Child Support Enforcement Program, 3093-3102 [E7-953]

Agencies

• DEPARTMENT OF HEALTH AND HUMAN SERVICES
• Administration for Children and Families
• Children and Families Administration

[Federal Register Volume 72, Number 15 (Wednesday, January 24, 2007)]
[Proposed Rules]
[Pages 3093-3102]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-953]


=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Administration for Children and Families

45 CFR Parts 301, 302, 303 and 304

RIN 0970-AC24


Child Support Enforcement Program

AGENCY: Office of Child Support Enforcement (OCSE), Administration for 
Children and Families (ACF), Department of Health and Human Services.

ACTION: Notice of proposed rulemaking (NPRM).

-----------------------------------------------------------------------

SUMMARY: These proposed regulations implement provisions of title IV-D 
of the Social Security Act (the Act) as amended by the Deficit 
Reduction Act of 2005, Pub. L. 109-171 (DRA of 2005). The proposed 
regulations address use of the tax refund intercept program to collect 
past-due child support on behalf of children who are not minors, 
mandatory review and adjustment of child support orders for families 
receiving Temporary Assistance to Needy Families (TANF), reduction of 
Federal matching rate for laboratory costs incurred in determining 
paternity, States' option to pay more child support collections to 
former assistance families, and the mandatory annual $25 fee in certain 
child support (IV-D) cases in which the State has collected and 
disbursed at least $500 of support. The regulations also make other 
conforming changes necessary to implement changes to the distribution 
and disbursement requirements.

DATES: Consideration will be given to comments received by March 26, 
2007.

ADDRESSES: Send comments to: Office of Child Support Enforcement, 
Administration for Children and Families, 370 L'Enfant Promenade, SW., 
4th Floor, Washington, DC 20447. Attention: Director, Policy Division, 
Mail Stop: OCSE/DP. Comments will be available for public inspection 
Monday through Friday from 8:30 a.m. to 5 p.m. on the 4th floor of the 
Department's offices at the above address. You may also transmit 
written comments electronically via the Internet at: https://
www.regulations.acf.hhs.gov. To download an electronic version of the 
rule, you may access https://www.regulations.gov.

FOR FURTHER INFORMATION CONTACT: Paige Hausburg, Policy Specialist, 
OCSE, 202-401-5635, e-mail: phausburg@acf.hhs.gov. Deaf and hearing-
impaired individuals may call

[[Page 3094]]

the Federal Dual Party Relay Service at 1-800-877-8339 between 8 a.m. 
and 7 p.m. eastern time.

SUPPLEMENTARY INFORMATION: 

I. Statutory Authority

    This notice of proposed rulemaking is published under the authority 
granted to the Secretary of the U.S. Department of Health and Human 
Services (the Secretary) by section 1102 of the Act, 42 U.S.C. 1302. 
Section 1102 authorizes the Secretary to publish regulations that may 
be necessary for the efficient administration of the functions for 
which he is responsible under the Act. The Deficit Reduction Act of 
2005 (DRA of 2005), Title VII, Subtitle C--Child Support, sections 
7301-7311 amends title IV-D of the Act. The specific sections of the 
DRA of 2005 included in the proposed regulation are discussed in detail 
under Provisions of the Regulation.

II. Provisions of the Regulations

Part 301--State Plan Approval and Grant Procedures

Section 301.1--General Definitions
    Section 7301(f) of the DRA of 2005, effective October 1, 2007, 
amends the definition of ``past-due support'' at section 464(c) of the 
Act for purposes of the Federal income tax refund offset program. 
Currently, the term ``past-due support'' limits access to the Federal 
income tax refund offset process to past-due support owed to or on 
behalf of a qualified child (a child who was a minor or who, while a 
minor was determined to be disabled under subchapter II or XVI of the 
Act and for whom an order of support is in force). Prior to enactment 
of the DRA of 2005, only past-due support due to a qualified child or 
adult child who was disabled could be submitted for offset. That 
limitation is removed by section 7301(f) of the DRA of 2005, effective 
October 1, 2007. This amendment will allow collection of past-due child 
support from the Federal income tax refund offset program on behalf of 
individuals who were owed child support as children but then aged out 
of the system without having collected the full support amount owed to 
them.
    Under Sec.  301.1, we propose changes to two definitions. First, we 
propose to amend the definition of ``past-due support'' by inserting 
language to place a time limit on the definition. The revised language 
would read: ``Through September 30, 2007, for purposes of referral for 
Federal income tax refund offset of support due an individual who is 
receiving services under Sec.  302.33 of this chapter, past-due support 
means support owed to or on behalf of a qualified child, or a qualified 
child and the parent with whom the child is living if the same support 
order includes support for the child and the parent.'' Therefore, 
effective October 1, 2007, past-due support owed in non-TANF cases will 
be treated the same as past-due support owed in TANF cases and may be 
submitted for Federal income tax refund offset until the debt is 
satisfied.
    Similarly, in Sec.  301.1, we propose to limit the applicability of 
the definition of ``Qualified child'' through September 30, 2007, 
because there is no longer any reference to a ``qualified child'' in 
section 464 of the Act effective October 1, 2007. Therefore, on or 
after October 1, 2007, past-due support owed on behalf of adults in 
non-TANF cases would qualify for Federal income tax refund offset, 
regardless of whether they are disabled.

