I

103D CONGRESS

2D SESSION H. R. 4138

To amend the Internal Revenue Code of 1986 to provide that the amount

of an overpayment otherwise payable to any person shall be reduced

by the amount of past-due, legally enforceable State tax obligations

of such person.

IN THE HOUSE OF REPRESENTATIVES

MARCH 24, 1994

Mr. JACOBS (for himself, Mr. GRANDY, Ms. WATERS, Mr. MAZZOLI, Mr.

FRANK of Massachusetts, Mr. BLUTE, Mr. WYNN, and Mr. BURTON of

Indiana) introduced the following bill; which was referred to the Committee on Ways and Means

A BILL

To amend the Internal Revenue Code of 1986 to provide

that the amount of an overpayment otherwise payable

to any person shall be reduced by the amount of pastdue, legally enforceable State tax obligations of such

person.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,
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1 SECTION 1. OFFSET OF PAST-DUE, LEGALLY ENFORCEABLE

2 STATE TAX OBLIGATIONS AGAINST OVERPAY3 MENTS.

4 (a) IN GENERAL.—Section 6402 of the Internal Rev5 enue Code of 1986 is amended by redesignating sub6 sections (e) through (i) as subsections (f) through (j), re7 spectively, and by inserting after subsection (d) the follow8 ing new subsection:

9 ‘‘(e) COLLECTION OF PAST-DUE, LEGALLY EN10 FORCEABLE STATE TAX OBLIGATIONS.—

11 ‘‘(1) IN GENERAL.—Upon receiving notice from

12 any State that a named person owes a past-due, le13 gally enforceable State tax obligation to such State,

14 the Secretary shall, under such conditions as may be

15 prescribed by the Secretary—

16 ‘‘(A) reduce the amount of any overpay17 ment payable to such person by the amount of

18 such State tax obligation;

19 ‘‘(B) pay the amount by which such over20 payment is reduced under subparagraph (A) to

21 such State and notify such State of such per22 son’s name, taxpayer identification number, ad23 dress, and the amount collected; and

24 ‘‘(C) notify the person making such over25 payment that the overpayment has been re-
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1 duced by an amount necessary to satisfy a past2 due, legally enforceable State tax obligation.

3 If an offset is made pursuant to a joint return, the

4 notice under subparagraph (B) shall include the

5 names, taxpayer identification numbers and address6 es of each person filing such return.

7 ‘‘(2) PRIORITIES FOR OFFSET.—Any overpay8 ment by a person shall be reduced pursuant to this

9 subsection—

10 ‘‘(A) after such overpayment is reduced

11 pursuant to—

12 ‘‘(i) subsection (a) with respect to any

13 liability for any internal revenue tax on the

14 part of the person who made the overpay15 ment,

16 ‘‘(ii) subsection (c) with respect to

17 past-due support (defined in section 464(c)

18 of the Social Security Act) assigned to the

19 State under section 402(a)(26) or

20 471(a)(17) of the Social Security Act, and

21 ‘‘(iii) subsection (d) with respect to

22 any past-due, legally enforceable debt owed

23 to a Federal agency, and

24 ‘‘(B) before such overpayment is credited

25 to—
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1 ‘‘(i) past-due support (defined in sec2 tion 464(c) of the Social Security Act) not

3 assigned to a State pursuant to subsection

4 (c), and

5 ‘‘(ii) the future liability for any Fed6 eral internal revenue tax of such person

7 pursuant to subsection (b).

8 If the Secretary receives notice from one or more

9 State agencies of more than one debt subject to

10 paragraph (1) that is owed by such person to such

11 an agency, any overpayment by such person shall be

12 applied against such debts in the order in which

13 such debts accrued.

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

15 No State may take action under this subsection until

16 such State—

17 ‘‘(A) notifies the person owing the past-due

18 State tax liability that the State proposes to

19 take action pursuant to this section,

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

21 present evidence that all or part of such liability

22 is not past-due or not legally enforceable,

23 ‘‘(C) considers any evidence presented by

24 such person and determines that an amount of
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1 such debt is past-due and legally enforceable,

2 and

3 ‘‘(D) satisfies such other conditions as the

4 Secretary may prescribe to ensure that the de5 termination made under subparagraph (C) is

6 valid and that the State has made reasonable

7 efforts to obtain payment of such State tax ob8 ligation.

