Federal Register / Vol. 62, No. 122 / Wednesday, June 25, 1997 / Rules and Regulations 34175 

(1) Cannot schedule, hear, and render 

decisions promptly, or 

(2) Learns a dispute has been settled 

by the parties prior to the decision. 

(c) Within 15 days after an award has 

been submitted to the parties, the 

arbitrator shall submit an Arbitrator’s 

Report and Fee Statement (Form R–19) 

to OAS showing a breakdown of the fee 

and expense charges so that the OAS 

may review conformance with stated 

charges under § 1404.11(a). The Form 

R–19 is not to be used to invoice the 

parties. 

(d) While FMCS encourages the 

publication of arbitration awards, 

arbitrators should not publicize awards 

if objected to by one of the parties. 

§ 1404.15 Fees and charges of arbitrators. 

(a) FMCS will charge all arbitrators an 

annual fee to be listed on the Roster. All 

arbitrators listed on the Roster may 

charge a per diem and other 

predetermined fees for services, if the 

amount of such fees have been provided 

in advance to FMCS. Each arbitrator’s 

maximum per diem and other fees are 

set forth on a biographical sketch which 

is sent to the parties when panels are 

submitted. The arbitrators shall not 

change any fee or add charges without 

giving at least 30 days advance written 

notice to FMCS. Arbitrators with dual 

business addresses must bill the parties 

for expenses from the least expensive 

business address to the hearing site. 

(b) In cases involving unusual 

amounts of time and expenses relative 

to the pre-hearing and post-hearing 

administration of a particular case, an 

administrative charge may be made by 

the arbitrator. 

(c) Arbitrators shall divulge all 

charges to the parties and obtain 

agreement thereto immediately after 

appointment. 

(d) The OAS requests that it be 

notified of any arbitrator’s deviation 

from the policies expressed in this part. 

While the OAS does not resolve 

individual fee disputes, repeated 

complaints concerning the fees charged 

by an arbitrator will be brought to the 

attention of the Arbitrator Review Board 

for consideration. Similarly, repeated 

complaints by arbitrators concerning 

non-payment of fees by the parties may 

lead to the denial of services or other 

actions by the OAS. 

§ 1404.16 Reports and biographical 

sketches. 

(a) Arbitrators listed on the Roster 

shall execute and return all documents, 

forms and reports required by the OAS. 

They shall also keep the OAS informed 

of changes of address, telephone 

number, availability, and of any 

business or other connection or 

relationship which involves labormanagement relations or which creates 

or gives the appearance of advocacy as 

defined in § 1404.5(c)(1). 

(b) The OAS will provide biographical 

sketches on each person admitted to the 

Roster from information supplied by 

applicants. Arbitrators may request 

revision of biographical information at 

later dates to reflect changes in fees, the 

existence of additional charges, or other 

relevant data. The OAS reserves the 

right to decide and approve the format 

and content of biographical sketches. 

Appendix to 29 CFR Part 1404 

Arbitration Policy; Schedule of Fees 

Annual listing fee for all arbitrators: $100 for 

the first address; $50 for second address 

Request for panel of arbitrators: $30 for each 

panel request (includes subsequent 

appointment) 

Direct appointment of arbitrator when a 

panel is not used—$20 per appointment 

List and biographic sketches of arbitrators in 

a specific area—$10 per request plus $.10 

per page 

John Calhoun Wells, 

Director. 

[FR Doc. 97–16387 Filed 6–24–97; 8:45 am] 

BILLING CODE 6732–10–M 

DEPARTMENT OF THE TREASURY 

Fiscal Service 

31 CFR Part 285 

RIN 1510–AA62 

Offset of Tax Refund Payments To 

Collect Past-Due, Legally Enforceable 

Nontax Debt 

AGENCY: Financial Management Service, 

Fiscal Service, Treasury. 

ACTION: Interim rule with request for 

comments. 

SUMMARY: Effective January 1, 1998, the 

Department of the Treasury (Treasury) 

will merge the tax refund offset program 

with the centralized administrative 

offset program operated by the Financial 

Management Service (FMS), a bureau of 

the Department of the Treasury. The 

merger of the two offset programs is 

intended to maximize and improve 

Treasury’s government-wide collection 

of delinquent nontax debt owed to the 

Federal Government. FMS will 

administer nontax debt collection 

functions that include the tax refund 

offset program. The Internal Revenue 

Service (IRS) will remain responsible for 

the administration of the internal 

revenue laws. To conform with the 

requirements of the merged offset 

program, this interim rule supersedes 

the tax refund offset procedures 

promulgated by the IRS. 

DATES: This rule is effective July 25, 

1997. This rule applies to tax refund 

payments payable after January 1, 1998. 

Comments will be received until July 

25, 1997. 

ADDRESSES: All comments should be 

addressed to Gerry Isenberg, Financial 

Program Specialist, Debt Management 

Services, Financial Management 

Service, Department of the Treasury, 

401 14th Street S.W., Room 151, 

Washington, D.C. 20227. A copy of this 

interim rule is being made available for 

downloading from the Financial 

Management Service home page at the 

following address: http:// 

www.fms.treas.gov. 

FOR FURTHER INFORMATION CONTACT: 

Gerry Isenberg, Financial Program 

Specialist, at (202) 874–6660; Pamela 

Dillon, Treasury Offset Program, at (202) 

874–8700; Ellen Neubauer or Ronda 

Kent, Senior Attorneys, at (202) 874– 

6680. 

SUPPLEMENTARY INFORMATION: 

Background 

FMS, as the Treasury disbursing 

agency, is responsible for the 

implementation of centralized 

administrative offset of Federal 

payments for the collection of 

delinquent nontax debt owed to Federal 

agencies and to States, including pastdue child support, in accordance with 

the provisions of the Debt Collection 

Improvement Act of 1996 (DCIA), Public 

Law 104–134, 110 Stat. 1321–358 et seq. 

(1996). In addition, FMS disburses more 

than 850 million Federal payments 

annually, including tax refund 

payments to taxpayers on behalf of the 

IRS. 

