[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3498 Introduced in House (IH)]







109th CONGRESS
  1st Session
                                H. R. 3498

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

                             July 28, 2005

 Mr. Turner (for himself, Mr. Tom Davis of Virginia, and Mr. Moran of 
  Virginia) introduced the following bill; which was referred to the 
  Committee on Government Reform, and in addition to the Committee on 
   Ways and Means, for a period to be subsequently determined by the 
  Speaker, in each case for consideration 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 Representatives of the 
United States of America in Congress assembled,

SECTION 1. EXPANSION OF TAX REFUND REDUCTION PROVISION TO INCLUDE 
              CERTAIN LOCAL TAX DEBT.

    (a) Section 3720A of title 31, United States Code (relating to 
reduction of tax refund by amount of debt) is amended by adding at the 
end the following:
    ``(j) Collection of Past-Due Legally Enforceable Local Government 
Tax Obligations.--(1) Upon receiving notice from any State on behalf of 
a local government that a named person owes a past-due, legally 
enforceable tax obligation to such 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
            ``(D) notify the person due the refund that the refund has 
        been reduced by an amount necessary to satisfy a past-due, 
        legally enforceable tax obligation.
    ``(2) Priorities for Offset.--(A) Any overpayment (as defined in 
section 6401 of the Internal Revenue Code of 1986) by a person shall be 
reduced pursuant to this subsection--
            ``(i) after such overpayment is reduced (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 defined in section 464(c) of the Social Security 
        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 income tax obligation (as 
        defined in section 6402(e) of the Internal Revenue Code of 
        1986); and
            ``(ii) before such overpayment is credited to the future 
        liability for any Federal internal revenue tax of such person.
    ``(B) If the Secretary receives notice from one or more States (on 
behalf of local governments) of more than one tax obligation subject to 
paragraph (1) that is owed by such person to any local government, any 
overpayment 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 
government certifies to the State that the local government--
            ``(A) has notified the person owing the past-due, legally 
        enforceable tax obligation by certified mail with return 
        receipt that the State (on behalf of the local government) 
        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 enforceable;
            ``(C) has considered any evidence presented by such person 
        and has determined that an amount of such debt is past-due and 
        legally enforceable; and
            ``(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 Enforceable 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 determined an amount of tax to 
                be due; or
                    ``(II) a determination after an administrative 
                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 redetermination of which has 
        expired, and which has not been delinquent for more than 10 
        years.
    ``(5) Regulations.--The Secretary shall issue regulations 
prescribing the time and manner in which States (on behalf of local 
governments) must submit notices of past-due, legally enforceable tax 
obligations and the necessary information 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 (on behalf of local governments) 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.
    ``(6) Erroneous Payment to State.--Any State receiving notice from 
the Secretary that an erroneous 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 regard to whether any 
other amounts payable to such State under such paragraph have been paid 
to such State).
    ``(k) Treatment of Payments Made to States.--The Secretary may 
provide that, for the purposes of determining interest, the payment of 
any amount withheld under subsection (j) to a State (on behalf of a 
local government) shall be treated as a payment to the person or 
persons making the overpayment.''.
    (b) Disclosure of Certain Information to Agencies of States 
Requesting Refund Offsets for Past-Due, Legally Enforceable Tax 
Obligations.--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 inserting 
                ``section 6402 or under subsection (j) of section 3720A 
                of title 31, United States Code, is''; and
                    (B) by striking ``section 6402.'' and inserting 
                ``section 6402 or under subsection (j) of section 3720A 
                of title 31, United States Code.''.
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