I 

110TH CONGRESS 

1ST SESSION H. R. 1865 

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 

APRIL 17, 2007 

Mr. TOM DAVIS of Virginia (for himself, Mr. TURNER, Mr. TOWNS, Mr. 

MORAN of Virginia, and Mr. BILBRAY) introduced the following bill; 

which was referred to the Committee on Oversight and 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. PILOT PROGRAM FOR EXPANDING TAX RE4 FUND REDUCTION PROVISION TO INCLUDE 

5 CERTAIN LOCAL TAX DEBT. 

6 (a) PILOT PROGRAM.—Section 3720A of title 31, 

7 United States Code (relating to reduction of tax refund 


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1 by amount of debt) is amended by adding at the end the 

2 following: 

3 ‘‘(j) PILOT PROGRAM FOR COLLECTION OF PAST4 DUE LEGALLY ENFORCEABLE LOCAL GOVERNMENT TAX

5 OBLIGATIONS.— 

6 ‘‘(1) IN GENERAL.—Upon receiving notice dur7 ing the pilot program period from any eligible State 

8 on behalf of a local government that a named person 

9 owes a past-due, legally enforceable tax obligation to 

10 the local government, the Secretary of the Treasury 

11 shall, under such conditions as may be prescribed by 

12 the Secretary, determine whether any amounts, as 

13 refunds of Federal taxes paid, are payable to such 

14 person. If the Secretary of the Treasury finds that 

15 any such amount is payable, he shall— 

16 ‘‘(A) reduce such refunds by an amount 

17 equal to the amount of such debt; 

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

19 the State for purposes of payment by the State 

20 to the local government on behalf of which the 

21 State submitted the notice; 

22 ‘‘(C) notify the State of the person’s name, 

23 taxpayer identification number, address, and 

24 the amount collected; and 


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

2 the refund has been reduced by an amount nec3 essary to satisfy a past-due, legally enforceable 

4 tax obligation. 

5 ‘‘(2) PRIORITIES FOR OFFSET.— 

6 ‘‘(A) Any overpayment (as defined in sec7 tion 6401 of the Internal Revenue Code of 

8 1986) by a person shall be reduced pursuant to 

9 this subsection— 

10 ‘‘(i) after such overpayment is re11 duced (I) with respect to any liability for 

12 any internal revenue tax on the part of the 

13 person who made the overpayment; (II) 

14 with respect to past-due support (as de15 fined in section 464(c) of the Social Secu16 rity Act); (III) with respect to any past17 due, legally enforceable debt owed to a 

18 Federal agency; and (IV) with respect to 

19 any past-due, legally enforceable State in20 come tax obligation (as defined in section 

21 6402(e) of the Internal Revenue Code of 

22 1986); and 

23 ‘‘(ii) before such overpayment is cred24 ited to the future liability for any Federal 

25 internal revenue tax of such person. 


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1 ‘‘(B) If the Secretary receives notice from 

2 one or more States of more than one tax obliga3 tion subject to paragraph (1) that is owed by 

4 such person to any local government, any over5 payment by such person shall be applied 

6 against such debts in the order in which such 

7 notices were filed. 

8 ‘‘(3) NOTICE; CONSIDERATION OF EVIDENCE.— 

9 No State may take action under this subsection on 

10 behalf of a local government until the local govern11 ment certifies to the State that the local govern12 ment— 

13 ‘‘(A) has notified the person owing the 

14 past-due, legally enforceable tax obligation by 

15 certified mail with return receipt that the State 

16 proposes to take action pursuant to this section; 

17 ‘‘(B) has given such person at least 60 

18 days to present evidence that all or part of such 

19 liability is not past-due or not legally enforce20 able; 

21 ‘‘(C) has considered any evidence pre22 sented by such person and has determined that 

23 an amount of such debt is past-due and legally 

24 enforceable; and 


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1 ‘‘(D) has satisfied such other conditions as 

2 the Secretary may prescribe to ensure that the 

3 determination made under subparagraph (C) is 

4 valid and that the local government has made 

5 reasonable efforts to obtain payment of such 

6 tax obligation. 

7 ‘‘(4) DEFINITION OF PAST-DUE, LEGALLY EN8 FORCEABLE TAX OBLIGATION.—In this subsection, 

9 the term ‘past-due, legally enforceable tax obligation’ 

10 means a tax debt— 

11 ‘‘(A)(i) which resulted from— 

12 ‘‘(I) a judgment rendered by a court 

13 of competent jurisdiction which has deter14 mined an amount of tax to be due; or 

15 ‘‘(II) a determination after an admin16 istrative hearing which has determined an 

17 amount of tax to be due; and 

18 ‘‘(ii) which is no longer subject to judicial 

19 review; or 

20 ‘‘(B) which resulted from a tax which has 

21 been assessed but not collected, the time for re22 determination of which has expired, and which 

23 has not been delinquent for more than 10 

24 years. 