Under 26 U.S.C. 6402(d) and 31 

U.S.C. 3720A, the tax refund of a 

taxpayer who owes delinquent debt to a 

Federal agency is reduced, or offset, by 

the amounts owed by the taxpayer. The 

funds offset from the taxpayers’ tax 

refunds are forwarded to the Federal 

agency collecting the delinquent debt. 

Since 1986, the IRS has been collecting 

delinquent debt owed to Federal 

agencies by tax refund offset. 

To improve the efficiency of 

Treasury’s collection of delinquent debt 

owed to Federal agencies, effective 

January 1, 1998, the tax refund offset 

program will merge with the centralized 

administrative offset program operated 

by FMS, known as the ‘‘Treasury Offset 

Program.’’ The Treasury Offset Program, 

described below, is a centralized offset 

program. Under the Treasury Offset 

Program, a Federal payment to a person 

can be reduced, or offset, by a 
34176 Federal Register / Vol. 62, No. 122 / Wednesday, June 25, 1997 / Rules and Regulations 

delinquent amount owed by that person 

to a Federal agency or to a State. In 

centralizing offset through the Treasury 

Offset Program, FMS will consolidate 

and simplify offset procedures for the 

Federal Government. The rules and 

procedures governing the Treasury 

Offset Program will reflect statutory 

requirements for particular types of 

payments or debts, as well as the 

general rules applicable to collection of 

debts by offset. 

The DCIA clarified that a Treasury 

disbursing official may conduct tax 

refund offsets (see section 31001(w) of 

the DCIA, codified at 31 U.S.C. 

3720A(h)). To conform with the 

requirements of the merged program, 

this regulation supersedes the 

procedures governing the tax refund 

offset program established by the IRS 

(codified at 26 CFR 301.6402–6), 

applicable to the collection of 

delinquent nontax debts owed to 

Federal agencies. The tax refund offset 

procedures in this rule supersede the 

procedures codified at 26 CFR 

301.6402–6. Procedures for processing 

claims by non-debtor spouses and for 

rejecting a taxpayer’s election to apply 

his or her refund to future tax liabilities 

remain governed by IRS rules. 

FMS will promulgate separate rules 

for the offset of tax refund payments for 

the collection of past-due child support 

under 26 U.S.C. 6402(c) (offset of pastdue support against overpayments) and 

42 U.S.C. 664 (collection of past-due 

support from Federal tax refunds). In 

addition, as authorized by the DCIA, 

FMS will promulgate rules for the offset 

of payments other than tax refund 

payments for the collection of debts 

owed to the United States and debts 

owed to States. FMS anticipates that 

Part 285 of this title will contain all of 

the provisions relating to offset by 

disbursing officials for the collection of 

debts owed to the Federal Government 

and to State governments, including 

past-due support. 

Under the Treasury Offset Program, 

before a payment is disbursed to a 

payee, FMS will compare the payee 

information with debtor information in 

a database operated by FMS. The 

database contains debtor information 

submitted and updated by Federal and 

State agencies collecting debts. If the 

payee’s name (or derivation of the name, 

known as a ‘‘name control’’) and 

taxpayer identifying number (TIN) 

match the name control and TIN of a 

debtor, the payment will be offset to 

satisfy the debt, to the extent allowed by 

law, including applicable regulations. 

The delinquent debt information will 

remain in the debtor database for 

continuous offset of tax refund and all 

other eligible Federal payments until 

debt collection activity for that debt is 

terminated because of payment, 

compromise, write-off or other reasons 

justifying termination. 

After January 1, 1998, tax refund 

payments will be offset as part of the 

Treasury Offset Program, subject to the 

requirements of 26 U.S.C. 6402 and 31 

U.S.C. 3720A. Since FMS issues 

different payment types daily, a nontax 

delinquent debt could be satisfied by 

the offset of a variety of Federal 

payment types, including vendor, 

salary, retirement and certain benefit 

payments, as well as tax refund 

payments. 

As required by IRS regulation codified 

at 26 CFR 301.6402–6, under the 

Treasury Offset Program and this rule, 

before submitting the debt to FMS for 

offset, creditor agencies are responsible 

for notifying debtors that their debt is 

delinquent and that the creditor agency 

intends to collect the debt by offset. In 

the notice, the creditor agency must 

inform debtors of their right to review 

applicable records and to seek a review 

of the determination of the debt. The 

creditor agency will certify to FMS that 

the requirements of this regulation and 

applicable Federal law have been met. 

After a tax refund offset occurs, FMS 

will notify the debtor that the offset has 

occurred. FMS will provide information 

to the debtor regarding the amount and 

date of the offset, the creditor agency to 

which the amount offset was paid or 

credited, and a contact within the 

creditor agency that will handle 

concerns or questions regarding the 

offset. The notice also will advise any 

non-debtor spouse who may have filed 

a joint tax return with the debtor of the 

steps that a non-debtor spouse may take 

to secure his or her proper share of the 

tax refund. IRS will continue to be 

responsible for reviewing refund claims 

by non-debtor spouses. FMS will 

provide creditor agencies with sufficient 

information to identify the debt for 

which amounts have been collected, but 

will not disclose the payment source for 

the amounts collected. FMS also will 

report offset information to the IRS at 

least weekly. 

Procedural Changes Under Treasury 

Offset Program 

As described in detail below, this rule 

supersedes certain procedures 

established by the IRS (codified at 26 

CFR 301.6402–6) applicable to the 

collection of delinquent nontax debts 

owed to Federal agencies. The 

procedural changes do not affect the 

rights of the debtor to dispute the nature 

or amount of the debt or method of 

collection; they only reflect the changes 

necessitated by the merger of tax refund 

offset with the Treasury Offset Program 

and/or enactment of the DCIA. For 

example, since FMS will implement tax 

refund offset, under this rule, agencies 

are required to refer delinquent debts 

and provide information and 

certification to FMS, instead of IRS. 

FMS, rather than IRS, will provide postoffset notices and information to debtors 

and agencies. Under the Treasury Offset 

Program, agencies will submit debts for 

offset on an ongoing basis, rather than 

annually. Therefore, agencies may 

report, as needed, routine increases to 

the amount of the debt (such as those 

resulting from interest, penalties, and 

costs) subject to notice and certification 

requirements. 