Part 302--State Plan Approval Requirements

Section 302.32--Collection and Disbursement of Support Payments by the 
IV-D Agency
    The proposed regulations make conforming changes to certain 
language in Sec.  302.32, Collection and Disbursement of Support 
Payments by the IV-D Agency, for consistency with certain changes made 
to sections 454 and 457 of the Act. (The term ``distribution'' refers 
to how a support collection is allocated between families and the State 
and Federal government in accordance with Federal requirements. The 
term ``disbursement'' refers to the act of paying, by check or 
electronic transfer, support collections to families.)
    Under the new section 454(34) of the Act, effective October 1, 
2009, or up to a year earlier at State option, States have a choice to 
distribute collections first to satisfy support owed to families in IV-
D cases. These proposed regulations make technical changes in 
Sec. Sec.  302.32(b)(2)(iv) and (3)(ii) to delete reference to a 
specific statutory requirement for payments to families to simplify the 
regulatory language. Technical changes to Sec.  302.51 are addressed 
later in this preamble.
Section 302.33--Services to Individuals Not Receiving Title IV-A 
Assistance
    We propose to add a new Sec.  302.33(e) to address the statutory 
requirement in section 454(6)(B)(ii) of the Act to impose an annual $25 
fee in certain cases. We are also revising the title of the section to 
more appropriately reflect the scope of the revised section.
    Section 7310(a) of the DRA of 2005 added section 454(6)(B)(ii) of 
the Act to require States, in the case of an individual who has never 
received assistance under a State program funded under title IV-A of 
the Act (hereinafter referred to as ``title IV-A program'') and for 
whom the State has collected at least $500 of support in any given 
Federal fiscal year, to impose an annual fee of $25 for each case in 
which services are furnished. The statutory effective date is October 
1, 2006, or if State legislation is necessary to impose the mandatory 
$25 fee, the effective date is three months after the first day of the 
first calendar quarter beginning after the close of the first regular 
session of the State legislature that begins after the date of the 
enactment of the DRA of 2005. However, final regulations governing the 
requirement may not be published until after the mandatory effective 
date for the annual $25 fee in a State. In such a case, the State 
should implement the fee in accordance with the statutory requirements 
until such time as the final regulations are effective.
    Section 454(6)(B)(ii) of the Act only refers to State programs 
funded under title IV-A of the Act. However, we believe it is 
authorized and consistent with the purpose and the scope of the 
statutory exemption from the $25 fee for current and former TANF cases 
and the intent of the Congress to not impose the fee in IV-D cases 
involving individuals who are receiving or have received assistance 
from a Tribal title IV-A Temporary Assistance to Needy Families (TANF) 
program as well. Tribal TANF recipients are a narrow, additional 
category of individuals receiving assistance under the same basic title 
IV-A statutory authority as State TANF recipients, just not under a 
State TANF program. The two programs are linked. Funds to operate 
Tribal IV-A programs in a State are deducted from the State's title IV-
A block grant. The Federal statute at section 454 of the Act does not 
provide for any additional categories of exempt individuals besides 
these who may be receiving, or who may have received in the past, other 
types of Federal, State or Tribal assistance.
    The proposed regulations at Sec.  302.33(e)(1) would read: ``Annual 
$25 fee. (1) In the case of an individual who has never received 
assistance under a State or Tribal title IV-A program, and for whom the 
State has disbursed to the family at least $500 of support in the 
Federal fiscal year, the State must impose in, and report for, that 
year an annual fee of $25 for each case in which services are 
provided.''

[[Page 3095]]

    A State would be required to impose the $25 fee in any case that 
meets the conditions for imposition of the fee under Sec.  302.33(e), 
including both existing and new IV-D cases.
    For purposes of Sec.  302.33(e)(1), an individual would be 
considered to have received assistance under a State or Tribal title 
IV-A program if he or she had received a cash assistance payment or 
some other type of TANF assistance as defined in Federal regulations 
governing the State title IV-A program at 45 CFR 260.31, or under a 
Tribal title IV-A program at 45 CFR 286.10. A State title IV-A program 
would include both assistance under a State TANF program as well as 
assistance under the TANF program's predecessor, Aid to Families with 
Dependent Children (AFDC), as defined in Federal regulations governing 
the AFDC program.
Definition of ``Annual''
    We propose that States impose the annual $25 fee within a Federal 
fiscal year period and report the fees for that Federal fiscal year. 
This proposal would ensure consistency among State programs in 
assessing the fee and reporting fees as program income as part of a 
State's mandated Federal reporting procedures. However, we encourage 
comments on, and a rationale for, an alternative 12-month period, for 
example, a calendar year, for providing more State flexibility.
When the $500 of Support Threshold Is Reached
    Under section 454(6)(B)(ii) of the Act, the annual fee must be 
imposed after the collection of at least $500 in a Federal fiscal year. 
Paragraph (e)(1) would require that support payments that make up this 
$500 also must have been disbursed to the family within the Federal 
fiscal year.
    We are proposing to require that the $500 support collection must 
have actually been disbursed to the family in a title IV-D case before 
imposing the $25 fee because to allow otherwise would result in 
imposition of a $25 fee in cases in which support is collected but is 
neither distributed nor disbursed to the family, e.g., a Federal income 
tax refund offset that is being held by the State because the obligated 
parent has requested a review under Sec.  303.72, or a collection that 
has not yet been disbursed because the State has lost contact with, and 
is attempting to locate, the family. We believe this would be 
inconsistent with the statute's concept that a case subject to the $25 
fee would have benefited from receipt of $500 in support during the 
year before an annual $25 fee is imposed. Therefore, at least $500 in 
support collections must have been disbursed to the family in a year 
before an annual $25 fee is imposed for that year. If $500 in support 
is collected in one year but not disbursed until the next year, the fee 
would be imposed in the year in which the collection was actually 
disbursed to the family.
    Imposing a time period within which the $500 must be collected and 
disbursed is consistent with the purpose of the fee provision which 
requires States to impose an ``annual fee.'' Setting a specific time 
period for reaching the $500 threshold (i.e. within a Federal fiscal 
year) will also contribute to the efficient administration of HHS' 
oversight responsibility with respect to the title IV-D program.
One $25 Fee for Each Qualifying Case
    Section 454(6)(B)(ii) of the Act, in part, requires a $25 fee to be 
imposed for each case in which services are provided. A title IV-D case 
is defined in instructions to the Federal reporting form 157 as a 
noncustodial parent (or putative father), custodial parent and 
child(ren) in common. Therefore, only one $25 fee would be imposed in a 
title IV-D case that otherwise met the requirements for imposition of 
the fee. If a custodial parent has multiple children by different 
noncustodial parents, there would be a separate title IV-D case for 
each noncustodial parent, and the State must impose the annual $25 fee 
for each of these title IV-D cases in which the State disburses at 
least $500 in the Federal fiscal year. And, if a noncustodial parent 
has multiple children in separate title IV-D cases, the State must 
impose the $25 fee in each qualifying case in which the $500 threshold 
and other conditions for imposing the fee under Sec.  302.33(e) are 
met.
Who Imposes the Fee in Interstate, International and Intergovernmental 
Tribal Title IV-D Cases?
    Section 454(6)(B)(ii) of the Act does not directly address 
imposition of the annual $25 fee in interstate cases, cases involving 
tribal members or the Tribal title IV-D programs, or international 
cases receiving services under section 454(32) of the Act. States have 
asked for clarification in this regulation about which State imposes a 
$25 fee when the conditions under section 454(6)(B)(ii) are met in 
these kinds of cases. We address each type separately, starting with 
interstate cases that involve more than one State. Many States take 
direct action against noncustodial parents or putative fathers in 
different States to establish paternity and a support order using long-
arm statutes or to enforce an order through direct income withholding, 
for example. The requirements of proposed Sec.  302.33(e) would apply 
to these interstate cases in which one State uses long-arm jurisdiction 
to establish or enforce support orders in another State where the 
noncustodial parent is living, without involving the IV-D agency in the 
other State. Therefore, for purposes of this discussion, we are only 
referring to title IV-D cases in which one State has requested 
assistance from another State in a child support case as interstate 
cases. The proposed regulation, under Sec.  303.7(e), requires the 
annual $25 fee to be imposed and reported by the initiating State in an 
interstate case. We have taken this position because the initiating 
State is the only State that has sufficient information to determine 
whether all the requirements for imposition of the fee have been met. 
That change is discussed further later in this preamble.
    With respect to international cases in which parents live in 
different countries, we believe such cases are covered by the fee 
provisions. However, section 454(32)(C) of the Act provides that ``no 
applications will be required from, and no costs will be assessed for 
such services against, the foreign reciprocating country or foreign 
obligee (but costs may at State option be assessed against the 
obligor).'' Section 459A of the Act addresses the Federal-level 
declaration of a foreign country to be a foreign reciprocating country 
and refers, under section 459A(d), to State-level reciprocal 
arrangements with foreign countries that are not the subject of a 
Federal-level declaration. (See PIQ-04-01, Processing Cases with 
Foreign Reciprocating Countries.) Therefore, while the $25 fee must be 
imposed when appropriate in international cases (when $500 has been 
collected in a Federal fiscal year and the family has never received 
State or Tribal TANF), it may not be taken out of the collection sent 
to, or charged to, a custodial parent in another country. The State 
could charge the noncustodial parent the fee or pay the fee itself in 
such cases.
    The proposed regulations at Sec.  302.33(e)(2) would require the 
State that receives the request from a foreign reciprocating country or 
a foreign country covered by a State level reciprocal agreement to 
impose the annual $25 fee in international cases receiving services 
under section 454(32) of the Act in which the criteria for imposition 
of the annual $25 fee under Sec.  302.33(e)(1) are met. Proposed Sec.  
302.33(e)(3), discussed later in the

