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104TH CONGRESS

1ST SESSION H. R. 757

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

JANUARY 31, 1995

Mr. JACOBS (for himself, Mr. MCCRERY, and Mr. MORAN) 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,

3 SECTION 1. OFFSET OF PAST-DUE, LEGALLY ENFORCEABLE

4 STATE TAX OBLIGATIONS AGAINST OVERPAY5 MENTS.

6 (a) IN GENERAL.—Section 6402 of the Internal Rev7 enue Code of 1986 is amended by redesignating sub-
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1 sections (e) through (i) as subsections (f) through (j), re2 spectively, and by inserting after subsection (d) the follow3 ing new subsection:

4 ‘‘(e) COLLECTION OF PAST-DUE, LEGALLY EN5 FORCEABLE STATE TAX OBLIGATIONS.—

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

7 any State that a named person owes a past-due, le8 gally enforceable State tax obligation to such State,

9 the Secretary shall, under such conditions as may be

10 prescribed by the Secretary—

11 ‘‘(A) reduce the amount of any overpay12 ment payable to such person by the amount of

13 such State tax obligation;

14 ‘‘(B) pay the amount by which such over15 payment is reduced under subparagraph (A) to

16 such State and notify such State of such per17 son’s name, taxpayer identification number, ad18 dress, and the amount collected; and

19 ‘‘(C) notify the person making such over20 payment that the overpayment has been re21 duced by an amount necessary to satisfy a past22 due, legally enforceable State tax obligation.

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

24 notice under subparagraph (B) shall include the
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1 names, taxpayer identification numbers and address2 es of each person filing such return.

3 ‘‘(2) PRIORITIES FOR OFFSET.—Any overpay4 ment by a person shall be reduced pursuant to this

5 subsection—

6 ‘‘(A) after such overpayment is reduced

7 pursuant to—

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

9 liability for any internal revenue tax on the

10 part of the person who made the overpay11 ment,

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

13 past-due support, and

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

15 any past-due, legally enforceable debt owed

16 to a Federal agency, and

17 ‘‘(B) before such overpayment is credited

18 to the future liability for any Federal internal

19 revenue tax of such person pursuant to sub20 section (b).

21 If the Secretary receives notice from one or more

22 State agencies of more than one debt subject to

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

24 an agency, any overpayment by such person shall be
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1 applied against such debts in the order in which

2 such debts accrued.

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

4 No State may take action under this subsection until

5 such State—

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

7 State tax liability that the State proposes to

8 take action pursuant to this section,

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

10 present evidence that all or part of such liability

11 is not past-due or not legally enforceable,

12 ‘‘(C) considers any evidence presented by

13 such person and determines that an amount of

14 such debt is past-due and legally enforceable,

15 and

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

17 Secretary may prescribe to ensure that the de18 termination made under subparagraph (C) is

19 valid and that the State has made reasonable

20 efforts to obtain payment of such State tax ob21 ligation.

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

23 TAX OBLIGATION.—For purposes of this subsection,

24 the term ‘past-due, legally enforceable State tax obli25 gation’ means a debt—
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1 ‘‘(A)(i) which resulted from—

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

3 of competent jurisdiction which has deter4 mined an amount of State tax to be due,

5 or

6 ‘‘(II) a determination after an admin7 istrative hearing which has determined an

8 amount of State tax to be due, and

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

10 review, or

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

12 which has been assessed but not collected, the

13 time for redetermination of which has expired,

14 and which has not been delinquent for more

15 than 10 years.

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

17 includes any local tax administered by the chief tax

18 administration agency of the State.

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

20 regulations prescribing the time and manner in

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

22 enforceable State tax obligations and the necessary

23 information that must be contained in or accompany

24 such notices. The regulations shall specify the mini25 mum amount of debt to which the reduction proce-
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1 dure established by paragraph (1) may be applied

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

3 Secretary for the cost of applying such procedure.

4 Any fee paid to the Secretary pursuant to the pre5 ceding sentence shall be used to reimburse appro6 priations which bore all or part of the cost of apply7 ing such procedure.

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

9 State receiving notice from the Secretary that an er10 roneous payment has been made to such State under

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

12 in accordance with such regulations as the Secretary

13 may prescribe, an amount equal to the amount of

14 such erroneous payment (without regard to whether

15 any other amounts payable to such State under such

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

17 (b) DISCLOSURE OF CERTAIN INFORMATION TO

18 STATES REQUESTING REFUND OFFSETS FOR PAST-DUE,

19 LEGALLY ENFORCEABLE STATE TAX OBLIGATIONS.—

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

21 is amended by adding at the end thereof the follow22 ing new paragraph:

23 ‘‘(5) DISCLOSURE OF CERTAIN INFORMATION

24 TO STATES REQUESTING A REDUCTION UNDER SEC25 TION 6402(e).—
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1 ‘‘(A) RETURN INFORMATION FROM THE

2 INTERNAL REVENUE SERVICE.—The Secretary

3 may, upon written request, disclose to State tax

4 officials or employees of a State seeking a re5 duction under subsection (e) of section 6402—

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

7 made or has not been made under such

8 subsection with respect to any person;

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

10 and

11 ‘‘(iii) taxpayer identifying information

12 of the person against whom a reduction

13 was made or not made.

14 ‘‘(B) RESTRICTION ON USE OF DISCLOSED

15 INFORMATION.—Any State tax official or em16 ployee of a State receiving return information

17 under subparagraph (A) shall use such informa18 tion only for the purposes of, and to the extent

19 necessary in, establishing appropriate agency

20 records or in defense of any litigation or admin21 istrative procedure ensuing from a reduction

22 made under section 6402(e).’’

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

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

25 lieu thereof ‘‘(c), (d)(5), (e)’’.
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1 (3) Clause (i) of section 6103(p)(3)(C) of such

2 Code is amended by inserting ‘‘(other than para3 graph (5))’’ after ‘‘(d)’’.

4 (c) CONFORMING AMENDMENTS.—

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

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

7 ‘‘(c), (d), and (e)’’.

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

9 Code is amended by striking ‘‘and before such over10 payment’’ and inserting ‘‘and before such overpay11 ment is reduced pursuant to subsection (e) and be12 fore such overpayment’’.

13 (3) Subsection (f) of section 6402 of such Code,

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

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

16 ‘‘(c), (d), or (e)’’, and

17 (B) by striking ‘‘Federal agency’’ and in18 serting ‘‘Federal agency or State’’.

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

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

21 by striking ‘‘subsection (c)’’ and inserting ‘‘sub22 section (c) or (e)’’.

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

24 this section shall apply to refunds payable under section
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1 6402 of the Internal Revenue Code of 1986 after Decem2 ber 31, 1995.

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