Under the IRS regulation (codified at 

26 CFR 301.6402–6(c)), prior to referring 

a debt for tax refund offset, among other 

things, agencies are required to attempt 

to collect the debt by administrative and 

salary offset. FMS’ Treasury Offset 

Program implements the DCIA mandate 

to conduct centralized administrative 

offset (31 U.S.C. 3716(c)) and salary 

offset (5 U.S.C. 5514(a)). Therefore, 

when an agency refers a debt to FMS’ 

Treasury Offset Program, the debt 

automatically will be subject to 

collection by administrative offset, 

salary offset, and tax refund offset. 

Under the IRS regulation (codified at 26 

CFR 301.6402–6(c)), prior to referring a 

debt for tax refund offset, agencies are 

required to report the debt to a 

consumer reporting agency. The DCIA 

requires that agencies report delinquent 

consumer debt to credit bureaus, which 

agencies may do prior to or after 

submitting a debt to the Treasury Offset 

Program. Although agencies are 

encouraged to report delinquent debt 

early in the collection process, credit 

bureau reporting is not a prerequisite to 

tax refund offset under this rule. 

Creditor agencies are required to 

provide the same due process rights to 

debtors under this rule as required by 

the IRS regulation (codified at 26 CFR 

301.6402–6) and agency-specific 

regulations. Under the IRS regulation 

codified at 26 CFR 301.6402–6(d)(1), 

agencies are required to mail the preoffset notice to a debtor at the mailing 

address obtained by the IRS. Although 

agencies may continue to use the IRS 

mailing address, this rule allows 

agencies the flexibility to use current 

address information contained in an 

agency’s records, which may include 

address information obtained from the 

debtor, public databases, and other 

means. Since 1992, when the IRS 

promulgated its final rule, access to 

address information databases has 

become widely available at reasonable 
Federal Register / Vol. 62, No. 122 / Wednesday, June 25, 1997 / Rules and Regulations 34177 

costs. Also, based on their experience as 

participants in the tax refund offset 

program over the last 10 years, some 

agencies have indicated that the debtor 

address in their files is a more 

appropriate mailing address for due 

process notification than the IRS 

address. The change contained in this 

rule recognizes the fact that, for the 

purpose of providing pre-offset notice to 

the taxpayer, the address obtained by a 

creditor agency may be more recent than 

the address that the IRS can provide 

based on a prior year’s tax return. 

Section Analysis 

(a) Definitions 

Creditor agency. The term ‘‘creditor 

agency’’ has the same meaning as found 

at 31 U.S.C. 3701(e)(1) and includes a 

Federal agency seeking to collect a 

claim through tax refund offset. 

Debt or claim. For the purposes of this 

rule, the terms ‘‘claim’’ and ‘‘debt’’ are 

synonymous and interchangeable and 

have the same meaning as found at 31 

U.S.C. 3701(b). The term includes debt 

administered by a third party acting as 

an agent for the Federal Government as 

set forth in 31 U.S.C. 3720A(a). 

Tax refund offset. For purposes of this 

rule, the term ‘‘tax refund offset’’ means 

withholding or reducing a tax refund 

payment by an amount necessary to 

satisfy a debt owed by the payee(s) of a 

tax refund payment. This rule governs 

the offset of tax refund payments under 

26 U.S.C. 6402(d), 31 U.S.C. 3720A and 

agency regulations promulgated in 

accordance with the requirements of 

this rule. This rule does not cover the 

offset of payments other than tax refund 

payments, nor does it cover tax refund 

offset for the collection of past-due 

support. The offset of tax refund 

payments to collect past-due child 

support is governed by 26 U.S.C. 

6402(c), 42 U.S.C. 664, and additional 

regulations issued by FMS and the 

Department of Health and Human 

Services. The offset of other types of 

Federal payments to collect delinquent 

debt is governed by 31 U.S.C. 3716, 5 

U.S.C. 5514, and related regulations 

issued by FMS, Office of Personnel 

Management, and agencies collecting 

debt. 

Tax refund payment. The tax refund 

payment is the amount to be refunded 

to the taxpayer after the IRS has applied 

the taxpayer’s overpayment to the 

taxpayer’s past-due tax liabilities in 

accordance with 26 U.S.C. 6402(a) and 

26 CFR 6402–3(a)(6)(i). 

(b) General Rule 

Paragraph (b)(1) states the general rule 

that Federal agencies, except the 

Tennessee Valley Authority (TVA), are 

required to submit nontax delinquent 

debt information to the Secretary of the 

Treasury for purposes of tax refund 

offset. TVA may, but is not required to, 

submit its delinquent debt information 

for tax refund offset. Under the IRS 

regulation codified at 26 CFR 301.6402– 

6(a), agencies submit debt information 

to the IRS. Under this rule, agencies will 

submit debt information to FMS, a 

bureau of the Treasury. FMS will 

operate the delinquent debtor database 

and agencies are required to submit 

debtor information to FMS for offset 

purposes. Federal agencies will submit 

delinquent debtor information to FMS 

for purposes of tax refund offset and 

administrative offset simultaneously. 

Thus, agencies will not have to submit 

duplicate information to the IRS (for tax 

refund offset) and FMS or other Federal 

agencies (for administrative offset). 

Paragraph (b)(2) describes the offset 

process. 

Paragraph (b)(3) identifies the types of 

debts that this rule does not cover. Tax 

debts are collected in accordance with 

the Internal Revenue Code and related 

regulations. As noted above, the IRS 

deducts any tax liabilities owed by the 

taxpayer before authorizing the issuance 

of the tax refund payment. 

Paragraph (b)(4) describes the rules 

applicable to tax refund offset for the 

purpose of collecting Federal Old Age, 

Survivors and Disability Insurance 

(OASDI) overpayments. These rules 

have not changed as a result of the 

merger of the tax refund offset program 

with the administrative offset program. 

Paragraph (b)(5) clarifies that an 

agency is not precluded from using 

other debt collection tools, such as wage 

garnishment, after submitting a debt to 

FMS for purposes of tax refund and 

administrative offset. 

