I 

108TH CONGRESS 

1ST SESSION H. R. 2958

To amend title 31, United States Code, to allow certain State and local 

tax debt to be collected through the reduction of Federal tax refunds. 

IN THE HOUSE OF REPRESENTATIVES 

JULY 25, 2003

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 

State and 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 STATE AND 

5 LOCAL TAX 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 STATE AND LOCAL GOVERNMENT TAX OBLIGA3 TIONS.—(1) Upon receiving notice from any State or local 

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

5 enforceable tax obligation to such government (other than 

6 an income tax debt to a State government), the Secretary 

7 of the Treasury shall, under such conditions as may be 

8 prescribed by the Secretary, determine whether any 

9 amounts, as refunds of Federal taxes paid, are payable 

10 to such person. If the Secretary of the Treasury finds that 

11 any such amount is payable, he shall—

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

13 to the amount of such debt; 

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

15 State or local government; 

16 ‘‘(C) notify the State or local government of the 

17 person’s name, taxpayer identification number, ad18 dress, and the amount collected; and 

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

20 refund has been reduced by an amount necessary to 

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

22 ‘‘(2) PRIORITIES FOR OFFSET.—(A) Any overpay23 ment (as defined in section 6401 of the Internal Revenue 

24 Code of 1986) by a person shall be reduced pursuant to 

25 this subsection—
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1 ‘‘(i) after such overpayment is reduced (I) with 

2 respect to any liability for any internal revenue tax 

3 on the part of the person who made the overpay4 ment; (II) with respect to past-due support (as de5 fined in section 464(c) of the Social Security Act); 

6 and (III) with respect to any past-due, legally en7 forceable debt owed to a Federal agency; and 

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

9 future liability for any Federal internal revenue tax 

10 of such person. 

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

12 more agencies of State or local governments of more than 

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

14 by such person to any such agency, including any claim 

15 by a State for a past-due legally enforceable income tax 

16 obligation, any overpayment by such person shall be ap17 plied against such debts in the order in which such notices 

18 were filed. 

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

20 State or local government may take action under this sub21 section until such State or local government—

22 ‘‘(A) notifies the person owing the past-due, le23 gally enforceable tax obligation by first-class mail at 

24 the taxpayer’s last known address that the State or 
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1 local government proposes to take action pursuant to 

2 this section; 

3 ‘‘(B) gives such person at least 60 days to 

4 present evidence that all or part of such liability is 

5 not past-due or not legally enforceable; 

6 ‘‘(C) considers any evidence presented by such 

7 person and determines that an amount of such debt 

8 is past-due and legally enforceable; and 

9 ‘‘(D) satisfies such other conditions as the Sec10 retary may prescribe to ensure that the determina11 tion made under subparagraph (C) is valid and that 

12 the State or local government has made reasonable 

13 efforts to obtain payment of such tax obligation. 

14 ‘‘(4) DEFINITION OF PAST-DUE, LEGALLY ENFORCE15 ABLE TAX OBLIGATION.—In this subsection, the term 

16 ‘past-due, legally enforceable tax obligation’ means a 

17 debt—

18 ‘‘(A)(i) which resulted from—

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

20 competent jurisdiction which has determined an 

21 amount of tax to be due; or 

22 ‘‘(II) a determination after an administra23 tive hearing which has determined an amount 

24 of tax to be due; and 
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1 ‘‘(ii) which is no longer subject to judicial re2 view; or 

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

4 assessed but not collected, the time for redetermina5 tion of which has expired, and which has not been 

6 delinquent for more than 10 years. 

7 ‘‘(5) REGULATIONS.—The Secretary shall issue regu8 lations prescribing the time and manner in which States 

9 and local governments must submit notices of past-due, 

10 legally enforceable tax obligations and the necessary infor11 mation that must be contained in or accompany such no12 tices. The regulations shall specify the types of taxes and 

13 the minimum amount of debt to which the reduction pro14 cedure established by paragraph (1) may be applied. The 

15 regulations may require States and local governments to 

16 pay a fee to reimburse the Secretary for the cost of apply17 ing such procedure. Any fee paid to the Secretary pursu18 ant to the preceding sentence shall be used to reimburse 

19 appropriations which bore all or part of the cost of apply20 ing such procedure. 

21 ‘‘(6) ERRONEOUS PAYMENT TO STATE OR LOCAL

22 GOVERNMENT.—Any State or local government receiving 

23 notice from the Secretary that an erroneous payment has 

24 been made to such State or local government under para25 graph (1) shall pay promptly to the Secretary, in accord-
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1 ance with such regulations as the Secretary may prescribe, 

2 an amount equal to the amount of such erroneous pay3 ment (without regard to whether any other amounts pay4 able to such State or local government under such para5 graph have been paid to such State or local government). 

6 ‘‘(k) TREATMENT OF PAYMENTS MADE TO STATE

7 AND LOCAL GOVERNMENTS.—The Secretary may provide 

8 that, for the purposes of determining interest, the pay9 ment of any amount withheld under subsection (j) to a 

10 State or local government shall be treated as a payment 

11 to the person or persons making the overpayment.’’. 

12 (b) DISCLOSURE OF CERTAIN INFORMATION TO

13 AGENCIES OF STATES AND LOCAL GOVERNMENTS RE14 QUESTING REFUND OFFSETS FOR PAST-DUE, LEGALLY

15 ENFORCEABLE TAX OBLIGATIONS.—Paragraph (10) of 

16 section 6103(l) of the Internal Revenue Code of 1986 is 

17 amended—

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

19 ‘‘6402’’ the following: ‘‘OR UNDER SUBSECTION (J)

20 OF SECTION 3720A OF TITLE 31, UNITED STATES

21 CODE’’; 

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

23 ‘‘6402’’ the following: ‘‘ or subsection (j) of section 

24 3720A of title 31, United States Code,’’; and 

25 (3) in subparagraph (B)—
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1 (A) by striking ‘‘section 6402 is’’ and in2 serting ‘‘section 6402 or under subsection (j) of 

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

4 is’’; and 

5 (B) by striking ‘‘section 6402.’’ and insert6 ing ‘‘section 6402 or under subsection (j) of 

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

Æ