80 FR 81463 - Offset of Tax Refund Payments To Collect Past-Due Support

DEPARTMENT OF THE TREASURY
Fiscal Service

Federal Register Volume 80, Issue 250 (December 30, 2015)

The Department of the Treasury (Treasury), Bureau of the Fiscal Service (Fiscal Service), is amending its regulation governing the offset of tax refund payments to collect past-due support obligations. This rule will limit the time period during which Treasury may recover certain tax refund offset collections from States, when the States have already forwarded such funds to custodial parents as required or as authorized by applicable laws. This change will limit the time period during which Treasury may require States to return the offset funds to six months from the date of such collection, if Treasury has determined that the underlying refund was not due to the taxpayer.

[Federal Register Volume 80, Number 250 (Wednesday, December 30, 2015)]
[Rules and Regulations]
[Pages 81463-81465]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2015-32732]


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

DEPARTMENT OF THE TREASURY

Fiscal Service

31 CFR Part 285

RIN 1510-AA10


Offset of Tax Refund Payments To Collect Past-Due Support

AGENCY: Bureau of the Fiscal Service, Fiscal Service, Treasury.

ACTION: Interim final rule with request for comments.

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

SUMMARY: The Department of the Treasury (Treasury), Bureau of the 
Fiscal Service (Fiscal Service), is amending its regulation governing 
the offset of tax refund payments to collect past-due support 
obligations. This rule will limit the time period during which Treasury 
may recover certain tax refund offset collections from States, when the 
States have already forwarded such funds to custodial parents as 
required or as authorized by applicable laws. This change will limit 
the time period during which Treasury may require States to return the 
offset funds to six months from the date of such collection, if 
Treasury has determined that the underlying refund was not due to the 
taxpayer.

DATES: Effective Date.
    This interim final rule is effective January 1, 2016.
    Comment date. Comments must be received by February 29, 2016.

ADDRESSES: You can download this interim rule at the following Web 
site: http://www.fms.treas.gov/debt. You may also inspect and copy this 
interim rule at: Treasury Department Library, Freedom of Information 
Act (FOIA) Collection, Room 1428, Main Treasury Building, 1500 
Pennsylvania Avenue NW., Washington, DC 20220. Before visiting, you 
must call (202) 622-0990 for an appointment.
    In accordance with the U.S. government's eRulemaking Initiative, 
Fiscal Service publishes rulemaking information on www.regulations.gov. 
Regulations.gov offers the public the ability to comment on, search, 
and view publicly available rulemaking materials, including comments 
received on rules.

Instructions for Comment Submission

    Comments on this rule, identified by docket FISCAL-2014-0005, 
should only be submitted using the following methods:
     Federal eRulemaking Portal: www.regulations.gov. Follow 
the instructions on the Web site for submitting comments. Fiscal 
Service recommends using this method to submit comments since mail can 
be subject to delays caused by security screening.
     Mail: Thomas Kobielus, Manager, Treasury Offset Program 
Division, Debt Management Services, Bureau of the Fiscal Service, 401 
14th Street SW., Room 220B, Washington, DC 20227. Please note that mail 
may be delayed due to security screening.
    The fax and email methods of submitting comments on rules to Fiscal 
Service have been discontinued.
    All submissions received must include the agency name (``Bureau of 
the Fiscal Service'') and docket number FISCAL-2014-0005 for this 
rulemaking.

[[Page 81464]]

In general, comments received will be published on Regulations.gov 
without change, including any business or personal information 
provided. Comments received, including attachments and other supporting 
materials, are part of the public record and subject to public 
disclosure. Do not disclose any information in your comment or 
supporting materials that you consider confidential or inappropriate 
for public disclosure.

FOR FURTHER INFORMATION CONTACT: Thomas Kobielus, Manager, at (202) 
874-6810, or Tricia Long, Senior Counsel, at (202) 874-6680.