9 ‘‘(4) PAST-DUE, LEGALLY ENFORCEABLE STATE

10 TAX OBLIGATION.—For purposes of this subsection,

11 the term ‘past-due, legally enforceable State tax obli12 gation’ means a debt—

13 ‘‘(A)(i) which resulted from—

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

15 of competent jurisdiction which has deter16 mined an amount of State tax to be due,

17 or

18 ‘‘(II) a determination after an admin19 istrative hearing which has determined an

20 amount of State tax to be due, and

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

22 review, or

23 ‘‘(B) which resulted from a State tax

24 which has been assessed but not collected, the

25 time for redetermination of which has expired,
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1 and which has not been delinquent for more

2 than 10 years.

3 For purposes of this paragraph, the term ‘State tax’

4 includes any local tax administered by the chief tax

5 administration agency of the State.

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

7 regulations prescribing the time and manner in

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

9 enforceable State tax obligations and the necessary

10 information that must be contained in or accompany

11 such notices. The regulations shall specify the mini12 mum amount of debt to which the reduction proce13 dure established by paragraph (1) may be applied

14 and that the State may pay a fee to reimburse the

15 Secretary for the cost of applying such procedure.

16 Any fee paid to the Secretary pursuant to the pre17 ceding sentence shall be used to reimburse appro18 priations which bore all or part of the cost of apply19 ing such procedure.

20 ‘‘(6) ERRONEOUS PAYMENT TO STATE.—Any

21 State receiving notice from the Secretary that an er22 roneous payment has been made to such State under

23 paragraph (1) shall pay promptly to the Secretary,

24 in accordance with such regulations as the Secretary

25 may prescribe, an amount equal to the amount of
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1 such erroneous payment (without regard to whether

2 any other amounts payable to such State under such

3 paragraph have been paid to such State).’’

4 (b) DISCLOSURE OF CERTAIN INFORMATION TO

5 STATES REQUESTING REFUND OFFSETS FOR PAST-DUE,

6 LEGALLY ENFORCEABLE STATE TAX OBLIGATIONS.—

7 (1) Subsection (d) of section 6103 of such Code

8 is amended by adding at the end thereof the follow9 ing new paragraph:

10 ‘‘(5) DISCLOSURE OF CERTAIN INFORMATION

11 TO STATES REQUESTING A REDUCTION UNDER SEC12 TION 6402(e).—

13 ‘‘(A) RETURN INFORMATION FROM THE

14 INTERNAL REVENUE SERVICE.—The Secretary

15 may, upon written request, disclose to State tax

16 officials or employees of a State seeking a re17 duction under subsection (e) of section 6402—

18 ‘‘(i) the fact that a reduction has been

19 made or has not been made under such

20 subsection with respect to any person;

21 ‘‘(ii) the amount of such reduction;

22 and

23 ‘‘(iii) taxpayer identifying information

24 of the person against whom a reduction

25 was made or not made.
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1 ‘‘(B) RESTRICTION ON USE OF DISCLOSED

2 INFORMATION.—Any State tax official or em3 ployee of a State receiving return information

4 under subparagraph (A) shall use such informa5 tion only for the purposes of, and to the extent

6 necessary in, establishing appropriate agency

7 records or in defense of any litigation or admin8 istrative procedure ensuing from a reduction

9 made under section 6402(e).’’

10 (2) Section 6103(p)(3)(A) of such Code is

11 amended by striking out ‘‘(c), (e)’’ and inserting in

12 lieu thereof ‘‘(c), (d)(5), (e)’’.

13 (3) Clause (i) of section 6103(p)(3)(C) of such

14 Code is amended by inserting ‘‘(other than para15 graph (5))’’ after ‘‘(d)’’.

16 (c) CONFORMING AMENDMENTS.—

17 (1) Subsection (a) of section 6402 of such Code

18 is amended by striking ‘‘(c) and (d)’’ and inserting

19 ‘‘(c), (d), and (e)’’.

20 (2) Paragraph (2) of section 6402(d) of such

21 Code is amended by striking ‘‘and before such over22 payment’’ and inserting ‘‘and before such overpay23 ment is reduced pursuant to subsection (e) and be24 fore such overpayment’’.
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1 (3) Subsection (f) of section 6402 of such Code,

2 as redesignated by subsection (a), is amended—

3 (A) by striking ‘‘(c) or (d)’’ and inserting

4 ‘‘(c), (d), or (e)’’, and

5 (B) by striking ‘‘Federal agency’’ and in6 serting ‘‘Federal agency or State’’.

7 (4) Subsection (h) of section 6402 of such

8 Code, as redesignated by subsection (a), is amended

9 by striking ‘‘subsection (c)’’ and inserting ‘‘sub10 section (c) or (e)’’.

11 (d) EFFECTIVE DATE.—The amendments made by

12 this section shall apply to refunds payable under section

13 6402 of the Internal Revenue Code of 1986 after Decem14 ber 31, 1994.

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