[[Page 3096]]

preamble, will address how the fee will actually be recovered or paid 
in these international cases, taking into account the prohibition in 
section 454(32)(C) of the Act that no costs will be assessed against 
the foreign reciprocating country or foreign obligee.
    We also considered the impact of the annual $25 fee on Tribal 
members and Tribal title IV-D programs. Section 454(6)(B)(ii) is a 
State plan requirement and as such is not applicable to Tribal IV-D 
programs. However, if a Tribe is under cooperative agreement with a 
State title IV-D program under section 454(33) of the Act and Sec.  
302.34 to assist the State in delivering title IV-D services, the Tribe 
would be required to impose the annual $25 fee in appropriate cases, if 
doing so is addressed under the cooperative agreement with the State. 
If it is not addressed in the cooperative agreement, the State IV-D 
agency would be responsible for collecting the fee in any case where it 
is the jurisdiction receiving the application for services or receiving 
a referral from the State TANF, foster care or title XIX programs. As 
described above, under Sec.  302.33(e)(1), a State would only impose 
the $25 fee in appropriate cases involving Tribal members who are 
receiving services from a State IV-D program and who have never 
received State or Tribal title IV-A assistance. A State may not impose 
a fee in a Tribal IV-D case that is referred to the State IV-D program 
for assistance in securing child support from a Tribal IV-D program 
because section 454(6)(B)(ii) of the Act does not apply to Tribal title 
IV-D programs under section 455(f) of the Act and 45 CFR Part 309. A 
case where a State IV-D program receives a request from another State 
IV-D program for assistance involving a tribal member would be treated 
as an interstate case and the fee would be imposed by the initiating 
State.
Collection of the Annual Fee: State Options To Retain, Charge, Recover 
or Pay the Annual Fee
    Under section 454(6)(B)(ii) of the Act, as added by section 
7310(a)(1) of the DRA of 2005, there are four options for the 
collection of the fee. The annual $25 fee may be retained by the State 
from support collected on behalf of the individual (but not from the 
first $500 so collected in a Federal fiscal year), or, it may be paid 
by the individual applying for services, recovered from the absent 
parent, or paid by the State out of its own funds. To implement this 
provision, the proposed regulation adds Sec.  302.33(e)(3) under which 
after the first $500 of support collected in a Federal fiscal year is 
disbursed to the family, the annual fee must be collected by one or 
more of the following methods: (i) retained by the State from support 
collected in cases subject to the fee under Sec.  302.33(e)(1) and (2), 
except in international cases receiving services under section 454(32) 
of the Act; (ii) paid by the individual applying for title IV-D 
services under section 454(4)(A)(ii) of the Act and implementing 
regulations at Sec.  302.33; (iii) recovered from the noncustodial 
parent; or (iv) paid by the State out of its own funds.
    In accordance with section 454(6)(B)(ii), the proposed Sec.  
302.33(e)(3) provides States with flexibility to choose the appropriate 
method or methods in a case to collect the fee, once imposed. The 
method or methods selected may affect the cost of administration of the 
title IV-D program. For example, a State may decide to first attempt to 
recover the fee by billing the noncustodial parent, and if the 
noncustodial parent does not pay the fee in a specified period of time 
(e.g., 60 days), may then choose to withhold the fee from a subsequent 
collection. Alternatively, a State could choose to require the 
noncustodial parent to pay the fee as part of the support order, and, 
should the noncustodial parent designate a portion of a subsequent 
payment as the $25 fee, or an employer remit to the State IV-D agency 
withheld wages sufficient to cover both the fee and the support 
obligation included in the support order, the State may retain that 
amount from that payment.
    Section 454(6)(B)(ii) of the Act also authorizes a State to retain 
the fee from support collected in excess of the first $500 collected in 
a Federal fiscal year. Section 7310 of the DRA of 2005 also made a 
conforming amendment to section 457(a)(3) of the Act under which, in 
the case of a family that has never received assistance under title IV-
A or title IV-E of the Act, the State shall distribute to the family 
the portion of the amount of support collected that remains after 
withholding any fee imposed pursuant to section 454(b)(B)(ii) of the 
Act. (A change to Sec.  302.51 to reflect this authority is discussed 
later in this preamble.) Therefore, under the option to retain the fee 
from collections, a State does not need the custodial parent or 
caretaker relative's permission to withhold the annual $25 fee from a 
collection on his or her behalf. Alternatively, a State could charge 
the custodial parent or caretaker relative the fee (assuming they were 
the individuals who applied for services) and require payment within a 
specified period of time or indicate that if the fee is not paid, the 
State will use the option to retain the fee from support and the fee 
will be deducted from the first collection following the deadline for 
payment of the fee by the custodial parent or caretaker relative.
    Retaining the annual fee from support collected on behalf of the 
family may be the least administratively burdensome method when 
collections in excess of the first $500 are disbursed to the family. 
However, while a State may charge the $25 fee to a custodial parent in 
an international case in which the custodial parent is in the U.S. and 
the noncustodial parent is in a foreign country, a State may not impose 
the fee on an individual residing in a foreign country in an 
international case. As discussed previously, section 454(32) of the Act 
prohibits States from charging application fees or assessing costs 
against the foreign country or foreign obligee. In such cases, the 
annual $25 fee imposed in international cases must be recovered from 
the parent or guardian living in the U.S. or be paid by the State. For 
purposes of international cases receiving services under section 
454(32) of the Act, the $500 in support may be considered disbursed to 
the family when it is transmitted to the foreign reciprocating country 
or directly to the family.
Requirement That the Fee Be Collected by the End of the Fiscal Year
    Under proposed Sec.  302.33(e)(4), using the Secretary's rulemaking 
authority in section 1102 of the Act, the proposed regulations provide 
that the State must report, in accordance with reporting requirements 
under 45 CFR 302.15, and instructions issued to States by the 
Secretary, the total amount of annual $25 fees imposed for each Federal 
fiscal year as program income, regardless of which method or methods 
are used under paragraph (e)(3). States are required to report program 
income on the 4th quarter expenditure report. Requiring States to 
report the total amount of fees imposed in that year will contribute to 
the efficient administration of the Secretary's functions under title 
IV-D of the Act by ensuring that States actually reduce title IV-D 
administrative costs for the fiscal year by the amount of fees that are 
due, as intended by the statute. Although section 7310 of the DRA of 
2005 does not include any specific sanction for a State's failure to 
collect the fee, section 454(6)(B)(ii) of the Act conveys a clear 
expectation that the $25 fee will actually be imposed and retained, 
collected, or paid in all eligible cases in which at least $500 of 
support was