(c) Regulations 

This paragraph requires agencies to 

promulgate temporary or final 

regulations for administrative and tax 

refund offset. Agencies that previously 

participated in the tax refund offset 

program may need to revise existing 

regulations to conform with the revised 

requirements in this rule. Regulations 

for administrative offset under 31 U.S.C. 

3716 are required since any debt 

submitted to the FMS debtor database 

will be subject to administrative and tax 

refund offset simultaneously (to the 

extent that payments are available for 

offset). Therefore, in addition to tax 

refund offset requirements, a creditor 

agency must meet the prerequisites for 

administrative offset before submitting 

debts for collection by offset. FMS 

anticipates that Federal employee salary 

offsets (whereby salary payments 

payable to Federal employees who owe 

Federal debt are reduced to satisfy the 

outstanding obligations) will be part of 

the Treasury Offset Program. 

(d) Agency Certification and Referral of 

Debt 

This paragraph describes the 

procedures related to the collection of 

past-due legally enforceable debt owed 

to Federal agencies by tax refund offset. 

Paragraph (d)(1) outlines the 

certification required by an agency 

submitting debt to FMS for tax refund 

offset. Section 3720A(b) of title 31 

requires that, before collecting a debt by 

tax refund offset, an agency must certify 

that reasonable efforts to collect the debt 

have been made by the agency. Under 

the IRS regulation codified at 26 CFR 

301.6402–6(c), before referring a debt for 

tax refund offset agencies are required, 

among other things, to report the debt to 

a credit bureau and attempt collection 

by salary and administrative offset. This 

rule no longer requires credit bureau 

reporting and offset collection as 

prerequisites to tax refund offset 

because the DCIA mandates that 

agencies submit their delinquent debts 

to Treasury for administrative offset and 

participate in matches for salary offset 

purposes. FMS’ Treasury Offset Program 

will implement the DCIA mandates to 

conduct centralized administrative (31 

U.S.C. 3716(c)) and salary offset (5 

U.S.C. 5514(a)). Therefore, when an 

agency refers a debt to FMS’ Treasury 

Offset Program, the debt automatically 

will be subject to collection by 

administrative offset, salary offset, and 

tax refund offset. Under this rule, by 

complying with the DCIA, agencies will 

meet the ‘‘reasonable efforts’’ 

requirement since, before submitting a 

debt for tax refund offset, agencies will 

have demanded payment, notified the 

debtor that the agency intends to collect 

the debt by offset through FMS’ 

Treasury Offset Program if payment is 

not received when due, and provided 

the debtor with an opportunity for 

review of the debt and to enter into a 

reasonable repayment plan. The DCIA 

further requires that agencies report 

delinquent consumer debt to credit 

bureaus, which agencies may do prior to 

or after submitting a debt to FMS’ 

Treasury Offset Program. Although 

agencies are encouraged to report 

delinquent debt early in the collection 

process, credit bureau reporting is not a 

prerequisite to tax refund offset under 

this rule. 

Paragraph (d)(1)(iv) requires agencies 

to certify that the debt is at least $25. If 

a debt referred to FMS is over $25 at the 

time it is referred, the debt will remain 
34178 Federal Register / Vol. 62, No. 122 / Wednesday, June 25, 1997 / Rules and Regulations 

subject to collection by offset until it is 

paid in full even if it falls below the $25 

minimum. 

Paragraph (d)(2) governs pre-offset 

notice and consideration of evidence. 

Under the IRS regulation codified at 26 

CFR 301.6402–6(d)(1), agencies are 

required to mail a pre-offset notice to a 

debtor at the mailing address obtained 

from the IRS. Paragraph (d)(2)(i) of this 

rule modifies this requirement. As noted 

above, many agencies can obtain 

updated address information from credit 

reports, public record databases and the 

debtor. In many cases, the address 

obtained by the agency is more recent 

than the address that the IRS can 

provide based on a prior year’s tax 

return. Therefore, agencies may mail the 

required pre-offset notice to the debtor 

at the most current address contained in 

the agency’s records related to the debt. 

An agency may, but is not required to, 

obtain address information from the IRS 

pursuant to 26 U.S.C. 6103(m)(2), (4), or 

(5) in accordance with IRS procedures. 

Paragraph (d)(2)(ii) requires that 

agencies provide debtors with at least 30 

days to request review by the agency 

when an agent of the creditor agency 

has handled the review. This 

requirement is the same as contained in 

the IRS regulation codified at 26 CFR 

301.6402–6(d)(2). 

Paragraph (d)(3) governs referral of 

past-due, legally enforceable debt. This 

paragraph describes the information that 

agencies must include for each debt 

submitted to FMS for purposes of tax 

refund offset. 

Paragraph (d)(4) describes the 

procedures for correcting and updating 

information transmitted to FMS by a 

creditor agency. Under the IRS 

regulation codified at 26 CFR 301.6402– 

6(f), agencies are not permitted to 

increase the amount of debt after they 

refer a debt to the IRS for tax refund 

offset. Under the Treasury Offset 

Program and this rule, agencies may 

increase the amount of the debt owed, 

subject to compliance with certification 

requirements. As operated by the IRS, 

agencies submit debts annually for tax 

refund offset. Since, in addition to tax 

refunds, other types of payments will be 

offset under the Treasury Offset 

Program, agencies will submit debts to 

the debtor database, and offsets will 

occur, on an ongoing basis. Payments 

will be offset and applied to a debtor’s 

debt in the order in which the payments 

are issued. A tax refund payment is one 

of many types of payments that may be 

offset. Therefore, agencies may increase 

the amount of the debt owed if the offset 

prerequisites have been met. 

(e) Priorities for Offset 

This paragraph describes how a tax 

refund payment is applied when a 

taxpayer owes multiple debts. The 

priorities as stated in the IRS regulation 

codified at 26 CFR 301.6402–6 have not 

changed. Before authorizing FMS to 

disburse a tax refund payment, the IRS 

will apply any amount of overpayment 

by the taxpayer to tax liabilities of the 

taxpayer (see definition of ‘‘tax refund 

payment’’ in paragraph (a) of this 

section). 

Paragraph (e)(1) states that the tax 

refund payment will be reduced and 

applied to a taxpayer’s debts in the 

following order of priority: First by the 

amount of any past-due support 

assigned to a State; second, by the 

amount of any past-due, legally 

enforceable debt owed to a Federal 

agency; and third, by the amount of any 

qualifying past-due support not 

assigned to a State. 

