Offset of Tax Refund Payments To Collect Past-Due, Legally Enforceable Nontax Debt, 68537-68538 [E9-30550]

Agencies

• Fiscal Service
• DEPARTMENT OF THE TREASURY

[Federal Register Volume 74, Number 247 (Monday, December 28, 2009)]
[Rules and Regulations]
[Pages 68537-68538]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-30550]


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DEPARTMENT OF THE TREASURY

Fiscal Service

31 CFR Part 285

RIN 1510-AB20


Offset of Tax Refund Payments To Collect Past-Due, Legally 
Enforceable Nontax Debt

AGENCY: Financial Management Service, Fiscal Service, Treasury.

ACTION: Final rule.

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SUMMARY: The Department of the Treasury, Financial Management Service 
(FMS), is amending its regulation governing the centralized offset of 
tax refund payments to collect nontax debts owed to the United States. 
The amendment authorizes the offset of Federal tax refunds irrespective 
of the amount of time the debt has been outstanding.

DATES: This rule is effective December 28, 2009.

FOR FURTHER INFORMATION CONTACT: Thomas Dungan, Senior Policy Analyst, 
at (202) 874-6660, or Tricia Long, Senior Counsel, at (202) 874-6680.

SUPPLEMENTARY INFORMATION:

I. Background

    The Food, Conservation and Energy Act of 2008, Public Law 110-234, 
Section 14219, 22 Stat. 923 (2008) (``the Act'') amended the Debt 
Collection Act of 1982 (as amended by the Debt Collection Improvement 
Act of 1996) to authorize the offset of Federal nontax payments (for 
example, contract and salary payments) to collect delinquent Federal 
debt without regard to the amount of time the debt has been delinquent. 
Prior to this change, nontax payments could be offset only to collect 
debt that was delinquent for a period of less than ten years.
    There is no similar time limitation in the statutes authorizing 
offset of Federal tax refund payments to collect Federal nontax debts 
(see 26 U.S.C. 6402(a) and 31 U.S.C. 3720A). However, Treasury had 
imposed a time limitation on collection of debts by tax refund offset 
in order to create uniformity in the way that it offset payments. Now 
that the ten-year limitation has been eliminated for the offset of 
nontax payments, the rationale for including a ten-year limitation for 
the offset of tax refund payments no longer applies. Therefore, on June 
11, 2009, Treasury issued a notice of proposed rulemaking proposing to 
remove the limitations period by explicitly stating that no time 
limitation shall apply. See 74 FR 27730. The proposed rule explained 
that by removing the time limitation, all Federal nontax debts, 
including debts that were ineligible for collection by offset prior to 
the removal of the limitations period, may now be collected by tax 
refund offset.
    Additionally, to avoid any undue hardship, Treasury proposed the 
addition of a notice requirement applicable to debts that were 
previously ineligible for collection by offset because they had been 
outstanding for more than ten years. For such debts, creditor agencies 
must certify to FMS that a notice of intent to offset was sent to the 
debtor after the debt became ten years delinquent. This notice of 
intent to offset is meant to alert the debtor that any debt the 
taxpayer owes to the United States may now be collected by offset, even 
if it is greater than ten years delinquent. It also allows the debtor 
additional opportunities to dispute the debt, enter into a repayment 
agreement or otherwise avoid offset. This requirement will apply even 
in a case where notice was sent prior to the debt becoming ten years 
old. This requirement applies only with respect to debts that were 
previously ineligible for collection by offset because of the previous 
time limitation. Accordingly, it does not apply with respect to debts 
that could be collected by offset without regard to any time limitation 
prior to this regulatory change--for example, Department of Education 
student loan debts.

II. Discussion of Comments

Public Comments

    FMS published a Notice of Proposed Rulemaking with request for 
comments on June 11, 2009 at 74 FR 27730. Accordingly, FMS is issuing 
this Final Rule after a review of the comments received.
    FMS received two comments on the proposed rule. One commenter 
expressed general support for the rule.
    The second commenter questioned whether the rule should be 
promulgated if the rule extended the time limitation on the collection 
of debts owed to entities receiving Federal financial relief in times 
of economic crisis. The commenter expressed concern that such a rule 
would have a larger negative impact on the economy than indicated in 
the notice of proposed rulemaking. This rule, however, only applies to 
the collection of nontax debts owed to the United States. It does not 
apply to debts owed to private entities receiving Federal assistance. 
Therefore, this rule will not have the effect anticipated by the 
commenter.
    FMS did not make any changes to the proposed rule based on the 
comments received.

