A bill to amend the American Rescue Plan Act of 2021 to provide for protection of recovery rebates.
Bill: S.823 | Sponsor: Sen. Brown, Sherrod (D-OH)
Policy area: Taxation

Summary:
This bill prohibits the attachment of a 2021 recovery rebate by legal process, including assignment, levy, or garnishment. A 2021 recovery rebate is a stimulus payment provided by the American Rescue Plan of 2021 for individual taxpayers and their dependents who have been affected by the COVID-19 (i.e., coronavirus disease 2019) pandemic.

To amend the American Rescue Plan Act of 2021 to provide for protection 
                          of recovery rebates.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. PROTECTION OF 2021 RECOVERY REBATES.

    (a) In General.--Subsection (c) of section 9601 of the American 
Rescue Plan Act of 2021 (Public Law 117-2) is amended--
            (1) in paragraph (2), by striking subparagraphs (A) and (B) 
        and inserting the following:
                    ``(A) subject to reduction or offset pursuant to 
                section 3716 or 3720A of title 31, United States Code, 
                or similar authority permitting offset,
                    ``(B) subject to reduction or offset pursuant to 
                subsection (c), (d), (e), or (f) of section 6402 of the 
                Internal Revenue Code of 1986, or
                    ``(C) reduced or offset by other assessed Federal 
                taxes that would otherwise be subject to levy or 
                collection.'', and
            (2) by adding at the end the following new paragraph:
            ``(4) Assignment of benefits.--
                    ``(A) In general.--The right of any person to any 
                applicable payment shall not be transferable or 
                assignable, at law or in equity, and no applicable 
                payment shall be subject to, execution, levy, 
                attachment, garnishment, or other legal process, or the 
                operation of any bankruptcy or insolvency law.
                    ``(B) Encoding of payments.--In the case of an 
                applicable payment described in subparagraph 
                (E)(iii)(I) that is certified for payment after the 
                date of the enactment of this paragraph under section 
                3528 of title 31, United States Code, and that is paid 
                electronically by direct deposit through the Automated 
                Clearing House (ACH) network, the Secretary of the 
                Treasury (or the Secretary's delegate) shall--
                            ``(i) issue the payment using a unique 
                        identifier that is reasonably sufficient to 
                        allow a financial institution to identify the 
                        payment as an applicable payment, and
                            ``(ii) further encode the payment pursuant 
                        to the same specifications as required for a 
                        benefit payment defined in section 212.3 of 
                        title 31, Code of Federal Regulations.
                    ``(C) Garnishment.--
                            ``(i) Encoded payments.--In the case of a 
                        garnishment order that applies to an account 
                        that has received an applicable payment that is 
                        encoded as provided in subparagraph (B), a 
                        financial institution shall follow the 
                        requirements and procedures set forth in part 
                        212 of title 31, Code of Federal Regulations, 
                        except--
                                    ``(I) notwithstanding section 212.4 
                                of title 31, Code of Federal 
                                Regulations (and except as provided in 
                                subclause (II)), a financial 
                                institution shall not fail to follow 
                                the procedures of sections 212.5 and 
                                212.6 of such title with respect to a 
                                garnishment order merely because such 
                                order has attached, or includes, a 
                                notice of right to garnish Federal 
                                benefits issued by a State child 
                                support enforcement agency, and
                                    ``(II) a financial institution 
                                shall not, with regard to any 
                                applicable payment, be required to 
                                provide the notice referenced in 
                                sections 212.6 and 212.7 of title 31, 
                                Code of Federal Regulations.
                            ``(ii) Other payments.--In the case of a 
                        garnishment order (other than an order that has 
                        been served by the United States) that has been 
                        received by a financial institution and that 
                        applies to an account into which an applicable 
                        payment that has not been encoded as provided 
                        in subparagraph (B) has been deposited 
                        electronically on any date during the lookback 
                        period or into which an applicable payment that 
                        has been deposited by check on any date in the 
                        lookback period, the financial institution, 
                        upon the request of the account holder, shall 
                        treat the amount of the funds in the account at 
                        the time of the request, up to the amount of 
                        the applicable payment (in addition to any 
                        amounts otherwise protected under part 212 of 
                        title 31, Code of Federal Regulations), as 
                        exempt from a garnishment order without 
                        requiring the consent of the party serving the 
                        garnishment order or the judgment creditor.
                            ``(iii) Liability.--A financial institution 
                        that acts in good faith in reliance on clauses 
                        (i) or (ii) shall not be subject to liability 
                        or regulatory action under any Federal or State 
                        law, regulation, court or other order, or 
                        regulatory interpretation for actions 
                        concerning any applicable payments.
                    ``(D) No reclamation rights.--This paragraph shall 
                not alter the status of applicable payments as tax 
                refunds or other nonbenefit payments for purpose of any 
                reclamation rights of the Department of the Treasury or 
                the Internal Revenue Service as per part 210 of title 
                31, Code of Federal Regulations.
                    ``(E) Definitions.--For purposes of this 
                paragraph--
                            ``(i) Account holder.--The term `account 
                        holder' means a natural person whose name 
                        appears in a financial institution's records as 
                        the direct or beneficial owner of an account.
                            ``(ii) Account review.--The term `account 
                        review' means the process of examining deposits 
                        in an account to determine if an applicable 
                        payment has been deposited into the account 
                        during the lookback period. The financial 
                        institution shall perform the account review 
                        following the procedures outlined in section 
                        212.5 of title 31, Code of Federal Regulations 
                        and in accordance with the requirements of 
                        section 212.6 of title 31, Code of Federal 
                        Regulations.
                            ``(iii) Applicable payment.--The term 
                        `applicable payment' means--
                                    ``(I) any advance refund amount 
                                paid pursuant to section 6428B(g) of 
                                the Internal Revenue Code of 1986,
                                    ``(II) any payment made by a 
                                possession of the United States with a 
                                mirror code tax system (as defined in 
                                subsection (b) of this section) 
                                pursuant to such subsection which 
                                corresponds to a payment described in 
                                subclause (I), and
                                    ``(III) any payment made by a 
                                possession of the United States without 
                                a mirror code tax system (as so 
                                defined) pursuant to subsection (b) of 
                                this section.
                            ``(iv) Garnishment.--The term `garnishment' 
                        means execution, levy, attachment, garnishment, 
                        or other legal process.
                            ``(v) Garnishment order.--The term 
                        `garnishment order' means a writ, order, 
                        notice, summons, judgment, levy, or similar 
                        written instruction issued by a court, a State 
                        or State agency, a municipality or municipal 
                        corporation, or a State child support 
                        enforcement agency, including a lien arising by 
                        operation of law for overdue child support or 
                        an order to freeze the assets in an account, to 
                        effect a garnishment against a debtor.
                            ``(vi) Lookback period.--The term `lookback 
                        period' means the two-month period that begins 
                        on the date preceding the date of account 
                        review and ends on the corresponding date of 
                        the month two months earlier, or on the last 
                        date of the month two months earlier if the 
                        corresponding date does not exist.''.
    (b) Effective Date.--The amendment made by this section shall take 
effect on the date of the enactment of this Act.
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