Paragraph (e)(2) states that if a debtor 

owes more than one past-due, legally 

enforceable debt to a Federal agency or 

agencies, the tax refund payment shall 

be credited against the debts in the 

order in which the debts accrued. A 

debt shall be considered to have accrued 

at the time at which the agency 

determines that the debt became past 

due. 

FMS notes that for payments other 

than tax refunds that are offset under 

the Treasury Offset Program, debts not 

subject to any time limitation for 

enforcement will be paid after debts 

subject to such limitations. One of the 

purposes of the DCIA is ‘‘to maximize 

collections of delinquent debts owed to 

the Government by ensuring quick 

action to enforce recovery of the debts 

and the use of all appropriate collection 

tools.’’ DCIA, Section 31001(b)(1). 

Generally, Government policy requires 

that agencies apply amounts recovered 

by offset to debts owed to Federal 

agencies in accordance with the best 

interests of the United States, 

considering the applicable statute of 

limitations. See Federal Claims 

Collection Standards at 4 CFR Part 

102.3(g). It is in the best interests of the 

United States to first collect debts that 

are subject to time limitations 

restrictions. Therefore, if a debtor owes 

multiple debts to the United States, 

amounts offset under 31 U.S.C. 3716 

will be applied first to older debts 

subject to a time limitation, and last to 

debts for which there is no limitation to 

when legal action to collect the debt 

may be initiated. See e.g., 20 U.S.C. 

1091a (no limitation terminates the 

period within which legal action, 

including offset, may be taken to collect 

a student loan). However, unlike 31 

U.S.C. 3716, 26 U.S.C. 6402(d)(2) states 

that a tax refund payment shall be 

applied to multiple debts owed to 

Federal agencies by a taxpayer in the 

order in which such debts accrued. 

Paragraph (e)(3) reiterates that the tax 

refund payment will be applied to the 

outstanding debts of a taxpayer prior to 

the taxpayer’s future estimated tax 

liabilities. Any amounts remaining after 

offset shall be applied to estimated tax, 

or will be refunded to the taxpayer. 

(f) Post-Offset Notice to the Debtor, the 

Creditor Agency, and the IRS 

As provided by the IRS under the IRS 

regulation codified at 26 CFR 301.6402– 

6(h), under this paragraph (f), once an 

offset of a tax refund payment has 

occurred, FMS will provide notice to 

the payee and the creditor agency 

collecting the debt. FMS will not inform 

the creditor agency of the payment 

source of the amounts collected. Since 

FMS and other disbursing agencies will 

be conducting offsets of various 

payment types, debt repayment may 

result from any one of a number of 

payment sources. In its notice to the 

payee, FMS also will notify a nondebtor spouse who files a joint income 

tax return with a debtor and who is 

entitled to a tax refund of the 

procedures that may be taken to secure 

his or her proper share of the tax refund. 

FMS will notify the IRS of any offsets. 

(g) Offset Made With Regard to a Tax 

Refund Payment Based Upon Joint 

Return 

This paragraph states that a nondebtor spouse who files a joint income 

tax return with a debtor should take 

appropriate action to secure his or her 

proper share of a tax refund from which 

an offset was made. Such procedures are 

governed by IRS rules and are not 

affected by this rule. 

(h) Disposition of Amounts Collected 

This paragraph describes how 

amounts collected from tax refund 

payments will be transmitted to creditor 

agencies. 

(i) Fees 

As did the IRS, FMS will charge a fee 

to cover the costs of the tax refund offset 

program incurred by FMS and IRS. FMS 

will deduct the fee from the amount 

offset before that amount is transmitted 

to the creditor agency. The creditor 

agency may add this fee to the amount 

of the debt as an administrative cost if 

permitted by law. FMS may adjust the 

amount of the fee annually to ensure 

that the fee adequately covers the 
Federal Register / Vol. 62, No. 122 / Wednesday, June 25, 1997 / Rules and Regulations 34179 

administrative costs of the tax refund 

offset program. 

(j) Review of Tax Refund Offsets 

As provided in the IRS regulation 

codified at 26 CFR 301.6402–6(l) and 

not changed by this rule, the reduction 

of a taxpayer’s refund made pursuant to 

26 U.S.C. 6402(d) shall not be subject to 

review by any court of the United States 

or by the Secretary of the Treasury, FMS 

or IRS in an administrative proceeding. 

Any action taken to recover the amount 

of a tax refund offset must be taken 

against the Federal creditor agency to 

which the amount of the reduction was 

paid. With respect to recoveries of 

overpayments of benefits under 42 

U.S.C. 404, any action to recover the 

amount of the tax refund offset must be 

taken against the Commissioner of 

Social Security. 

(k) Access to and Use of Confidential 

Tax Information 

Since creditor agencies will not 

receive information identifying the 

payment source of an offset, FMS does 

not anticipate that creditor agencies will 

have access to and use of confidential 

tax information under the merged offset 

programs. If any such information is 

disclosed, however, access to and use of 

such information is restricted and 

governed by 26 U.S.C. 6103. 

(l) Effective Date 

The merger of the tax refund offset 

program with the administrative offset 

program conducted by FMS will be 

effective for all tax refund payments 

payable after January 1, 1998. Before 

that date, Federal agencies must publish 

or amend tax refund offset regulations 

and otherwise comply with tax refund 

offset prerequisites, such as providing 

notice to debtors, to participate in the 

merged program for tax refund 

payments payable after January 1, 1998. 

Therefore, although this rule applies to 

tax refund payments payable after 

January 1, 1998, agencies are required to 

comply with the requirements of this 

rule on July 25, 1997. 

Regulatory Analyses 

This interim rule is not a significant 

regulatory action as defined in 

Executive Order 12866. Because no 

notice of proposed rulemaking is 

required for this interim rule, the 

provisions of the Regulatory Flexibility 

Act do not apply. 

Special Analyses 

FMS is promulgating this interim rule 

without opportunity for prior public 

comment pursuant to the 

Administrative Procedure Act, 5 U.S.C. 

