I 
110TH CONGRESS 
1ST SESSION H. R. 1865 
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 
APRIL 17, 2007 
Mr. TOM DAVIS of Virginia (for himself, Mr. TURNER, Mr. TOWNS, Mr. 
MORAN of Virginia, and Mr. BILBRAY) introduced the following bill; 
which was referred to the Committee on Oversight and Government Re-
form, and in addition to the Committee on Ways and Means, for a period 
to be subsequently determined by the Speaker, in each case for consider-
ation 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. PILOT PROGRAM FOR EXPANDING TAX RE-
FUND REDUCTION PROVISION TO INCLUDE 
CERTAIN LOCAL TAX DEBT. 
(a) PILOT PROGRAM.—Section 3720A of title 31, 
United States Code (relating to reduction of tax refund 
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by amount of debt) is amended by adding at the end the 
following: 
‘‘(j) PILOT PROGRAM FOR COLLECTION OF PAST- 
DUE LEGALLY ENFORCEABLE LOCAL GOVERNMENT TAX 
OBLIGATIONS.— 
‘‘(1) IN GENERAL.—Upon receiving notice dur-
ing the pilot program period from any eligible State 
on behalf of a local government that a named person 
owes a past-due, legally enforceable tax obligation 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 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 for purposes of payment by the State 
to the local government on behalf of which the 
State submitted the notice; 
‘‘(C) notify the State of the person’s name, 
taxpayer identification number, address, and 
the amount collected; and 
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‘‘(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 
‘‘(ii) before such overpayment is cred-
ited to the future liability for any Federal 
internal revenue tax of such person. 
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‘‘(B) If the Secretary receives notice from 
one or more States of more than one tax obliga-
tion subject to paragraph (1) that is owed by 
such person to any local government, any over-
payment by such person shall be applied 
against such debts in the order in which such 
notices were filed. 
‘‘(3) NOTICE; CONSIDERATION OF EVIDENCE.— 
No State may take action under this subsection on 
behalf of a local government until the local govern-
ment certifies to the State that the local govern-
ment— 
‘‘(A) has notified the person owing the 
past-due, legally enforceable tax obligation by 
certified mail with return receipt that the State 
proposes to take action pursuant to this section; 
‘‘(B) 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 enforce-
able; 
‘‘(C) 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 
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‘‘(D) has satisfied such other conditions as 
the Secretary may prescribe to ensure that the 
determination made under subparagraph (C) is 
valid and that the local government has made 
reasonable efforts to obtain 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 
has not been delinquent for more than 10 
years. 
‘‘(5) ELIGIBLE STATE.— 
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‘‘(A) In this subsection, the term ‘eligible 
State’ means a State selected by the Secretary 
under subparagraph (B). 
‘‘(B) The Secretary shall select at least 
three, and not more than five, States to partici-
pate in the pilot program under this subsection. 
The Secretary may consider a State for selec-
tion only if it participates in the procedure ap-
plicable under section 6402(e) of the Internal 
Revenue Code of 1986 (relating to collection of 
past-due, legally enforceable State income tax 
obligations). 
‘‘(C) The Secretary should consider the fol-
lowing States for selection under this para-
graph: 
‘‘(i) Illinois. 
‘‘(ii) Iowa. 
‘‘(iii) Louisiana. 
‘‘(iv) New York. 
‘‘(v) Ohio. 
‘‘(vi) Virginia. 
‘‘(6) REGULATIONS.—The Secretary shall issue 
regulations prescribing the time and manner in 
which States must submit notices of past-due, legally 
enforceable tax obligations and the necessary infor-
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mation that must be contained in or accompany 
such notices. The regulations shall specify the types 
of taxes and the minimum amount of debt to which 
the reduction procedure established by paragraph 
(1) may be applied. The regulations may require 
States to pay a fee to reimburse the Secretary for 
the cost of applying such procedure, and such fee 
may be reimbursed by local governments to States in 
accordance with applicable State law. Any fee paid 
to the Secretary pursuant to the preceding sentence 
shall be used to reimburse appropriations which bore 
all or part of the cost of applying such procedure. 
‘‘(7) ERRONEOUS
PAYMENT
TO
STATE.—Any 
State receiving notice from the Secretary that an er-
roneous payment has been made to such State with 
respect to a notice by the State on behalf of a local 
government 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 re-
gard to whether any other amounts payable to such 
State under such paragraph have been paid to such 
State). 
‘‘(8) PILOT PROGRAM.— 
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‘‘(A) PERIOD OF PILOT PROGRAM.—Sub-
ject to subparagraph (B), this subsection shall 
apply only during 2009 and 2010. 
‘‘(B) EXTENSION
AND
EXPANSION
OF 
PILOT PROGRAM.— 
‘‘(i) This subsection applies after 
2010 to any State described in clause (ii) 
unless, before December 31, 2010, the Sec-
retary submits to Congress a report con-
taining a determination that the pilot pro-
gram has negatively affected Federal rev-
enue or Federal revenue collection proc-
esses. 
‘‘(ii) In applying this subsection after 
2010, the term ‘eligible State’ means any 
State participating in the procedure appli-
cable under section 6402(e) of the Internal 
Revenue Code of 1986 (relating to collec-
tion of past-due, legally enforceable State 
income tax obligations). 
‘‘(k) 
TREATMENT
OF
PAYMENTS
MADE
TO 
STATES.—The Secretary may provide that, for the pur-
poses of determining interest, the payment of any amount 
withheld under subsection (j) to a State shall be treated 
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as a payment to the person or persons making the over-
payment.’’. 
(b) DISCLOSURE
OF CERTAIN INFORMATION
TO 
AGENCIES OF STATES REQUESTING REFUND OFFSETS 
FOR PAST-DUE, LEGALLY ENFORCEABLE TAX OBLIGA-
TIONS.—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 
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