[[Page 3097]]

collected in a Federal fiscal year. Therefore, each State is 
responsible for imposing, retaining, collecting or paying, and 
reporting the total of amount of annual $25 fees imposed in all cases 
in which it is required to be imposed during the fiscal year. If the 
$500 threshold is reached toward the end of a Federal fiscal year, the 
methods available to the State to collect or pay the fee may be limited 
to retaining the fee from a subsequent collection, if there is one made 
and disbursed before the end of the year, or paying the fee out of 
State funds. If a State does not make any collections above the $500 
threshold or collects less than $25 in excess of the first $500 
disbursed to the family in the year, the State must collect the fee 
using one of the other methods, and, if all else fails, pay the fee 
itself by the end of the fiscal year. We are specifically soliciting 
comments on ways to effectively ensure timely collection of the annual 
fee.
    Section 7310(b) of the DRA of 2005 makes a conforming amendment to 
section 457(a)(3) of the Act, which requires that in the case of 
families that never received assistance, the State must distribute to 
the family the portion of the amount so collected that remains after 
withholding any fee pursuant to section 454(6)(B)(ii) of the Act. 
Therefore, if a State opts to retain the fee from a collection, the 
State may retain the annual $25 fee imposed under Sec.  302.33(e)(1) 
and (2) from a collection in excess of the first $500 disbursed to the 
family in a never-assistance case, regardless of whether or not the 
collection is considered, under section 457 of the Act and implementing 
regulations at Sec.  302.51, a payment on current support or 
arrearages.
    For purposes of distribution under section 457 of the Act, 
assistance is defined in section 457(c)(1) as assistance under a State 
title IV-A TANF program or the program that TANF replaced, AFDC or 
title IV-E foster care program. If the State withholds the annual $25 
fee from the collection on behalf of a never assistance case (i.e., 
opts to retain the fee from a collection in such a case), and chooses 
to assess the fee against the custodial parent the State must give the 
noncustodial parent credit in the payment record for the entire amount 
of the payment. However, the State may deduct the annual $25 fee from a 
payment if the State has chosen to recover the fee from the 
noncustodial parent and the noncustodial parent has designated a 
portion of the payment as the annual $25 fee. In such a case, the 
noncustodial parent must get credit for paying the fee, and for paying 
support in the amount that is paid in excess of the fee.
Annual $25 Fee as Program Income
    The intent of the annual $25 fee is to recoup in part the costs of 
the title IV-D program to the Federal and State governments by 
decreasing program expenditures. Under Sec.  304.50, Treatment of 
Program Income, fees, recovered costs, and interest are considered 
program income that must be used to reduce title IV-D expenditures 
before seeking Federal financial participation in the title IV-D 
program's expenditures. Program income is reported in accordance with 
45 CFR 302.15 and instructions issued by the Secretary. This reported 
program income must include the total amount of annual $25 fees 
imposed, regardless of whether the fees are retained from collections, 
paid by the custodial parent, recovered from the noncustodial parent or 
paid by the State. In addition, State-paid annual $25 fees are not an 
allowable title IV-D expenditure eligible for Federal matching under 
section 455 of the Act or 45 CFR part 304. Section 454(6)(B)(ii) of the 
Act requires that State funds used to pay the annual $25 fee may not be 
considered as an administrative cost of the State title IV-D program 
and must be counted as program income.
    Therefore, proposed Sec.  302.33(e)(5) requires that State funds 
used to pay the annual $25 fee shall not be considered administrative 
costs of the State for operation of the title IV-D plan, and that all 
annual $25 fees imposed during a Federal fiscal year must be considered 
income to the program, in accordance with Sec.  304.50. States will be 
required to report the total amount of annual $25 fees imposed on Line 
2a, Fees and Costs Recovered, on Form OCSE-396A, Child Support 
Enforcement Program Financial Report, in addition to any other fees, 
costs recovered and interest.
Section 302.51--Distribution of Support Collections
    Section 7301(b) of the DRA revises section 457(a)(3) of the Act to 
require a State to pay, to a family that has never received assistance 
under a title IV-A or IV-E program, the portion of an amount collected 
that remains after withholding any annual $25 fee that may be imposed 
under section 454(6)(B)(ii) of the Act. This statutory requirement is 
being addressed in these proposed regulations by an amendment to Sec.  
302.51(a)(1) to include an additional exception in accordance with 
proposed paragraph (a)(5). Therefore, the revised paragraph (a)(1) 
would read as follows: ``(a)(1)For purposes of distribution in a IV-D 
case, amounts collected, except as provided under paragraphs (a)(3) and 
(5) of this section, shall be treated first as payment on the required 
support obligation for the month in which the support was collected and 
if any amounts are collected which are in excess of such amount, these 
excess amounts shall be treated as amounts which represent payment on 
the required support obligation for previous months.'' Paragraph (a)(5) 
would read as follows: ``(a)(5) The State must pay to a family that has 
never received assistance under a State program funded or approved 
under title IV-A of the Act or foster care under title IV-E of the Act 
the portion of the amount collected that remains after withholding any 
annual $25 fee that the State imposes under Sec.  302.33(e) of this 
part.''
    Certain changes made by section 7301(b) of the DRA which allow 
States to increase child support payments to families and simplify 
child support distribution rules were explained earlier under the 
discussion of Sec.  302.32, Collection and Disbursement of Support 
Payments by the IV-D agency, including a new State plan requirement at 
section 454(34) of the Act under which a State must certify which 
option for distribution of collections in former assistance cases it 
will use. This statutory requirement is being addressed in these 
proposed regulations at Sec.  302.51(a)(3) for consistency with State 
options for distribution of collections in former assistance cases 
authorized under the section 7301(b) of the DRA of 2005.
    Current Sec.  302.51(a)(3) requires that amounts collected through 
Federal income tax refund offset must be distributed as arrearages in 
accordance with implementing regulations for the Federal income tax 
refund offset process in Sec.  303.72(h), and section 457(a)(2)(B)(iv) 
of the Act, under which Federal income tax refund offsets are first 
retained to satisfy any past-due support assigned to the State. We are 
making a conforming change to Sec.  302.51(a)(3) to include the States' 
option, effective October 1, 2009, or up to a year earlier at State 
option, under section 454(34) of the Act, to use Federal income tax 
refund offset collections to satisfy current support, if not already 
paid for the month and to first pay collections, including Federal 
income tax refund offsets, to a former assistance family, before 
satisfying any support assigned to the State.
Section 302.70--Required State Laws
    Section 7302 of the DRA of 2005 amended section 466(a)(10) of the 
Act to require States to enact laws requiring

