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 Commit-
tee 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 past-
due, legally enforceable State tax obligations of such
person.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. OFFSET OF PAST-DUE, LEGALLY ENFORCEABLE
STATE TAX OBLIGATIONS AGAINST OVERPAY-
MENTS.
(a) IN GENERAL.—Section 6402 of the Internal Rev-
enue Code of 1986 is amended by redesignating sub-
sections (e) through (i) as subsections (f) through (j), re-
spectively, and by inserting after subsection (d) the follow-
ing new subsection:
‘‘(e) COLLECTION
OF PAST-DUE, LEGALLY EN-
FORCEABLE STATE TAX OBLIGATIONS.—
‘‘(1) IN GENERAL.—Upon receiving notice from
any State that a named person owes a past-due, le-
gally enforceable State tax obligation to such State,
the Secretary shall, under such conditions as may be
prescribed by the Secretary—
‘‘(A) reduce the amount of any overpay-
ment payable to such person by the amount of
such State tax obligation;
‘‘(B) pay the amount by which such over-
payment is reduced under subparagraph (A) to
such State and notify such State of such per-
son’s name, taxpayer identification number, ad-
dress, and the amount collected; and
‘‘(C) notify the person making such over-
payment that the overpayment has been re-
duced by an amount necessary to satisfy a past-
due, legally enforceable State tax obligation.
If an offset is made pursuant to a joint return, the
notice under subparagraph (B) shall include the
names, taxpayer identification numbers and address-
es of each person filing such return.
‘‘(2) PRIORITIES FOR OFFSET.—Any overpay-
ment by a person shall be reduced pursuant to this
subsection—
‘‘(A) after such overpayment is reduced
pursuant to—
‘‘(i) subsection (a) with respect to any
liability for any internal revenue tax on the
part of the person who made the overpay-
ment,
‘‘(ii) subsection (c) with respect to
past-due support (defined in section 464(c)
of the Social Security Act) assigned to the
State 
under 
section 
402(a)(26) 
or
471(a)(17) of the Social Security Act, and
‘‘(iii) subsection (d) with respect to
any past-due, legally enforceable debt owed
to a Federal agency, and
‘‘(B) before such overpayment is credited
to—
such debt is past-due and legally enforceable,
and
‘‘(D) satisfies such other conditions as the
Secretary may prescribe to ensure that the de-
termination made under subparagraph (C) is
valid and that the State has made reasonable
efforts to obtain payment of such State tax ob-
ligation.
‘‘(4) PAST-DUE, LEGALLY ENFORCEABLE STATE
TAX OBLIGATION.—For purposes of this subsection,
the term ‘past-due, legally enforceable State tax obli-
gation’ means a debt—
‘‘(A)(i) which resulted from—
‘‘(I) a judgment rendered by a court
of competent jurisdiction which has deter-
mined an amount of State tax to be due,
or
‘‘(II) a determination after an admin-
istrative hearing which has determined an
amount of State tax to be due, and
‘‘(ii) which is no longer subject to judicial
review, or
‘‘(B) which resulted from a State tax
which has been assessed but not collected, the
time for redetermination of which has expired,
and which has not been delinquent for more
than 10 years.
For purposes of this paragraph, the term ‘State tax’
includes any local tax administered by the chief tax
administration agency of the State.
‘‘(5) REGULATIONS.—The Secretary shall issue
regulations prescribing the time and manner in
which States must submit notices of past-due, legally
enforceable State tax obligations and the necessary
information that must be contained in or accompany
such notices. The regulations shall specify the mini-
mum amount of debt to which the reduction proce-
dure established by paragraph (1) may be applied
and that the State may pay a fee to reimburse the
Secretary for the cost of applying such procedure.
Any fee paid to the Secretary pursuant to the pre-
ceding sentence shall be used to reimburse appro-
priations which bore all or part of the cost of apply-
ing such procedure.
‘‘(6) ERRONEOUS
PAYMENT
TO
STATE.—Any
State receiving notice from the Secretary that an er-
roneous payment has been made to such State under
paragraph (1) shall pay promptly to the Secretary,
in accordance with such regulations as the Secretary
may prescribe, an amount equal to the amount of
such erroneous payment (without regard to whether
any other amounts payable to such State under such
paragraph have been paid to such State).’’
(b) DISCLOSURE
OF CERTAIN INFORMATION
TO
STATES REQUESTING REFUND OFFSETS FOR PAST-DUE,
LEGALLY ENFORCEABLE STATE TAX OBLIGATIONS.—
(1) Subsection (d) of section 6103 of such Code
is amended by adding at the end thereof the follow-
ing new paragraph:
‘‘(5) DISCLOSURE
OF
CERTAIN
INFORMATION
TO STATES REQUESTING A REDUCTION UNDER SEC-
TION 6402(e).—
‘‘(A) RETURN
INFORMATION
FROM
THE
INTERNAL REVENUE SERVICE.—The Secretary
may, upon written request, disclose to State tax
officials or employees of a State seeking a re-
duction under subsection (e) of section 6402—
‘‘(i) the fact that a reduction has been
made or has not been made under such
subsection with respect to any person;
‘‘(ii) the amount of such reduction;
and
‘‘(iii) taxpayer identifying information
of the person against whom a reduction
was made or not made.
‘‘(B) RESTRICTION ON USE OF DISCLOSED
INFORMATION.—Any State tax official or em-
ployee of a State receiving return information
under subparagraph (A) shall use such informa-
tion only for the purposes of, and to the extent
necessary in, establishing appropriate agency
records or in defense of any litigation or admin-
istrative procedure ensuing from a reduction
made under section 6402(e).’’
(2) Section 6103(p)(3)(A) of such Code is
amended by striking out ‘‘(c), (e)’’ and inserting in
lieu thereof ‘‘(c), (d)(5), (e)’’.
(3) Clause (i) of section 6103(p)(3)(C) of such
Code is amended by inserting ‘‘(other than para-
graph (5))’’ after ‘‘(d)’’.
(c) CONFORMING AMENDMENTS.—
(1) Subsection (a) of section 6402 of such Code
is amended by striking ‘‘(c) and (d)’’ and inserting
‘‘(c), (d), and (e)’’.
(2) Paragraph (2) of section 6402(d) of such
Code is amended by striking ‘‘and before such over-
payment’’ and inserting ‘‘and before such overpay-
ment is reduced pursuant to subsection (e) and be-
fore such overpayment’’.
(3) Subsection (f) of section 6402 of such Code,
as redesignated by subsection (a), is amended—
(A) by striking ‘‘(c) or (d)’’ and inserting
‘‘(c), (d), or (e)’’, and
(B) by striking ‘‘Federal agency’’ and in-
serting ‘‘Federal agency or State’’.
(4) Subsection (h) of section 6402 of such
Code, as redesignated by subsection (a), is amended
by striking ‘‘subsection (c)’’ and inserting ‘‘sub-
section (c) or (e)’’.
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to refunds payable under section
6402 of the Internal Revenue Code of 1986 after Decem-
ber 31, 1994.
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