25 ‘‘(5) ELIGIBLE STATE.— 


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1 ‘‘(A) In this subsection, the term ‘eligible 

2 State’ means a State selected by the Secretary 

3 under subparagraph (B). 

4 ‘‘(B) The Secretary shall select at least 

5 three, and not more than five, States to partici6 pate in the pilot program under this subsection. 

7 The Secretary may consider a State for selec8 tion only if it participates in the procedure ap9 plicable under section 6402(e) of the Internal 

10 Revenue Code of 1986 (relating to collection of 

11 past-due, legally enforceable State income tax 

12 obligations). 

13 ‘‘(C) The Secretary should consider the fol14 lowing States for selection under this para15 graph: 

16 ‘‘(i) Illinois. 

17 ‘‘(ii) Iowa. 

18 ‘‘(iii) Louisiana. 

19 ‘‘(iv) New York. 

20 ‘‘(v) Ohio. 

21 ‘‘(vi) Virginia. 

22 ‘‘(6) REGULATIONS.—The Secretary shall issue 

23 regulations prescribing the time and manner in 

24 which States must submit notices of past-due, legally 

25 enforceable tax obligations and the necessary inforVerDate Aug 31 2005 23:42 Apr 19, 2007 Jkt 059200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H1865.IH H1865

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1 mation that must be contained in or accompany 

2 such notices. The regulations shall specify the types 

3 of taxes and the minimum amount of debt to which 

4 the reduction procedure established by paragraph 

5 (1) may be applied. The regulations may require 

6 States to pay a fee to reimburse the Secretary for 

7 the cost of applying such procedure, and such fee 

8 may be reimbursed by local governments to States in 

9 accordance with applicable State law. Any fee paid 

10 to the Secretary pursuant to the preceding sentence 

11 shall be used to reimburse appropriations which bore 

12 all or part of the cost of applying such procedure. 

13 ‘‘(7) ERRONEOUS PAYMENT TO STATE.—Any 

14 State receiving notice from the Secretary that an er15 roneous payment has been made to such State with 

16 respect to a notice by the State on behalf of a local 

17 government under paragraph (1) shall pay promptly 

18 to the Secretary, in accordance with such regulations 

19 as the Secretary may prescribe, an amount equal to 

20 the amount of such erroneous payment (without re21 gard to whether any other amounts payable to such 

22 State under such paragraph have been paid to such 

23 State). 

24 ‘‘(8) PILOT PROGRAM.— 


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1 ‘‘(A) PERIOD OF PILOT PROGRAM.—Sub2 ject to subparagraph (B), this subsection shall 

3 apply only during 2009 and 2010. 

4 ‘‘(B) EXTENSION AND EXPANSION OF

5 PILOT PROGRAM.— 

6 ‘‘(i) This subsection applies after 

7 2010 to any State described in clause (ii) 

8 unless, before December 31, 2010, the Sec9 retary submits to Congress a report con10 taining a determination that the pilot pro11 gram has negatively affected Federal rev12 enue or Federal revenue collection proc13 esses. 

14 ‘‘(ii) In applying this subsection after 

15 2010, the term ‘eligible State’ means any 

16 State participating in the procedure appli17 cable under section 6402(e) of the Internal 

18 Revenue Code of 1986 (relating to collec19 tion of past-due, legally enforceable State 

20 income tax obligations). 

21 ‘‘(k) TREATMENT OF PAYMENTS MADE TO

22 STATES.—The Secretary may provide that, for the pur23 poses of determining interest, the payment of any amount 

24 withheld under subsection (j) to a State shall be treated 


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1 as a payment to the person or persons making the over2 payment.’’. 

3 (b) DISCLOSURE OF CERTAIN INFORMATION TO

4 AGENCIES OF STATES REQUESTING REFUND OFFSETS

5 FOR PAST-DUE, LEGALLY ENFORCEABLE TAX OBLIGA6 TIONS.—Paragraph (10) of section 6103(l) of the Internal 

7 Revenue Code of 1986 is amended— 

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

9 ‘‘6402’’ the following: ‘‘OR UNDER SUBSECTION (j) OF

10 SECTION 3720A OF TITLE 31, UNITED STATES CODE’’; 

11 (2) in subparagraph (A), by inserting after 

12 ‘‘6402’’ the following: ‘‘or subsection (j) of section 

13 3720A of title 31, United States Code,’’; and 

14 (3) in subparagraph (B)— 

15 (A) by striking ‘‘section 6402 is’’ and in16 serting ‘‘section 6402 or under subsection (j) of 

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

18 is’’; and 

19 (B) by striking ‘‘section 6402.’’ and insert20 ing ‘‘section 6402 or under subsection (j) of 

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

Æ 


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