I 

109TH CONGRESS 

1ST SESSION H. R. 3498 

To amend title 31, United States Code, to allow certain local tax debt 

to be collected through the reduction of Federal tax refunds. 

IN THE HOUSE OF REPRESENTATIVES 

JULY 28, 2005 

Mr. TURNER (for himself, Mr. TOM DAVIS of Virginia, and Mr. MORAN of 

Virginia) introduced the following bill; which was referred to the Committee on Government Reform, and in addition to the Committee on 

Ways and Means, for a period to be subsequently determined by the 

Speaker, in each case for consideration of such provisions as fall within 

the jurisdiction of the committee concerned 

A BILL 

To amend title 31, United States Code, to allow certain 

local tax debt to be collected through the reduction of 

Federal tax refunds. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. EXPANSION OF TAX REFUND REDUCTION PRO4 VISION TO INCLUDE CERTAIN LOCAL TAX 

5 DEBT. 

6 (a) Section 3720A of title 31, United States Code (re7 lating to reduction of tax refund by amount of debt) is 

8 amended by adding at the end the following: 
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1 ‘‘(j) COLLECTION OF PAST-DUE LEGALLY ENFORCE2 ABLE LOCAL GOVERNMENT TAX OBLIGATIONS.—(1) 

3 Upon receiving notice from any State on behalf of a local 

4 government that a named person owes a past-due, legally 

5 enforceable tax obligation to such local government, the 

6 Secretary of the Treasury shall, under such conditions as 

7 may be prescribed by the Secretary, determine whether 

8 any amounts, as refunds of Federal taxes paid, are pay9 able to such person. If the Secretary of the Treasury finds 

10 that any such amount is payable, he shall— 

11 ‘‘(A) reduce such refunds by an amount equal 

12 to the amount of such debt; 

13 ‘‘(B) pay the amount of such reduction to the 

14 State for purposes of payment by the State to the 

15 local government on behalf of which the State sub16 mitted the notice; 

17 ‘‘(C) notify the State of the person’s name, tax18 payer identification number, address, and the 

19 amount collected; and 

20 ‘‘(D) notify the person due the refund that the 

21 refund has been reduced by an amount necessary to 

22 satisfy a past-due, legally enforceable tax obligation. 

23 ‘‘(2) PRIORITIES FOR OFFSET.—(A) Any overpay24 ment (as defined in section 6401 of the Internal Revenue 
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1 Code of 1986) by a person shall be reduced pursuant to 

2 this subsection— 

3 ‘‘(i) after such overpayment is reduced (I) with 

4 respect to any liability for any internal revenue tax 

5 on the part of the person who made the overpay6 ment; (II) with respect to past-due support (as de7 fined in section 464(c) of the Social Security Act); 

8 (III) with respect to any past-due, legally enforce9 able debt owed to a Federal agency; and (IV) with 

10 respect to any past-due, legally enforceable State in11 come tax obligation (as defined in section 6402(e) of 

12 the Internal Revenue Code of 1986); and 

13 ‘‘(ii) before such overpayment is credited to the 

14 future liability for any Federal internal revenue tax 

15 of such person. 

16 ‘‘(B) If the Secretary receives notice from one or 

17 more States (on behalf of local governments) of more than 

18 one tax obligation subject to paragraph (1) that is owed 

19 by such person to any local government, any overpayment 

20 by such person shall be applied against such debts in the 

21 order in which such notices were filed. 

22 ‘‘(3) NOTICE; CONSIDERATION OF EVIDENCE.—No 

23 State may take action under this subsection on behalf of 

24 a local government until the local government certifies to 

25 the State that the local government— 
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1 ‘‘(A) has notified the person owing the past2 due, legally enforceable tax obligation by certified 

3 mail with return receipt that the State (on behalf of 

4 the local government) proposes to take action pursu5 ant to this section; 

6 ‘‘(B) has given such person at least 60 days to 

7 present evidence that all or part of such liability is 

8 not past-due or not legally enforceable; 

9 ‘‘(C) has considered any evidence presented by 

10 such person and has determined that an amount of 

11 such debt is past-due and legally enforceable; and 

12 ‘‘(D) has satisfied such other conditions as the 

13 Secretary may prescribe to ensure that the deter14 mination made under subparagraph (C) is valid and 

15 that the local government has made reasonable ef16 forts to obtain payment of such tax obligation. 

