I 
110TH CONGRESS 
2D SESSION 
H. R. 7335 
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 
DECEMBER 10, 2008 
Mr. MORAN of Virginia 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 de-
termined 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. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. EXPANSION OF TAX REFUND REDUCTION PRO-
VISION TO INCLUDE CERTAIN LOCAL TAX 
DEBT. 
(a) EXPANSION OF PROGRAM.—Section 3720A of 
title 31, United States Code (relating to reduction of tax 
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refund by amount of debt) is amended by adding at the 
end the following: 
‘‘(j) COLLECTION OF PAST-DUE LEGALLY ENFORCE-
ABLE LOCAL GOVERNMENT TAX OBLIGATIONS.— 
‘‘(1) IN GENERAL.—Upon receiving notice from 
any eligible State on behalf of a local government, 
or from any eligible local government, that a named 
person owes a past-due, legally enforceable tax obli-
gation to the local government, the Secretary of the 
Treasury shall, under such conditions as may be 
prescribed by the Secretary, determine whether any 
amounts, as refunds of Federal taxes paid, are pay-
able to such person. If the Secretary of the Treasury 
finds that any such amount is payable, he shall— 
‘‘(A) reduce such refunds by an amount 
equal to the amount of such debt; 
‘‘(B) pay the amount of such reduction— 
‘‘(i) to the State for purposes of pay-
ment by the State to the local government 
on behalf of which the State submitted the 
notice; or 
‘‘(ii) to the eligible local government 
that submitted the notice; 
‘‘(C) notify the State or eligible local gov-
ernment of the person’s name, taxpayer identi-
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fication number, address, and the amount col-
lected; and 
‘‘(D) notify the person due the refund that 
the refund has been reduced by an amount nec-
essary to satisfy a past-due, legally enforceable 
tax obligation. 
‘‘(2) PRIORITIES FOR OFFSET.— 
‘‘(A) Any overpayment (as defined in sec-
tion 6401 of the Internal Revenue Code of 
1986) by a person shall be reduced pursuant to 
this subsection— 
‘‘(i) after such overpayment is re-
duced (I) with respect to any liability for 
any internal revenue tax on the part of the 
person who made the overpayment; (II) 
with respect to past-due support (as de-
fined in section 464(c) of the Social Secu-
rity Act); (III) with respect to any past- 
due, legally enforceable debt owed to a 
Federal agency; and (IV) with respect to 
any past-due, legally enforceable State in-
come tax obligation (as defined in section 
6402(e) of the Internal Revenue Code of 
1986); and 
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‘‘(ii) before such overpayment is cred-
ited to the future liability for any Federal 
internal revenue tax of such person. 
‘‘(B) If the Secretary receives notice from 
one or more States or eligible local governments 
of more than one tax obligation subject to para-
graph (1) that is owed by such person to any 
local government, any overpayment by such per-
son shall be applied against such debts in the 
order in which such notices were filed. 
‘‘(3) NOTICE; CONSIDERATION OF EVIDENCE.— 
‘‘(A) No State may take action under this 
subsection (on behalf of a local government) 
until the local government certifies to the State 
that the local government— 
‘‘(i) has notified the person owing the 
past-due, legally enforceable tax obligation 
by certified mail with return receipt that 
the State (on behalf of the local govern-
ment) proposes to take action pursuant to 
this section; 
‘‘(ii) has given such person at least 60 
days to present evidence that all or part of 
such liability is not past-due or not legally 
enforceable; 
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‘‘(iii) has considered any evidence pre-
sented by such person and has determined 
that an amount of such debt is past-due 
and legally enforceable; and 
‘‘(iv) has satisfied such other condi-
tions as the Secretary may prescribe to en-
sure that the determination made under 
clause (iii) is valid and that the local gov-
ernment has made reasonable efforts to ob-
tain payment of such tax obligation. 
‘‘(B) No eligible local government may 
take action under this subsection until the local 
government— 
‘‘(i) has notified the person owing the 
past-due, legally enforceable tax obligation 
by certified mail with return receipt that 
the local government proposes to take ac-
tion pursuant to this section; 
‘‘(ii) has given such person at least 60 
days to present evidence that all or part of 
such liability is not past-due or not legally 
enforceable; 
‘‘(iii) has considered any evidence pre-
sented by such person and has determined 
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that an amount of such debt is past-due 
and legally enforceable; and 
‘‘(iv) has satisfied such other condi-
tions as the Secretary may prescribe to en-
sure that the determination made under 
clause (iii) is valid and that the local gov-
ernment has made reasonable efforts to ob-
tain payment of such tax obligation. 
‘‘(4) DEFINITION OF PAST-DUE, LEGALLY EN-
FORCEABLE TAX OBLIGATION.—In this subsection, 
the term ‘past-due, legally enforceable tax obligation’ 
means a tax debt— 
‘‘(A)(i) which resulted from— 
‘‘(I) a judgment rendered by a court 
of competent jurisdiction which has deter-
mined an amount of tax to be due; or 
‘‘(II) a determination after an admin-
istrative hearing which has determined an 
amount of tax to be due; and 
‘‘(ii) which is no longer subject to judicial 
review; or 
‘‘(B) which resulted from a tax which has 
been assessed but not collected, the time for re-
determination of which has expired, and which 
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has not been delinquent for more than 10 
years. 
‘‘(5) ELIGIBLE STATE.—In this subsection, the 
term ‘eligible State’ means a State that participates 
in the procedure applicable under section 6402(e) of 
the Internal Revenue Code of 1986 (relating to col-
lection of past-due, legally enforceable State income 
tax obligations). 
‘‘(6) ELIGIBLE LOCAL GOVERNMENT.—In this 
subsection, the term ‘eligible local government’ 
means a municipality described in clause (ii) of sec-
tion 6103(b)(5)(A) of the Internal Revenue Code of 
1986. 
‘‘(7) REGULATIONS.—The Secretary shall issue 
regulations prescribing the time and manner in 
which eligible States (on behalf of local govern-
ments) and eligible local governments must submit 
notices of past-due, legally enforceable tax obliga-
tions and the necessary information that must be 
contained in or accompany such notices. The regula-
tions shall specify the types of taxes and the min-
imum amount of debt to which the reduction proce-
dure established by paragraph (1) may be applied. 
The regulations may require eligible States (on be-
half of local governments) and eligible local govern-
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