[[Page 3098]]

the use of procedures to review, and if appropriate, adjust at least 
once every three years, child support orders for families receiving 
TANF in which there is an assignment of support under title IV-A of the 
Act. Under section 466(a)(10) of the Act and Sec.  303.8, States may 
review orders using State child support guidelines and adjust them if 
appropriate, apply a cost-of-living adjustment to the orders, or use 
automated methods to identify orders eligible for review, conduct the 
reviews and adjust the orders, if appropriate. Section 7302 of the DRA 
of 2005 reinstates the pre-1996 requirement for States to review and, 
if appropriate, adjust orders in TANF cases on a three-year cycle. This 
change only affects those cases in which the families are currently 
receiving TANF. It does not apply to arrearage-only IV-D cases in which 
a State is only collecting arrearages assigned to the State because of 
title IV-A assistance provided in years past.
    For consistency with section 466(a)(10) of the Act, the proposed 
regulations revise Sec.  302.70(a)(10), under which the State must have 
in effect laws providing for the review and adjustment of child support 
orders. The requirements in current Sec. Sec.  302.70(a)(10)(i) and 
(ii) are obsolete and would be replaced with reference to requirements 
for review and adjustment of child support orders in accordance with 
Sec.  303.8. Specific changes to the content of Sec.  303.8(b)(1), 
which address the requirements that are in effect until September 30, 
2007 and those that become effective on October 1, 2007, are discussed 
later in this preamble.

Part 303--Standards for Program Operations

Section 303.7--Provision of Services in Interstate Title IV-D Cases
    In Sec.  302.33(c)(2), in an interstate case, the application fee 
is charged by the State in which the individual applies for services. 
Under responding State responsibilities in interstate cases in Sec.  
303.7(c)(7)(iv), the responding State must forward collections to the 
location specified by the initiating State title IV-D agency for 
distribution and disbursement. Because the application fee is paid in 
the initiating State and that State is responsible for distribution and 
disbursement of collections in interstate cases in accordance with 
Question and Answer 12 of OCSE-AT-98-24 (https://www.acf.hhs.gov/
programs/cse/pol/AT/1998/at-9824.htm, only the initiating State has all 
the information necessary to know whether the annual $25 fee should be 
imposed in a particular case. Accordingly, we believe it is appropriate 
for the initiating State to impose the annual $25 fee in eligible cases 
after the $500 threshold is met, and to report the amount of fees 
imposed as required under Sec.  302.33(e)(3).
    Section 7310 of the DRA does not specifically address which State 
is to impose and collect the annual $25 fee. Using the Secretary's 
rulemaking authority in section 1102 of the Act, we are proposing to 
amend Sec.  303.7(e) to require that the title IV-D agency in the 
initiating State impose the annual $25 fee in accordance with proposed 
changes to Sec.  302.33(e) discussed earlier in this preamble. This 
change is necessary to ensure consistency in the collection of the 
mandatory annual $25 fee in interstate cases.
Section 303.8--Review and Adjustment of Child Support Orders
    As discussed earlier, section 7302 of the DRA of 2005 revised 
section 466(a)(10) of the Act, effective October 1, 2007, to require 
States to review and, if appropriate, adjust orders in State title IV-A 
cases at least once every three years. Now that title IV-A assistance 
is time limited under TANF, it is especially important that States 
ensure, prior to the family ceasing to receive TANF, that the support 
order, which is essential to the family's continued financial 
independence, is set at the appropriate level based on the responsible 
parent's or parents' income and ability to pay.
    Under current Sec.  303.8(b)(1), a State must conduct a review 
every three years only if requested by either the parent or the title 
IV-D agency. Proposed Sec.  303.8(b)(1) would require, effective 
October 1, 2007, a State to have procedures under which, every three 
years (or such shorter cycle as the State may determine), if there is 
an assignment under part A or upon the request of either parent, the 
State shall, with respect to a support order being enforced under this 
part, take into account the best interests of the child involved and 
(i) review and, if appropriate, adjust orders in accordance with the 
State's guidelines; (ii) apply a cost-of-living adjustment to the 
order; or (iii) use automated methods to identify orders eligible for 
review, conduct the review, identify orders eligible for adjustment, 
and apply the appropriate adjustment to the orders eligible for 
adjustment under any threshold that may be established by the State.
Section 303.72--Requests for Collection of Past-Due Support by Federal 
Tax Refund Offset
    As discussed earlier in the preamble, section 7301(f) of the DRA of 
2005 changes the definition of ``past-due support'' at section 464(c) 
of the Act to allow, effective October 1, 2007, arrearages owed to 
grown children to be submitted for Federal income tax refund offset 
process. Therefore, the proposed regulations revise Sec.  
303.72(a)(3)(i), with respect to past-due support owed in cases in 
which the IV-D agency is providing services under Sec.  302.33, to 
allow support owed to or on behalf of a child, or a child and the 
parent with whom the child is living if the same support order includes 
support for the child and the parent, to be submitted for Federal 
income tax refund offset, effective October 1, 2007.
    As discussed earlier with respect to distribution options for 
States under section 454(34) of the Act, as added by section 
7301(b)(2)(C) of the DRA of 2005, effective October 1, 2009, or up to a 
year earlier at State option, a State may choose either to apply 
amounts collected, including amounts offset from Federal income tax 
refunds, to satisfy any support owed to the family first or to continue 
to distribute Federal tax offset amounts, as under current 
457(a)(2)(B)(iv), to satisfy any past-due support assigned to the State 
first. Section 303.72(h)(1) would be revised to eliminate reference to 
distributing amounts offset as past-due support and to refer simply to 
distribution in accordance with section 457 of the Act, and effective 
October 1, 2009, or up to a year earlier at State option, in accordance 
with section 454(34) of the Act, pursuant to which States elect which 
distribution priority in former assistance cases to use under their IV-
D programs. In addition, Sec.  303.72(h)(3) would be revised to include 
the requirement that a IV-D agency, effective October 1, 2009, or up to 
a year earlier at State option, must inform individuals receiving 
services under Sec.  302.33 in advance, when the State has opted, under 
section 454(34) of the Act, to continue to apply amounts offset first 
to satisfy any past-due support which has been assigned to the State 
and submitted for Federal income tax refund offset.