17 ‘‘(4) DEFINITION OF PAST-DUE, LEGALLY EN18 FORCEABLE TAX OBLIGATION.—In this subsection, the 

19 term ‘past-due, legally enforceable tax obligation’ means 

20 a tax debt—

21 ‘‘(A)(i) which resulted from—

22 ‘‘(I) a judgment rendered by a court of 

23 competent jurisdiction which has determined an 

24 amount of tax to be due; or 
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1 ‘‘(II) a determination after an administra2 tive hearing which has determined an amount 

3 of tax to be due; and 

4 ‘‘(ii) which is no longer subject to judicial re5 view; or 

6 ‘‘(B) which resulted from a tax which has been 

7 assessed but not collected, the time for redetermina8 tion of which has expired, and which has not been 

9 delinquent for more than 10 years. 

10 ‘‘(5) REGULATIONS.—The Secretary shall issue regu11 lations prescribing the time and manner in which States 

12 (on behalf of local governments) must submit notices of 

13 past-due, legally enforceable tax obligations and the nec14 essary information that must be contained in or accom15 pany such notices. The regulations shall specify the types 

16 of taxes and the minimum amount of debt to which the 

17 reduction procedure established by paragraph (1) may be 

18 applied. The regulations may require States (on behalf of 

19 local governments) to pay a fee to reimburse the Secretary 

20 for the cost of applying such procedure, and such fee may 

21 be reimbursed by local governments to States in accord22 ance with applicable State law. Any fee paid to the Sec23 retary pursuant to the preceding sentence shall be used 

24 to reimburse appropriations which bore all or part of the 

25 cost of applying such procedure. 
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1 ‘‘(6) ERRONEOUS PAYMENT TO STATE.—Any State 

2 receiving notice from the Secretary that an erroneous pay3 ment has been made to such State with respect to a notice 

4 by the State on behalf of a local government under para5 graph (1) shall pay promptly to the Secretary, in accord6 ance with such regulations as the Secretary may prescribe, 

7 an amount equal to the amount of such erroneous pay8 ment (without regard to whether any other amounts pay9 able to such State under such paragraph have been paid 

10 to such State). 

11 ‘‘(k) TREATMENT OF PAYMENTS MADE TO

12 STATES.—The Secretary may provide that, for the pur13 poses of determining interest, the payment of any amount 

14 withheld under subsection (j) to a State (on behalf of a 

15 local government) shall be treated as a payment to the 

16 person or persons making the overpayment.’’. 

17 (b) DISCLOSURE OF CERTAIN INFORMATION TO

18 AGENCIES OF STATES REQUESTING REFUND OFFSETS

19 FOR PAST-DUE, LEGALLY ENFORCEABLE TAX OBLIGA20 TIONS.—Paragraph (10) of section 6103(l) of the Internal 

21 Revenue Code of 1986 is amended— 

22 (1) in the paragraph heading, by inserting after 

23 ‘‘6402’’ the following: ‘‘OR UNDER SUBSECTION (j) OF

24 SECTION 3720A OF TITLE 31, UNITED STATES CODE’’; 
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1 (2) in subparagraph (A), by inserting after 

2 ‘‘6402’’ the following: ‘‘or subsection (j) of section 

3 3720A of title 31, United States Code,’’; and 

4 (3) in subparagraph (B)—

5 (A) by striking ‘‘section 6402 is’’ and in6 serting ‘‘section 6402 or under subsection (j) of 

7 section 3720A of title 31, United States Code, 

8 is’’; and 

9 (B) by striking ‘‘section 6402.’’ and insert10 ing ‘‘section 6402 or under subsection (j) of 

11 section 3720A of title 31, United States Code.’’.

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