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.
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 STATE AND 
LOCAL TAX DEBT. 
(a) Section 3720A of title 31, United States Code (re-
lating to reduction of tax refund by amount of debt) is 
amended by adding at the end the following:
‘‘(j) COLLECTION OF PAST-DUE LEGALLY ENFORCE-
ABLE STATE AND LOCAL GOVERNMENT TAX OBLIGA-
TIONS.—(1) Upon receiving notice from any State or local 
government that a named person owes a past-due, legally 
enforceable tax obligation to such government (other than 
an income tax debt to a State 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 payable 
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 to the 
State or local government; 
‘‘(C) notify the State or local government of the 
person’s name, taxpayer identification number, ad-
dress, and the amount collected; and 
‘‘(D) notify the person due the refund that the 
refund has been reduced by an amount necessary to 
satisfy a past-due, legally enforceable tax obligation. 
‘‘(2) PRIORITIES FOR OFFSET.—(A) Any overpay-
ment (as defined in section 6401 of the Internal Revenue 
Code of 1986) by a person shall be reduced pursuant to 
this subsection—
‘‘(i) after such overpayment is reduced (I) with 
respect to any liability for any internal revenue tax 
on the part of the person who made the overpay-
ment; (II) with respect to past-due support (as de-
fined in section 464(c) of the Social Security Act); 
and (III) with respect to any past-due, legally en-
forceable debt owed to a Federal agency; and 
‘‘(ii) before such overpayment is credited to the 
future liability for any Federal internal revenue tax 
of such person. 
‘‘(B) If the Secretary receives notice from one or 
more agencies of State or local governments of more than 
one tax obligation subject to paragraph (1) that is owed 
by such person to any such agency, including any claim 
by a State for a past-due legally enforceable income tax 
obligation, any overpayment by such person shall be ap-
plied against such debts in the order in which such notices 
were filed. 
‘‘(3) NOTICE; CONSIDERATION OF EVIDENCE.—No 
State or local government may take action under this sub-
section until such State or local government—
‘‘(A) notifies the person owing the past-due, le-
gally enforceable tax obligation by first-class mail at 
the taxpayer’s last known address that the State or
‘‘(ii) which is no longer subject to judicial re-
view; or 
‘‘(B) which resulted from a tax which has been 
assessed but not collected, the time for redetermina-
tion of which has expired, and which has not been 
delinquent for more than 10 years. 
‘‘(5) REGULATIONS.—The Secretary shall issue regu-
lations prescribing the time and manner in which States 
and local governments must submit notices of past-due, 
legally enforceable tax obligations and the necessary infor-
mation that must be contained in or accompany such no-
tices. The regulations shall specify the types of taxes and 
the minimum amount of debt to which the reduction pro-
cedure established by paragraph (1) may be applied. The 
regulations may require States and local governments to 
pay a fee to reimburse the Secretary for the cost of apply-
ing such procedure. Any fee paid to the Secretary pursu-
ant to the preceding sentence shall be used to reimburse 
appropriations which bore all or part of the cost of apply-
ing such procedure. 
‘‘(6) ERRONEOUS
PAYMENT
TO
STATE
OR
LOCAL 
GOVERNMENT.—Any State or local government receiving 
notice from the Secretary that an erroneous payment has 
been made to such State or local government under para-
graph (1) shall pay promptly to the Secretary, in accord-
ance with such regulations as the Secretary may prescribe, 
an amount equal to the amount of such erroneous pay-
ment (without regard to whether any other amounts pay-
able to such State or local government under such para-
graph have been paid to such State or local government). 
‘‘(k) TREATMENT OF PAYMENTS MADE TO STATE 
AND LOCAL GOVERNMENTS.—The Secretary may provide 
that, for the purposes of determining interest, the pay-
ment of any amount withheld under subsection (j) to a 
State or local government shall be treated as a payment 
to the person or persons making the overpayment.’’. 
(b) DISCLOSURE
OF CERTAIN INFORMATION
TO 
AGENCIES OF STATES AND LOCAL GOVERNMENTS RE-
QUESTING REFUND OFFSETS FOR PAST-DUE, LEGALLY 
ENFORCEABLE TAX OBLIGATIONS.—Paragraph (10) of 
section 6103(l) of the Internal Revenue Code of 1986 is 
amended—
(1) in the paragraph heading, by inserting after 
‘‘6402’’ the following: ‘‘OR UNDER SUBSECTION (J) 
OF SECTION 3720A OF TITLE 31, UNITED STATES 
CODE’’; 
(2) in subparagraph (A), by inserting after 
‘‘6402’’ the following: ‘‘ or subsection (j) of section 
3720A of title 31, United States Code,’’; and 
(3) in subparagraph (B)—
(A) by striking ‘‘section 6402 is’’ and in-
serting ‘‘section 6402 or under subsection (j) of 
section 3720A of title 31, United States Code, 
is’’; and 
(B) by striking ‘‘section 6402.’’ and insert-
ing ‘‘section 6402 or under subsection (j) of 
section 3720A of title 31, United States Code.’’.
Æ