553, because FMS has determined that 

a comment period would be 

unnecessary, impractical, and contrary 

to the public interest. A comment 

period is unnecessary because this 

interim rule does not contain any 

significant, substantive changes from 

the IRS regulations and does not change 

how the tax refund offset program 

affects the taxpayer who owes 

delinquent nontax debt. This interim 

rule reflects changes to procedures 

under which creditor agencies submit 

debt information to Treasury because of 

DCIA requirements and the merger of 

the tax refund offset program with other 

Federal offset programs. Under this 

regulation, creditor agencies will submit 

delinquent debt information to FMS, 

instead of the IRS. Creditor agencies 

remain responsible for providing 

debtors with the same pre-offset notice, 

opportunities, and rights to dispute the 

debt as required under existing IRS 

regulations. 

The purpose of a delayed effective 

date is to afford persons affected by a 

rule a reasonable time to prepare for 

compliance. However, in this case, 

many agencies have participated in the 

tax refund offset program over the last 

10 years. Procedures affecting debtors 

remain substantially unchanged. The 

procedural changes in this rule affect 

how agencies will participate in the 

offset program. In order to implement 

the merged offset programs for tax 

refund payments made after January 1, 

1998, agencies may need to modify and/ 

or promulgate their own offset 

regulations and provide debtors with 

pre-offset notice prior to October 1997. 

This interim rule provides critical 

guidance that will facilitate creditor 

agencies’ participation in the tax refund 

offset program in 1998. 

The merged offset programs will 

improve the efficiency of Treasury’s 

government-wide collection of nontax 

delinquent debts. Therefore, FMS 

believes that good cause exists and that 

it is in the public interest to issue the 

interim rule without opportunity for 

prior public comment. 

The public is invited to submit 

comments on the interim rule which 

will be taken into account before a final 

rule is issued. 

List of Subjects in 31 CFR Part 285 

Administrative practice and 

procedure, Claims, Privacy, Taxes. 

Authority and Issuance 

For the reasons set forth in the 

preamble, part 285 is added to 31 CFR 

chapter II, subchapter A, to read as 

follows: 

PART 285—DEBT COLLECTION 

AUTHORITIES UNDER THE DEBT 

COLLECTION IMPROVEMENT ACT OF 

1996 

Subpart A—Disbursing Official Offset 

Sec.


285.1 [Reserved]


285.2 Offset of tax refund payments to


collect past-due, legally enforceable 

nontax debt. 

Authority: 26 U.S.C. 6402; 31 U.S.C. 321, 

3720A. 

Subpart A—Disbursing Official Offset 

§ 285.1 [Reserved] 

§ 285.2 Offset of tax refund payments to 

collect past-due, legally enforceable nontax 

debt. 

(a) Definitions. For purposes of this 

section: 

Creditor agency means a Federal 

agency owed a claim that seeks to 

collect that claim through tax refund 

offset. 

Debt or claim refers to an amount of 

money, funds, or property which has 

been determined by an agency official to 

be due the United States from any 

person, organization, or entity, except 

another Federal agency. For the 

purposes of this section, the terms 

‘‘claim’’ and ‘‘debt’’ are synonymous 

and interchangeable and includes debt 

administered by a third party acting as 

an agent for the Federal Government. 

Debtor means a person who owes a 

debt or claim. The term ‘‘person’’ 

includes any individual, organization or 

entity, except another Federal agency. 

FMS means the Financial 

Management Service, a bureau of the 

Department of the Treasury. 

IRS means the Internal Revenue 

Service, a bureau of the Department of 

the Treasury. 

Tax refund offset means withholding 

or reducing a tax refund payment by an 

amount necessary to satisfy a debt owed 

by the payee(s) of a tax refund payment. 

Tax refund payment means any 

overpayment of Federal taxes to be 

refunded to the person making the 

overpayment after the IRS makes the 

appropriate credits as provided in 26 

U.S.C. 6402(a) and 26 CFR 6402– 

3(a)(6)(i) for any liabilities for any tax on 

the part of the person who made the 

overpayment. 

(b) General rule. (1) A Federal agency 

(as defined in 26 U.S.C. 6402(g)) that is 

owed by a person a past-due, legally 

enforceable nontax debt shall notify 

FMS of the amount of such debt for 

collection by tax refund offset. However, 

any agency subject to section 9 of the 

Act of May 18, 1933 (16 U.S.C. 831h) 

owed such a debt may, but is not 
34180 Federal Register / Vol. 62, No. 122 / Wednesday, June 25, 1997 / Rules and Regulations 

required to, notify FMS of the amount 

of such debt for collection by tax refund 

offset. 

(2) FMS will compare tax refund 

payment records, as certified by the IRS, 

with records of debts submitted to FMS. 

A match will occur when the taxpayer 

identifying number (as that term is used 

in 26 U.S.C. 6109) and name (or 

derivation of the name, known as a 

‘‘name control’’) of a payment 

certification record are the same as the 

taxpayer identifying number and name 

control of a debtor record. When a 

match occurs and all other requirements 

for tax refund offset have been met, FMS 

will reduce the amount of any tax 

refund payment payable to a debtor by 

the amount of any past-due, legally 

enforceable debt owed by the debtor. 

Any amounts not offset will be paid to 

the payee(s) listed in the payment 

certification record. 

(3) This section does not apply to any 

debt or claim arising under the Internal 

Revenue Code. 

(4)(i) This section applies to Federal 

Old Age, Survivors and Disability 

Insurance (OASDI) overpayments 

provided the requirements of 31 U.S.C. 

3720A(f)(1) and (2) are met with respect 

to such overpayments. 

(ii) For purposes of this section, 

‘‘OASDI overpayment’’ means any 

overpayment of benefits made to an 

individual under title II of the Social 

Security Act (42 U.S.C. 401 et seq.). 

(5) A creditor agency is not precluded 

from using debt collection procedures, 

such as wage garnishment, to collect 

debts that have been submitted to FMS 

for purposes of offset under this part. 

Such debt collection procedures may be 

used separately or in conjunction with 

offset collection procedures. 