SUPPLEMENTARY INFORMATION: 

I. Background

    When a tax refund payment is issued and offset through the Treasury 
Offset Program (TOP) to collect a delinquent child support debt owed by 
the taxpayer, the taxpayer receives the benefit of the payment in the 
form of a credit on the amount of debt owed. If the Internal Revenue 
Service (IRS) subsequently determines that the taxpayer was not 
entitled to that tax refund, the taxpayer is accordingly not entitled 
to the credit on the debt owed. Currently, IRS has unlimited time 
during which to require Fiscal Service to recover such erroneous offset 
funds from the Federal or State agency which collected the funds. 
Fiscal Service requires return of monies representing the offset from 
State agencies notwithstanding the fact that the State agency may have 
already forwarded such funds to the custodial parent.
    States submit past-due support obligations to TOP both for 
collection of support debts which have been assigned to the State 
pursuant to 42 U.S.C. 608(a)(3) and on behalf of custodial parents, 
pursuant to 42 U.S.C. 654(4). Collections for support debts collected 
on behalf of custodial parents pursuant to 42 U.S.C. 654(4) are 
required by 42 U.S.C. 657 to be forwarded by the States to the 
custodial parent. By regulation, any of those collections resulting 
from tax refund offsets must be forwarded within 30 calendar days of 
initial receipt (unless the refund offset is based upon a joint return, 
in which case, the State has six months). See 45 CFR 302.32(b)(3)(ii). 
States also collect money as reimbursement for public assistance paid 
to the family. States have the option, as authorized by 42 U.S.C. 657, 
to forward such collections to custodial parents. Therefore, in many 
cases, the States no longer have the funds in their possession to 
return to Treasury. Under current procedures, States are required to 
pay Treasury from their own funds, or Treasury may retain such amounts 
from subsequent offset collections made on behalf of the States. This 
rule will impose a six-month limit upon Treasury for seeking recoupment 
from States for erroneous offset funds which have been forwarded to 
custodial parents pursuant to 42 U.S.C. 657.
    Following implementation of this rule, IRS and Fiscal Service will 
continue to work with the Federal Office of Child Support Enforcement 
(OCSE) and State child support agencies to assess the impact of this 
interim final rule and to identify potential improvements in the tax 
offset process, including the practice of recouping from States 
erroneous offset funds that have been forwarded to custodial parents. 
Once sufficient data respecting implementation of this new rule is 
available, but in no case later than 2 years, Treasury will work with 
OCSE to consider further reduction in the time limit placed upon it for 
seeking recoupment from States.
    The six-month limitation in this rule applies only to the offset of 
tax refund payments to collect past-due support obligations when States 
have forwarded the collected funds to the custodial parent. This rule 
does not apply when States have retained the funds. This rule does not 
apply to any other type of debt being collected by tax refund offset 
under 31 CFR part 285. This rule does not affect Treasury's rights to 
seek recovery of the erroneous offset funds from any person through any 
other means permitted by law.
    Fiscal Service developed this interim final rule in consultation 
with the IRS and the Department of Health and Human Services (HHS) and 
appreciates their assistance. As required by 42 U.S.C. 664(b)(1), HHS 
has approved this interim final rule.

II. Procedural Analyses

Request for Comment on Plain Language

    Executive Order 12866 requires each agency in the Executive branch 
to write regulations that are simple and easy to understand. We invite 
comment on how to make this interim rule clearer. For example, you may 
wish to discuss: (1) Whether we have organized the material to suit 
your needs; (2) whether the requirements of the rule are clear; or (3) 
whether there is something else we could do to make this rule easier to 
understand.

Regulatory Planning and Review

    The interim 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 interim rule will not have a 
significant economic impact on a substantial number of small entities. 
This rule merely provides a time frame for Treasury to require States 
to return collections. Moreover, the provisions contained in this 
interim rule impose no additional costs to small entities. Accordingly, 
a regulatory flexibility analysis under the Regulatory Flexibility Act 
(5 U.S.C. 601 et seq.) is not required.

