 CFR Part 285

    Administrative practice and procedure, 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.

Adoption as Final Rule

Accordingly, the interim rule adding Sec.  285.8 to 31 CFR part 285, 
subpart A, which was published at 64 FR 71228 on December 20, 1999, is 
adopted as a final rule without change.

    Dated: January 21, 2005.
Richard L. Gregg,
[FR Doc. 05-1421 Filed 1-25-05; 8:45 am]

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