(c) Regulations. Prior to submitting 

debts to FMS for collection by tax 

refund offset, Federal agencies shall 

promulgate temporary or final 

regulations under 31 U.S.C. 3716 and 31 

U.S.C. 3720A, governing the agencies’ 

authority to collect debts by 

administrative offset, in general, and 

offset of tax refund payments, in 

particular. 

(d) Agency certification and referral of 

debt—(1) Past-due, legally enforceable 

debt eligible for tax refund offset. For 

purposes of this section, when a Federal 

agency refers a past-due, legally 

enforceable debt to FMS for tax refund 

offset, the agency will certify to FMS 

that: 

(i) The debt is past-due and legally 

enforceable in the amount submitted to 

FMS and that the agency will ensure 

that collections are properly credited to 

the debt; 

(ii) Except in the case of a judgment 

debt or as otherwise allowed by law, the 

debt is referred for offset within ten 

years after the agency’s right of action 

accrues; 

(iii) The creditor agency has made 

reasonable efforts to obtain payment of 

the debt in that the agency has: 

(A) Submitted the debt to FMS for 

collection by administrative offset and 

complied with the provisions of 31 

U.S.C. 3716(a) and related regulations, 

to the extent that collection of the debt 

by administrative offset is not 

prohibited by statute; 

(B) Notified, or has made a reasonable 

attempt to notify, the debtor that the 

debt is past-due, and unless repaid 

within 60 days after the date of the 

notice, will be referred to FMS for tax 

refund offset; 

(C) Given the debtor at least 60 days 

to present evidence that all or part of the 

debt is not past-due or legally 

enforceable, considered any evidence 

presented by the debtor, and determined 

that the debt is past-due and legally 

enforceable; and 

(D) Provided the debtor with an 

opportunity to make a written 

agreement to repay the amount of the 

debt; 

(iv) The debt is at least $25; and 

(v) In the case of an OASDI 

overpayment— 

(A) The individual is not currently 

entitled to monthly insurance benefits 

under title II of the Social Security Act 

(42 U.S.C. 401 et seq.); 

(B) The notice describes conditions 

under which the Commissioner of 

Social Security is required to waive 

recovery of the overpayment, as 

provided under 42 U.S.C. 404(b); and 

(C) If the debtor files a request for a 

waiver under 42 U.S.C. 404(b) within 

the 60-day notice period, the agency has 

considered the debtor’s request. 

(2) Pre-offset notice and consideration 

of evidence for past-due, legally 

enforceable debt. (i) For purposes of 

paragraph (d)(1)(iii)(B) of this section, a 

creditor agency has made a reasonable 

attempt to notify the debtor if the 

agency uses the current address 

information contained in the agency’s 

records related to the debt. Agencies 

may, but are not required to, obtain 

address information from the IRS 

pursuant to 26 U.S.C. 6103(m)(2), (4), or 

(5). 

(ii) For purposes of paragraph 

(d)(1)(iii)(C) of this section, if the 

evidence presented by the debtor is 

considered by an agent of the creditor 

agency, or other entities or persons 

acting on the agency’s behalf, the debtor 

must be accorded at least 30 days from 

the date the agent or other entity or 

person determines that all or part of the 

debt is past-due and legally enforceable 

to request review by an officer or 

employee of the agency of any 

unresolved dispute. The agency must 

then notify the debtor of its decision. 

(3) Referral of past-due, legally 

enforceable debt. A Federal agency will 

submit past-due, legally enforceable 

debt information for tax refund offset to 

FMS in the time and manner prescribed 

by FMS. For each debt, the creditor 

agency will include the following 

information: 

(i) The name and taxpayer identifying 

number (as defined in 26 U.S.C. 6109) 

of the debtor who is responsible for the 

debt; 

(ii) The amount of such past-due and 

legally enforceable debt; 

(iii) The date on which the debt 

became past-due; 

(iv) The designation of the Federal 

agency or subagency referring the debt; 

and 

(v) In the case of an OASDI 

overpayment, a certification by the 

Commissioner of Social Security 

designating whether the amount payable 

to the agency is to be deposited in either 

the Federal Old-Age and Survivors 

Insurance Trust Fund or the Federal 

Disability Insurance Trust Fund, but not 

both. 

(4) Correcting and updating referral. 

If, after referring a past-due, legally 

enforceable debt to FMS as provided in 

paragraph (d)(3) of this section, a 

creditor agency determines that an error 

has been made with respect to the 

information transmitted to FMS, or if an 

agency receives a payment or credits a 

payment to the account of a debtor 

referred to FMS for offset, or if the debt 

amount is otherwise incorrect, the 

agency shall promptly notify FMS and 

make the appropriate correction of the 

agency’s records. Creditor agencies will 

provide certification as required under 

paragraph (d)(1) of this section for any 

increases to amounts owed. 

(5) FMS may reject a certification 

which does not comply with the 

requirements of paragraph (d)(1) of this 

section. Upon notification of the 

rejection and the reason for the 

rejection, a creditor agency may 

resubmit the debt with a corrected 

certification. 

(e) Priorities for offset. (1) A tax 

refund payment shall be reduced first by 

the amount of any past-due support 

assigned to a State under section 

402(a)(26) or section 471(a)(17) of the 

Social Security Act (42 U.S.C. 602(a)(26) 

or 42 U.S.C. 671(a)(17)) which is to be 

offset under 26 U.S.C. 6402(c), 42 U.S.C. 

664 and the regulations thereunder; 

second, by the amount of any past-due, 
Federal Register / Vol. 62, No. 122 / Wednesday, June 25, 1997 / Rules and Regulations 34181 

legally enforceable debt owed to a 

Federal agency which is to be offset 

under 26 U.S.C. 6402(d), 31 U.S.C. 

3720A and this section; and third, by 

the amount of any qualifying past-due 

support not assigned to a State which is 

to be offset under 26 U.S.C. 6402(c), 42 

U.S.C. 664 and the regulations 

thereunder. 

(2) If a debtor owes more than one 

past-due, legally enforceable debt to a 

Federal agency or agencies, the tax 

refund payment shall be credited 

against the debts in the order in which 

the debts accrued. A debt shall be 

considered to have accrued at the time 

at which the agency determines that the 

debt became past due. 

