[Congressional Bills 104th Congress]
[From the U.S. Government Publishing Office]
[S. 1408 Introduced in Senate (IS)]







104th CONGRESS
  1st Session
                                S. 1408

 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 SENATE OF THE UNITED STATES

                            November 9, 1995

   Mr. Hatch introduced the following bill; which was read twice and 
                  referred to the Committee on Finance

_______________________________________________________________________

                                 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 Representatives of the 
United States of America in Congress assembled,

SECTION 1. OFFSET OF PAST-DUE, LEGALLY ENFORCEABLE STATE TAX 
              OBLIGATIONS AGAINST OVERPAYMENTS.

    (a) In General.--Section 6402 of the Internal Revenue Code of 1986 
is amended by redesignating subsections (e) through (i) as subsections 
(f) through (j), respectively, and by inserting after subsection (d) 
the following new subsection:
    ``(e) Collection of Past-Due, Legally Enforceable State Tax 
Obligations.--
            ``(1) In general.--Upon receiving notice from any State 
        that a named person owes a past-due, legally 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 overpayment payable 
                to such person by the amount of such State tax 
                obligation;
                    ``(B) pay the amount by which such overpayment is 
                reduced under subparagraph (A) to such State and notify 
                such State of such person's name, taxpayer 
                identification number, address, and the amount 
                collected; and
                    ``(C) notify the person making such overpayment 
                that the overpayment has been reduced 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 addresses of each person filing such 
        return.
            ``(2) Priorities for offset.--Any overpayment 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 overpayment,
                            ``(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 subsection (b).
        If the Secretary receives notice from one or more State 
        agencies of more than one debt subject to paragraph (1) that is 
        owed by such person to such an agency, any overpayment by such 
        person 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 past-due State 
                tax liability that the State proposes to take action 
                pursuant to this section,
                    ``(B) gives such person at least 60 days to present 
                evidence that all or part of such liability is not 
                past-due or not legally enforceable,
                    ``(C) considers any evidence presented by such 
                person and determines that an amount of such debt is 
                past-due and legally enforceable, and
                    ``(D) satisfies such other conditions as the 
                Secretary may prescribe to ensure that the 
                determination made under subparagraph (C) is valid and 
                that the State has made reasonable efforts to obtain 
                payment of such State tax obligation.
            ``(4) Past-due, legally enforceable state tax obligation.--
        For purposes of this subsection, the term `past-due, legally 
        enforceable State tax obligation' means a debt--
                    ``(A)(i) which resulted from--
                            ``(I) a judgment rendered by a court of 
                        competent jurisdiction which has determined an 
                        amount of State tax to be due, or
                            ``(II) a determination after an 
                        administrative 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 types 
        of State 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. 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.
            ``(6) Erroneous payment to state.--Any State receiving 
        notice from the Secretary that an erroneous 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) Paragraph (10) of section 6103(l) of the Internal 
        Revenue Code of 1986 is amended by striking ``(c) or (d)'' and 
        inserting ``(c), (d), or (e)''.
            (2) The paragraph heading for such paragraph (10) is 
        amended by striking ``section 6402(c) or 6402(d)'' and 
        inserting ``subsection (c), (d), or (e) of section 6402''.
    (c) Conforming Amendments.--
            (1) Subsection (a) of section 6402 of the Internal Revenue 
        Code of 1986 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 overpayment'' and 
        inserting ``and before such overpayment is reduced pursuant to 
        subsection (e) and before 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 inserting 
                ``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 ``subsection (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 December 31, 1996.
                                 <all>