‘‘(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; 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 the future liability for any Federal internal 
revenue tax of such person pursuant to sub-
section (b). 
If the Secretary receives notice from a State or 
States of more than one debt subject to paragraph 
(1) or subsection (e) that is owed by a person to 
such State or States, any overpayment by such per-
son shall be applied against such debts in the order 
in which such debts accrued. 
‘‘(3) NOTICE; CONSIDERATION OF EVIDENCE.— 
No State may take action under this subsection until 
such State—
‘‘(A) notifies the person owing the covered 
unemployment compensation debt that the 
State proposes to take action pursuant to this 
section; 
‘‘(B) provides such person at least 60 days 
to present evidence that all or part of such li-
ability is not legally enforceable or due to fraud; 
‘‘(C) considers any evidence presented by 
such person and determines that an amount of 
such debt is legally enforceable and due to 
fraud; 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 covered un-
employment compensation debt. 
‘‘(4) COVERED UNEMPLOYMENT COMPENSATION 
DEBT.—For purposes of this subsection, the term 
‘covered unemployment compensation debt’ means— 
‘‘(A) a past-due debt for erroneous pay-
ment of unemployment compensation due to 
fraud which has become final under the law of 
a State certified by the Secretary of Labor pur-
suant to section 3304 and which remains uncol-
lected; 
‘‘(B) contributions due to the unemploy-
ment fund of a State for which the State has 
determined the person to be liable due to fraud; 
and 
‘‘(C) any penalties and interest assessed on 
such debt. 
‘‘(5) REGULATIONS.— 
‘‘(A) IN
GENERAL.—The Secretary may 
issue regulations prescribing the time and man-
ner in which States must submit notices of cov-
ered unemployment compensation debt and the 
necessary information that must be contained 
in or accompany such notices. The regulations 
may specify the minimum amount of debt to 
which the reduction procedure established by 
paragraph (1) may be applied. 
‘‘(B) FEE PAYABLE TO SECRETARY.—The 
regulations may require States to pay a fee to 
the Secretary, which may be deducted from 
amounts collected, to reimburse the Secretary 
for the cost of applying such procedure. Any fee 
paid to the Secretary pursuant to the preceding 
sentence shall be used to reimburse appropria-
tions which bore all or part of the cost of apply-
ing such procedure. 
‘‘(C) SUBMISSION OF NOTICES THROUGH 
SECRETARY OF LABOR.—The regulations may 
include a requirement that States submit no-
tices of covered unemployment compensation 
debt to the Secretary via the Secretary of Labor 
in accordance with procedures established by 
the Secretary of Labor. Such procedures may 
require States to pay a fee to the Secretary of 
Labor to reimburse the Secretary of Labor for 
the costs of applying this subsection. Any such 
fee shall be established in consultation with the 
Secretary of the Treasury. Any fee paid to the 
Secretary of Labor may be deducted from 
amounts collected and shall be used to reim-
burse the appropriation account which bore all 
or part of the cost of applying this subsection. 
‘‘(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 LEGALLY 
ENFORCEABLE STATE UNEMPLOYMENT COMPENSATION 
DEBT RESULTING FROM FRAUD.— 
(1) GENERAL RULE.—Paragraph (3) of section 
6103(a) of such Code is amended by inserting 
‘‘(10),’’ after ‘‘(6),’’. 
(2) DISCLOSURE TO DEPARTMENT OF LABOR 
AND ITS AGENT.—Paragraph (10) of section 6103(l) 
of such Code is amended— 
(A) by striking ‘‘(c), (d), or (e)’’ each place 
it appears in the heading and text and inserting 
‘‘(c), (d), (e), or (f)’’, 
(B) in subparagraph (A) by inserting ‘‘, to 
officers and employees of the Department of 
Labor and its agent for purposes of facilitating 
the exchange of data in connection with a re-
quest made under subsection (f)(5) of section 
6402,’’ after ‘‘section 6402’’, and 
(C) in subparagraph (B) by inserting ‘‘, 
and any agents of the Department of Labor,’’ 
after ‘‘agency’’ the first place it appears.
(3) SAFEGUARDS.—Paragraph (4) of section 
6103(p) of such Code is amended— 
(A) in the matter preceding subparagraph 
(A), by striking ‘‘(l)(16),’’ and inserting 
‘‘(l)(10), (16),’’; 
(B) in subparagraph (F)(i), by striking 
‘‘(l)(16),’’ and inserting ‘‘(l)(10), (16),’’; and 
(C) in the matter following subparagraph 
(F)(iii)— 
(i) in each of the first two places it 
appears, by striking ‘‘(l)(16),’’ and insert-
ing ‘‘(l)(10), (16),’’; 
(ii) by inserting ‘‘(10),’’ after ‘‘para-
graph (6)(A),’’; and 
(iii) in each of the last two places it 
appears, by striking ‘‘(l)(16)’’ and insert-
ing ‘‘(l)(10) or (16)’’. 
(c) EXPENDITURES FROM STATE FUND.—Section 
3304(a)(4) of such Code is amended— 
(1) in subparagraph (E), by striking ‘‘and’’ 
after the semicolon; 
(2) in subparagraph (F), by inserting ‘‘and’’ 
after the semicolon; and 
(3) by adding at the end the following new sub-
paragraph:
‘‘(G) with respect to amounts of covered 
unemployment compensation debt (as defined in 
section 6402(f)(4)) collected under section 
6402(f)— 
‘‘(i) amounts may be deducted to pay 
any fees authorized under such section; 
and 
‘‘(ii) the penalties and interest de-
scribed in section 6402(f)(4)(B) may be 
transferred to the appropriate State fund 
into which the State would have deposited 
such amounts had the person owing the 
debt paid such amounts directly to the 
State;’’. 
(d) CONFORMING AMENDMENTS.— 
(1) Subsection (a) of section 6402 of such Code 
is amended by striking ‘‘(c), (d), and (e),’’ and in-
serting ‘‘(c), (d), (e), and (f)’’. 
(2) Paragraph (2) of section 6402(d) of such 
Code is amended by striking ‘‘and before such over-
payment is reduced pursuant to subsection (e)’’ and 
inserting ‘‘and before such overpayment is reduced 
pursuant to subsections (e) and (f)’’.