Unfunded Mandates Act of 1995

    Section 202 of the Unfunded Mandates Reform Act of 1995, 2 U.S.C. 
1532 (Unfunded Mandates Act), requires that an 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 this interim 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.

Federalism

    This rule has been reviewed under Executive Order (EO) 13132, 
Federalism. This rule relieves the States of an obligation to return 
funds to the Federal Government after a certain time period when the 
States have already forwarded the funds to custodial parents, as 
required or authorized by applicable laws, and they no longer have such 
funds. Treasury, with assistance from the Office of Child Support 
Enforcement at the Department of Health and Human Services, consulted 
with the States when developing this interim rule. Therefore, in 
accordance with Executive Order 13132, it is determined that this rule 
does not have sufficient federalism implications to warrant the 
preparation of a federalism summary impact statement.

[[Page 81465]]

Administrative Procedure Act

    This rule is being issued without prior public notice and comment 
because under 5 U.S.C. 553(b) good cause exists to determine that prior 
notice and comment rulemaking is unnecessary and contrary to the public 
interest. The policy being implemented through this rule imposes a time 
limitation on Treasury for recovering erroneous offset funds from 
States that have forwarded such funds onto families. It relieves the 
States of the burden of having to pay such amounts to Treasury from 
their own funds and does not adversely affect the rights of the public.

List of Subjects in 31 CFR Part 285

    Administrative practice and procedure, Child support, Child 
welfare, Claims, Credits, 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, Veterans' benefits, Wages.

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

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

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

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


0
2. Amend Sec.  285.3 as follows:
0
a. Revise paragraph (g).
0
b. Redesignate paragraphs (h) through (k) as paragraphs (i) through 
(l), respectively.
0
c. Add a new paragraph (h).
    The revision and addition read as follows:


Sec.  285.3  Offset of tax refund payments to collect past-due support.

* * * * *
    (g) Disposition of amounts collected. Fiscal Service will transmit 
amounts collected for debts, less fees charged under paragraph (i) of 
this section, to HHS or to the appropriate State. If IRS notifies 
Fiscal Service that a tax refund payment that was offset was erroneous 
or otherwise not due to the taxpayer, Fiscal Service will notify HHS or 
the appropriate State that the tax refund payment was not eligible for 
offset. Subject to paragraph (h) of this section, Fiscal Service may 
deduct the amount of the erroneous offset funds from amounts payable to 
HHS or the State, as the case may be; or, upon Fiscal Service's 
request, the State shall return promptly to the affected taxpayer or 
Fiscal Service an amount equal to the amount of the erroneous funds 
(unless the State previously has forwarded such amounts, or any portion 
of such amounts, to the affected taxpayer). HHS and States shall notify 
Fiscal Service any time HHS or a State returns an erroneous offset 
payment to an affected taxpayer. Fiscal Service and HHS, or the 
appropriate State, will adjust their debtor records accordingly.
    (h) Time limitation. If IRS notifies Fiscal Service on or after 
January 1, 2016, that a tax refund payment that was offset was 
erroneous or otherwise not due to the taxpayer, Fiscal Service shall 
not deduct the amount of the erroneous offset funds from amounts due to 
HHS or the State, or otherwise demand return of the offset funds from 
the State pursuant to paragraph (g) of this section, if the date of 
IRS's notification to Fiscal Service in paragraph (g) is more than six 
months after the date the tax refund was offset (i.e., the tax refund 
payment date); and the State has already forwarded the funds as 
required or authorized by 42 U.S.C. 657. This paragraph does not apply 
to paragraph (f) of this section.

David A. Lebryk,
Fiscal Assistant Secretary.
[FR Doc. 2015-32732 Filed 12-29-15; 8:45 am]
 BILLING CODE 4810-AS-P