Part 304--Federal Financial Participation

Section 304.20--Availability and Rate of Federal Financial 
Participation
    Section 7303 of the DRA of 2005 reduces the previously enhanced 
Federal matching rate for laboratory

[[Page 3099]]

costs to determine paternity, effective October 1, 2006. The enhanced 
matching rate was originally implemented in 1988 because of the high 
costs of genetic testing for the determination of paternity. However, 
the cost of genetic testing is much more reasonable than it was in 
1988. The Federal matching rate of 66 percent applies to laboratory 
costs for determining paternity beginning October 1, 2006.
    Currently, Sec.  304.20(d) allows Federal financial participation 
at the 90 percent rate for laboratory costs incurred in determining 
paternity on or after October 1, 1988. The proposed regulation revises 
Sec.  304.20(d) by eliminating the availability of enhanced funding for 
genetic testing costs after September 30, 2006.

III. Impact Analysis

Paperwork Reduction Act of 1995

    This rule contains information collection requirements that have 
been submitted to the Office of Management and Budget (OMB) under the 
Paperwork Reduction Act of 1995 (PRA). Under this Act, no persons are 
required to respond to a collection of information unless it displays a 
valid OMB control number. These requirements will not become effective 
until approved by OMB.
    There is a new reporting requirement for a State's IV-D plan in 
section 454(34) of the Act, to indicate which distribution option the 
State will choose to implement. A new State plan preprint page has been 
developed as part of this Paperwork Reduction Act (PRA) request. In 
addition, a new State plan preprint page has been developed for the 
State to indicate that a State will impose a fee and how it will be 
collected. States will also be required to keep track of the total 
amount of $25 fees that must be included as program income reported on 
the OCSE-396A. A State plan preprint page is not necessary. However, 
the tracking burden is indicated below.
    All States already have the capability of automating the new and 
revised information collection requirements imposed by the DRA of 2005 
and these implementing regulations. Therefore, as provided below, the 
paperwork impact on States under the Paperwork Reduction Act of 1995 
(44 U.S.C. 3507(d)) will be minimal.
    The additional incremental estimated burdens for these data 
collections (i.e. not including existing burden) are:

----------------------------------------------------------------------------------------------------------------
                                                                               Average  burden
                 Requirement                     Number of        Yearly         hours  per       Total  burden
                                                respondents     submittals        response            hours
----------------------------------------------------------------------------------------------------------------
State Plan (OCSE-100).......................  ..............  ..............  ................  ................
Preprint page 2.4 Collection/Distribution of              54               1               .25              13.5
 Support Payments...........................
State Plan Transmittal Page (Distribution)..              54               1               .25              13.5
Preprint page 2.5-4 Services to Individuals               54               1               .25              13.5
 (Fee)......................................
State Plan Transmittal Page (Fee)...........              54               1               .25              13.5
Financial Form 396A (Tracking the $25 fee)..              54               4              1                216
----------------------------------------------------------------------------------------------------------------

    The total estimated burden for the entire State Plan and Financial 
Report Forms are:

----------------------------------------------------------------------------------------------------------------
                                                                    Number of        Yearly       Total  burden
                          Requirement                              respondents     submittals        hours *
----------------------------------------------------------------------------------------------------------------
State Plan (OCSE-100)..........................................              54               6              189
State Plan Transmittal (OCSE-21-U4)............................              54               6              108
                                                                ------------------------------------------------
    Total......................................................  ..............  ..............  ...............
Financial Report Form (396A)...................................              54               4            1944
----------------------------------------------------------------------------------------------------------------
\*\ Includes incremental burden noted in previous chart.

    In accordance with the Paperwork Reduction Act of 1995, this notice 
invites the general public and other public agencies to comment on the 
information collection requirements contained in this proposed rule. 
The Administration for Children and Families (ACF) will consider 
comments by the public on this proposed collection of information in 
the following areas:
    (1) Evaluating whether the proposed collection is necessary for the 
proper performance of the functions of ACF, including whether the 
information will have practical utility;
    (2) Evaluating the accuracy of ACF's estimate of the burden of the 
proposed collection of information, including the validity of the 
methodology and assumptions used;
    (3) Enhancing the quality, usefulness and clarity of the 
information to be collected; and
    (4) Minimizing the burden of the collection of information on those 
who are to respond, including through the use of appropriate automated, 
electronic, mechanical, or other technology, e.g., permitting 
electronic submission of responses.
    OMB is required to make a decision concerning the collection of 
information contained in these proposed regulations between 30 and 60 
days after publication of this document in the Federal Register. 
Therefore, a comment is best assured of having its full effect if OMB 
receives it within 30 days of publication. This does not affect the 
deadline for the public to comment to the Department on the proposed 
regulations.
    To make sure that your comments and related material do not reach 
OMB more than once, please submit them by only one of the following 
means:
    1. By fax to OMB at (202) 395-6974. To ensure your comments are 
received in time, mark the fax to the attention of the Desk Officer for 
the Administration for Children and Families.
    2. By e-mail to kmatsuoka@omb.eop.gov.
    Copies of the proposed collection may be obtained by writing to the 
Administration for Children and

[[Page 3100]]

Families, Office of Administration, Office of Information Services, 370 
L'Enfant Promenade, SW., Washington, DC 20447, Attn: ACF Reports 
Clearance Officer. All requests should be identified by the title of 
the information collection (i.e., State Plan OCSE-100 and State Plan 
Transmittal OCSE-21-U4). E-mail address: rsargis@acf.hhs.gov

Regulatory Flexibility Analysis

    The Secretary certifies that, under 5 U.S.C. 605(b), as enacted by 
the Regulatory Flexibility Act (Pub. L. 96-354), this rule will not 
result in a significant impact on a substantial number of small 
entities. The primary impact is on State governments. State governments 
are not considered small entities under the Act.