(3) Reduction of the tax refund 

payment pursuant to 26 U.S.C. 6402(a), 

(c), and (d) shall occur prior to crediting 

the overpayment to any future liability 

for an internal revenue tax. Any amount 

remaining after tax refund offset under 

26 U.S.C. 6402 (a), (c), and (d) shall be 

refunded to the taxpayer, or applied to 

estimated tax, if elected by the taxpayer 

pursuant to IRS regulations. 

(f) Post-offset notice to the debtor, the 

creditor agency, and the IRS. (1)(i) FMS 

will notify the payee(s) to whom the tax 

refund payment is due, in writing of: 

(A) The amount and date of the offset 

to satisfy a past-due, legally enforceable 

nontax debt; 

(B) The creditor agency to which this 

amount has been paid or credited; and 

(C) A contact point within the creditor 

agency that will handle concerns or 

questions regarding the offset. 

(ii) The notice in paragraph (f)(1)(i) of 

this section will also advise any nondebtor spouse who may have filed a 

joint tax return with the debtor of the 

steps which a non-debtor spouse may 

take in order to secure his or her proper 

share of the tax refund. See paragraph 

(g) of this section. 

(2) FMS will advise each creditor 

agency of the names, mailing addresses, 

and identifying numbers of the debtors 

from whom amounts of past-due, legally 

enforceable debt were collected and of 

the amounts collected from each debtor 

for that agency. FMS will not advise the 

creditor agency of the source of payment 

from which such amounts were 

collected. If a payment from which an 

amount of past-due, legally enforceable 

debt is to be withheld is payable to two 

individual payees, FMS will notify the 

creditor agency and furnish the name 

and address of each payee to whom the 

payment was payable. 

(3) At least weekly, FMS will notify 

the IRS of the names and taxpayer 

identifying numbers of the debtors from 

whom amounts of past-due, legally 

enforceable debt were collected and the 

amounts collected from each debtor. 

(g) Offset made with regard to a tax 

refund payment based upon joint 

return. If the person filing a joint return 

with a debtor owing the past-due, 

legally enforceable debt takes 

appropriate action to secure his or her 

proper share of a tax refund from which 

an offset was made, the IRS will pay the 

person his or her share of the refund 

and request that FMS deduct that 

amount from amounts payable to the 

creditor agency. FMS and the creditor 

agency will adjust their debtor records 

accordingly. 

(h) Disposition of amounts collected. 

FMS will transmit amounts collected for 

past-due, legally enforceable debts, less 

fees charged under paragraph (i) of this 

section, to the creditor agency’s account. 

If an erroneous payment is made to any 

agency, FMS will notify the creditor 

agency that an erroneous payment has 

been made. The agency shall pay 

promptly to FMS an amount equal to 

the amount of the erroneous payment 

(without regard to whether any other 

amounts payable to such agency have 

been paid). 

(i) Fees. The creditor agency will 

reimburse FMS and the IRS for the full 

cost of administering the tax refund 

offset program. FMS will deduct the fees 

from amounts collected prior to 

disposition and transmit a portion of the 

fees deducted to reimburse the IRS for 

its share of the cost of administering the 

tax refund offset program. To the extent 

allowed by law, creditor agencies may 

add the offset fees to the debt. 

(j) Review of tax refund offsets. Any 

reduction of a taxpayer’s refund made 

pursuant to 26 U.S.C. 6402(d) shall not 

be subject to review by any court of the 

United States or by the Secretary of the 

Treasury, FMS or IRS in an 

administrative proceeding. No action 

brought against the United States to 

recover the amount of this reduction 

shall be considered to be a suit for 

refund of tax. Any legal, equitable, or 

administrative action by any person 

seeking to recover the amount of the 

reduction of the overpayment must be 

taken against the Federal creditor 

agency to which the amount of the 

reduction was paid. Any action which 

is otherwise available with respect to 

recoveries of overpayments of benefits 

under 42 U.S.C. 404 must be taken 

against the Commissioner of Social 

Security. 

(k) Access to and use of confidential 

tax information. Access to and use of 

confidential tax information in 

connection with the tax refund offset 

program are restricted by 26 U.S.C. 

6103. Generally, agencies will not 

receive confidential tax information 

from FMS. To the extent such 

information is received, agencies are 

subject to the safeguard, recordkeeping, 

and reporting requirements of 26 U.S.C. 

6103(p)(4) and the regulations 

thereunder. The agency shall inform its 

officers and employees who access or 

use confidential tax information of the 

restrictions and penalties under the 

Internal Revenue Code for misuse of 

confidential tax information. 

(l) Effective date. This section applies 

to tax refund payments payable under 

26 U.S.C. 6402 after January 1, 1998. 

Dated: June 6, 1997. 

Russell D. Morris, 

Commissioner, Financial Management 

Service. 

[FR Doc. 97–16181 Filed 6–24–97; 8:45 am] 

BILLING CODE 4810–35–P 

DEPARTMENT OF TRANSPORTATION 

Coast Guard 

33 CFR Part 151 

[CGD 97–015] 

RIN 2115–AF43 

Antarctic Treaty Environmental 

Protection Protocol; Correction 

AGENCY: Coast Guard, DOT.


ACTION: Direct final rule; correction.


SUMMARY: This document contains


corrections to the direct final


regulations [CGD 97–015] which were


published Monday, April 14, 1997 (62


FR 18043). The regulations incorporated


the Antarctic Treaty Environmental


Protection Protocol into the Code of


Federal Regulations (CFR).


DATES: This rule is effective on


September 30, 1997.


FOR FURTHER INFORMATION CONTACT: 

Lieutenant Commander Ray Perry, 

Office of Operating and Environmental 

Standards at (202) 267–2714. 

SUPPLEMENTARY INFORMATION: 

Background 

The direct final rule that is the subject 

of this correction amends Title 33 of the 

Code of Federal Regulations to 

implement the Antarctic Science, 

Tourism, and Conservation Act of 1996 

(Pub. L. 104–227). These regulations 

should guide U.S. owned and/or 

operated vessels to properly prepare for 

voyages in the Antarctic. The rule will 

harmonize U.S. regulations with 

international standards and improve 

preparedness to respond to a spill.