III. Regulatory Analysis

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. Treasury has been 
collecting delinquent Federal nontax through tax refund offset since 
1986. This final rule only provides guidance that is expected to 
facilitate Federal agencies' participation in the tax refund offset 
program with respect to debts that were outstanding more than ten years 
prior to the effective date of this rule. Therefore, FMS believes that 
good cause exists, and that it is in

[[Page 68538]]

the public interest, to make this final rule effective upon 
publication.

Regulatory Planning and Review

    The rule does not meet the criteria for a ``significant regulatory 
action'' as defined in Executive Order 12866. Therefore, the regulatory 
review procedures contained therein do not apply.

Regulatory Flexibility Act Analysis

    It is hereby certified that the rule will not have a significant 
economic impact on a substantial number of small entities. The rule 
only affects the time that a delinquent nontax debt may be collected. 
Accordingly, a regulatory flexibility analysis under the Regulatory 
Flexibility Act (5 U.S.C. 601 et seq.) is not required.

Unfunded Mandates Act

    Section 202 of the Unfunded Mandates Reform Act of 1995, 2 U.S.C. 
1532 (Unfunded Mandates Act), requires that the agency prepare a 
budgetary impact statement before promulgating any rule likely to 
result in a Federal mandate that may result in the expenditure by 
State, local, and tribal governments, in the aggregate, or by the 
private sector, of $100 million or more in any one year. If a budgetary 
impact statement is required, section 205 of the Unfunded Mandates Act 
also requires the agency to identify and consider a reasonable number 
of regulatory alternatives before promulgating the rule. We have 
determined that the rule will not result in expenditures by State, 
local, and tribal governments, in the aggregate, or by the private 
sector, of $100 million or more in any one year. Accordingly, we have 
not prepared a budgetary impact statement or specifically addressed any 
regulatory alternatives.

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.

0
For the reasons set forth in the preamble, 31 CFR part 285 is amended 
as follows:

PART 285--DEBT COLLECTION AUTHORITIES UNDER THE DEBT COLLECTION 
IMPROVEMENT ACT OF 1996

0
1. The authority citation for part 285 continues to read as follows:

    Authority:  5 U.S.C. 5514; 26 U.S.C. 6402; 31 U.S.C. 321, 3701, 
3711, 3716, 3719, 3720A, 3720B, 3720D; 42 U.S.C. 664; E.O. 13019, 61 
FR 51763, 3 CFR, 1996 Comp., p. 216.


0
2. In Sec.  285.2, remove paragraph (d)(1)(ii), redesignate paragraphs 
(d)(1)(iii) through (d)(1)(v) as paragraphs (d)(1)(ii) through 
(d)(1)(iv), respectively, and add paragraph (d)(6) as follows:


Sec.  285.2  Offset of tax refund payments to collect past-due, legally 
enforceable nontax debt.

* * * * *
    (d) * * *
    (6)(i) Creditor agencies may submit debts to FMS for collection by 
tax refund offset irrespective of the amount of time the debt has been 
outstanding. Accordingly, all nontax debts, including debts that were 
delinquent for ten years or longer prior to January 27, 2010 may be 
collected by tax refund offset.
    (ii) For debts outstanding more than ten years on or before January 
27, 2010, creditor agencies must certify to FMS that the notice of 
intent to offset described in paragraph (d)(1)(ii)(B) of this section 
was sent to the debtor after the debt became ten years delinquent. This 
requirement will apply even in a case where notice was also sent prior 
to the debt becoming ten years delinquent, but does not apply to any 
debt that could be collected by offset without regard to any time 
limitation prior to January 27, 2010.
* * * * *

    Dated: December 18, 2009.
Richard L. Gregg,
Acting Fiscal Assistant Secretary.
[FR Doc. E9-30550 Filed 12-24-09; 8:45 am]
BILLING CODE 4810-35-P