Regulatory Impact Analysis

    Executive Order 12866 requires that regulations be reviewed to 
ensure that they are consistent with the priorities and principles set 
forth in the Executive Order. The Department has determined that these 
proposed rules are consistent with these priorities and principles and 
is an economically significant rule as defined by the Executive Order 
because it will have an estimated $500 million impact on the economy 
over a 5 year period and, potentially, a $100 million impact on the 
economy in any given year. Specifically, we estimate that the 
requirement for review and adjustment of child support orders in TANF 
cases every three years will cost the Federal government approximately 
$15 million in FY 2008 but result in approximately $40 million in 
savings over four years. Similarly, this provision will cost State 
governments approximately $10 million in FY 2008 but save States almost 
$40 million over four years with a net government impact of 
approximately $25 million in costs in FY 2008 and approximately $80 
million in savings by FY 2011. These costs reflect the upfront 
increased administrative costs involved in reviewing these cases and as 
appropriate updating the orders every three years and the savings that 
will result overtime in the way of increased revenues (Federal and 
State shares of the larger collections amounts). This provision also is 
beneficial to families in terms of ensuring that support order remain 
fair and equitable over time and reflect the noncustodial parent's 
current ability to pay support.
    The provision on imposition of a $25 annual collection fee for 
never-TANF cases with at least $500 in collections will save the 
Federal government a little less than $50 million in FY 2007 (when the 
provision is effective) and result in approximately $270 in Federal 
savings over five years. The provision will save State governments 
approximately $25 million in FY 2007 and approximately $140 million 
over five years. These fees will partially offset the government's 
costs of providing services and are representative of Federal and State 
cost sharing in the program (66 and 34 percent respectively).
    Finally, the provision eliminating enhanced Federal funding for the 
cost of paternity testing will save the Federal government almost $8 
million in FY 2007 and approximately $40 million over five years and 
will result in a dollar for dollar increase in State costs. In other 
words, for each dollar saved by the Federal government because of the 
decrease in federal financial participation will result in a dollar in 
State costs. Enhanced federal funding for paternity testing is no 
longer necessary because the cost of these tests has decreased 
significantly over time.
    All together these provisions save the Federal and State 
governments approximately $66 million in FY 2007 and approximately $495 
million over five years. As each of these provisions was mandated under 
the Deficit Reduction Act of 2005, alternatives to this rulemaking are 
limited. We could have chosen not to update program regulations to 
reflect these statutory changes but that would be confusing to the 
public and would ultimately have no budgetary impact since these 
provisions are effective without regard to the issuance of regulations.
    In the end, the proposed rule remains consistent with the statute 
and the underlying budget implications.

Unfunded Mandates Reform Act of 1995

    Section 202 of the Unfunded Mandates Reform Act of 1995 requires 
that a covered agency prepare a budgetary impact statement before 
promulgating a rule that includes any Federal mandate that may result 
in the expenditure by State, local, and Tribal governments, in the 
aggregate, or by the private sector, of $120 million or more in any one 
year.
    If a covered agency must prepare a budgetary impact statement, 
section 205 further requires that it select the most cost-effective and 
least burdensome alternative that achieves the objectives of the rule 
and is consistent with the statutory requirements. In addition, section 
203 requires a plan for informing and advising any small governments 
that may be significantly or uniquely impacted by the rule.
    The Department has determined that this proposed rule, in 
implementing the new statutory requirements of the Deficit Reduction 
Act, would not impose a mandate that will result in the expenditure by 
State, local, and Tribal governments, in the aggregate, or by the 
private sector, of more than $100 million in any one year. Rather, we 
estimate that combined the proposed provisions will result in savings 
to States. Over five years, the Federal government will save 
approximately $315 million as a result of the review and adjustment and 
collection fee provisions of the regulation and States will save almost 
$180 million. States will receive approximately $40 million less in 
federal reimbursement for laboratory costs associated with paternity 
establishment over five years. Thus, the net impact of the regulation 
on States is a savings of almost $140 million over five years.

Congressional Review

    This notice of proposed rule making is not a major rule as defined 
in 5 U.S.C. chapter 8.

Assessment of Federal Regulations and Policies on Families

    Section 654 of the Treasury and General Government Appropriations 
Act of 1999 requires Federal agencies to determine whether a proposed 
policy or regulation may negatively affect family well-being. If the 
agency's determination is affirmative, then the agency must prepare an 
impact assessment addressing seven criteria specified in the law. The 
required review of the regulations and policies to determine their 
effect on family well-being has been completed and these regulations 
will have a positive impact on family well-being as defined in the 
legislation because expanded access to the Federal income tax refund 
offset, mandatory three-year reviews of support orders in TANF cases, 
and State options to pay more collections to families will ensure more 
child support is paid to families.

Executive Order 13132

    Executive Order 13132 prohibits an agency from publishing any rule 
that has federalism implications if the rule either imposes substantial 
direct compliance costs on State and local governments or is not 
required by statute, or the rule preempts State law, unless the agency 
meets the consultation and funding requirements of section 6 of the 
Executive Order. We do not believe the regulation has federalism impact 
as defined in the Executive order. However, consistent with Executive 
Order 13132, the Department specifically solicits comments from State 
and local

[[Page 3101]]

government officials on this proposed rule.

List of Subjects

45 CFR Part 301

    Child support, Grants programs/social programs.

45 CFR Part 302

    Child support, Grants programs/social programs.

45 CFR Part 303

    Child support, Grant programs/social programs.

45 CFR Part 304

    Child support, Grants programs/social programs.

(Catalog of Federal Domestic Assistance Programs No. 93.563, Child 
Support Enforcement Program.)

Wade F. Horn,
Assistant Secretary for Children and Families.

    Approved: October 23, 2006.
Michael O. Leavitt,
Secretary of Health and Human Services.
    For the reasons discussed above, we propose to amend title 45 
chapter III of the Code of Federal Regulations as follows:

PART 301--STATE PLAN APPROVAL AND GRANT PROCEDURES

    1. The authority citation for part 301 continues to read as 
follows:

    Authority: 42 U.S.C. 651 through 658, 660, 664, 666, 667, 1301, 
and 1302.

    2. In Sec.  301.1, revise the definitions of ``Past-due support'' 
and ``Qualified child'' to read as follows:


Sec.  301.1  General definitions.

* * * * *
    Past due support means the amount of support determined under a 
court order or an order of an administrative process established under 
State law for support and maintenance of a child, or of a child and the 
parent with whom the child is living, which has not been paid. Through 
September 30, 2007, for purposes of referral for Federal income tax 
refund offset of support due an individual who is receiving services 
under Sec.  302.33 of this chapter, past-due support means support owed 
to or on behalf of a qualified child, or a qualified child and the 
parent with whom the child is living if the same support order includes 
support for the child and the parent.
* * * * *
    Qualified child, through September 30, 2007, means a child who is a 
minor or who, while a minor, was determined to be disabled under title 
II or XVI of the Act, and for whom a support order is in effect.
* * * * *

PART 302--STATE PLAN APPROVAL REQUIREMENTS

    1. The authority citation for part 302 continues to read as 
follows:

    Authority: 42 U.S.C. 651 through 658, 660, 664, 666, 667, 1302, 
1396a(a)(25), 1396b(d)(2), 1396b(o), 1396b(p), and 1396k.

    2. In Sec.  302.32, revise paragraphs (b) introductory text, (b)(2) 
introductory text, (b)(2)(iv), and (b)(3)(ii) to read as follows:


Sec.  302.32  Collection and disbursement of support payments by the 
title IV-D Agency.

* * * * *
    (b) Timeframes for disbursement of support payments by the State 
disbursement unit (SDU) under section 454B of the Act.
    (1) * * *
    (2) Amounts collected by the title IV-D agency on behalf of 
recipients of aid under the State's title IV-A or title IV-E plan for 
whom an assignment under section 408(a)(3) or 471(a)(17) of the Act is 
effective shall be disbursed by the SDU within the following 
timeframes:
    (i) * * *
    (ii) * * *
    (iii) * * *
    (iv) Collections as a result of Federal income tax refund offset 
paid to the family or distributed in title IV-E foster care cases under 
Sec.  302.52(b)(4) of this part, must be sent to the title IV-A family 
or title IV-E agency, as appropriate, within 30 calendar days of the 
date of initial receipt by the title IV-D agency, unless State law 
requires a post-offset appeal process and an appeal is filed timely, in 
which case the SDU must send any payment to the title IV-A family or 
title IV-E agency within 15 calendar days of the date the appeal is 
resolved.
    (3)(i) * * *
    (ii) Collections due the family as a result of Federal income tax 
refund offset must be sent to the family within 30 calendar days of the 
date of initial receipt in the title IV-D agency, except:
    (A) If State law requires a post-offset appeal process and an 
appeal is timely filed, in which case the SDU must send any payment to 
the family within 15 calendar days of the date the appeal is resolved; 
or
    (B) As provided in Sec.  303.72(h)(5) of this chapter.
    3. In Sec.  302.33, revise the section heading and add new 
paragraph (e) to read as follows:


Sec.  302.33  Services to individuals not receiving title IV-A 
assistance.

* * * * *
    (e) Annual $25 fee. (1) In the case of an individual who has never 
received assistance under a State or Tribal title IV-A program, and for 
whom the State has disbursed to the family at least $500 of support in 
the Federal fiscal year, the State must impose in, and report for, that 
year an annual fee of $25 for each case in which services are provided.
    (2) The State must impose the annual $25 fee in international cases 
under section 454(32) of the Act in which the criteria for imposition 
of the annual $25 fee under paragraph (e)(1) of this section are met.
    (3) For each Federal fiscal year, after the first $500 of support 
is disbursed to the family, the fee must be collected by one or more of 
the following methods:
    (i) Retained by the State from support collected in cases subject 
to the fee except in international cases receiving services under 
section 454(32) of the Act;
    (ii) Paid by the individual applying for services under section 
454(4)(A)(ii) of the Act and implementing regulations in this section;
    (iii) Recovered from the noncustodial parent; or
    (iv) Paid by the State out of its own funds.
    (4) The State must report, in accordance with Sec.  302.15 of this 
part and instructions issued by the Secretary, the total amount of 
annual $25 fees imposed under this section for each Federal fiscal year 
as program income, regardless of which method or methods are used under 
paragraph (e)(3) of this section.
    (5) State funds used to pay the annual $25 fee shall not be 
considered administrative costs of the State for the operation of the 
title IV-D plan, and all annual $25 fees imposed during a Federal 
fiscal year must be considered income to the program, in accordance 
with Sec.  304.50 of this chapter.
    4. In Sec.  302.51, revise paragraphs (a)(1) and (a)(3) and add 
paragraph (a)(5) to read as follows:


Sec.  302.51  Distribution of support collections.

* * * * *
    (a)(1) For purposes of distribution in a IV-D case, amounts 
collected, except as provided under paragraphs (a)(3) and (5) of this 
section, shall be treated first as payment on the required support 
obligation for the month in which the support was collected and if any 
amounts are collected which are in excess of such amount, these excess 
amounts shall be treated as amounts

[[Page 3102]]

which represent payment on the required support obligation for previous 
months.
    (2) * * *
    (3)(i) Except as provided in subparagraph (ii) of this paragraph, 
amounts collected through Federal income tax refund offset must be 
distributed as arrearages in accordance with Sec.  303.72 of this 
chapter, and section 457 of the Act;
    (ii) Effective October 1, 2009, or up to a year earlier at State 
option, amounts collected through Federal income tax refund offset 
shall be distributed in accordance with Sec.  303.72 of this chapter 
and the option selected under section 454(34) of the Act.
    (4) * * *
    (5) The State must pay to a family that has never received 
assistance under a state program funded or approved under title IV-A or 
foster care under title IV-E of the Act the portion of the amount 
collected that remains after withholding any annual $25 fee that the 
State imposes under Sec.  302.33(e) of this part.
* * * * *
    5. In Sec.  302.70, revise paragraph (a)(10) in its entirety to 
read as follows:


Sec.  302.70  Required State laws.

    (a) * * *
    (10) Procedures for the review and adjustment of child support 
orders in accordance with Sec.  303.8(b) of this chapter.
* * * * *

PART 303--STANDARDS FOR PROGRAM OPERATIONS

    1. The authority citation for part 303 is revised to read as 
follows:

    Authority: 42 U.S.C. 651 through 658, 659, 659A, 660, 663, 664, 
666, 667, 1302, 1396a(a)(25), 1396b(d)(2), 1396b(o), 1396b(p), and 
1396k.

    2. In Sec.  303.7, add new paragraph (e) to read as follows:


Sec.  303.7  Provision of services in interstate cases.

* * * * *
    (e) Imposition and reporting of annual $25 fee in interstate cases. 
The title IV-D agency in the initiating State must impose and report 
the annual $25 fee in accordance with Sec.  302.33(e) of this chapter.
* * * * *
    3. In Sec.  303.8, revise paragraphs (b) introductory text and 
(b)(1) introductory text to read as follows:


Sec.  303.8  Review and adjustment of child support orders.

    (a) * * *
    (b) Required procedures. Pursuant to section 466(a)(10) of the Act, 
effective October 1, 2007, when providing services under this chapter:
    (1) The State must have procedures under which, every three years 
(or such shorter cycle as the State may determine), if there is an 
assignment under part A, or upon the request of either parent, the 
State shall, with respect to a support order being enforced under this 
part, taking into account the best interests of the child involved:
* * * * *
    4. In Sec.  303.72 revise paragraphs (a)(3) introductory text, 
(a)(3)(i), and (h)(1) and (h)(3) to read as follows:


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

    (a) * * *
    (1) * * *
    (2) * * *
    (3) For support owed in cases where the title IV-D agency is 
providing title IV-D services under Sec.  302.33 of this chapter:
    (i) The support is owed to or on behalf of a child, or a child and 
the parent with whom the child is living if the same support order 
includes support for the child and the parent.
* * * * *
    (h) Distribution of collections. (1) Collections received by the 
IV-D agency as a result of refund offset to satisfy title IV-A or non-
IV-A past-due support shall be distributed as required in accordance