Collection of past-due legally enforceable local government tax obligations

(a)

In general

Section 6402 of the Internal Revenue Code of 1986 (relating to authority to make credits or refunds) is amended by redesignating subsections (g) through (l) as subsections (h) through (m), respectively, and by inserting after subsection (f) the following:

(g)

Collection of past-Due legally enforceable local government tax obligations

(1)

In general

Upon receiving notice from any State on behalf of a local government, or from any eligible local government, that a named person owes a past-due, legally enforceable local government tax obligation to the local government, 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 tax obligation; (B)pay the amount by which such overpayment is reduced under subparagraph (A)— (i)to such State for purposes of payment by the State to the local government on behalf of which such State submitted the notice; or (ii)to the eligible local government that submitted the notice; (C)notify the State or eligible local government of the person’s name, taxpayer identification number, address, and the amount collected; and (D)notify the person making such overpayment that the overpayment has been reduced by an amount necessary to satisfy a past-due, legally enforceable tax obligation. (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; (iii)subsection (d) with respect to any past-due, legally enforceable debt owed to a Federal agency; (iv)subsection (e) with respect to any past-due, legally enforceable State income tax obligation; and (v)subsection (f) with respect to any covered unemployment compensation debt; and (B)before such overpayment is credited to the future liability for any Federal internal revenue tax of such person.

If the Secretary receives notice from one or more States or eligible 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

(A)

State

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— (i)has notified the person owing the past-due, legally enforceable local government 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; (ii)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; (iii)has considered any evidence presented by such person and has determined that an amount of such debt is past-due and legally enforceable; and (iv)has satisfied such other conditions as the Secretary may prescribe to ensure that the determination made under clause (iii) is valid and that the local government has made reasonable efforts to obtain payment of such tax obligation. (B)

Eligible local government

No eligible local government may take action under this subsection until the local government— (i)has notified the person owing the past-due, legally enforceable local government tax obligation by certified mail with return receipt that the local government proposes to take action pursuant to this section; (ii)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; (iii)has considered any evidence presented by such person and has determined that an amount of such debt is past-due and legally enforceable; and (iv)has satisfied such other conditions as the Secretary may prescribe to ensure that the determination made under clause (iii) is valid and that the local government has made reasonable efforts to obtain payment of such tax obligation. (4)

Past-due, legally enforceable local government tax obligation

In this subsection, the term past-due, legally enforceable local government 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 to a local government; or (II)a determination after an administrative hearing which has determined an amount of tax to be due to a local government; and (ii)which is no longer subject to judicial review; or (B)which resulted from a tax imposed by a local government 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)

Eligible local government

For purposes of this subsection, the term eligible local government means a municipality described in clause (ii) of section 6103(b)(5)(A). (6)

Regulations

The Secretary shall issue regulations prescribing the time and manner in which States (on behalf of local governments) and eligible local governments must submit notices of past-due, legally enforceable local government 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) and eligible local governments 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. (7)

Erroneous payment to State or local government

Any State or eligible local government receiving notice from the Secretary that an erroneous payment has been made to such State or eligible local government with respect to a notice by the State (on behalf of a local government) or notice by the eligible 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 or eligible local government under such paragraph have been paid to such State or eligible local government).

(b)

Disclosure of return information

Section 6103(l)(10) of the Internal Revenue Code of 1986 (relating to disclosure of certain information to agencies requesting a reduction under subsection (c), (d), or (e) of section 6402) is amended by striking or (f) each place it appears in the text and heading and inserting (f), or (g). (c)

Conforming amendments

(1)Section 6402(a) of the Internal Revenue Code of 1986 is amended by striking and (f) and inserting (f), and (g). (2)Paragraph (2) of section 6402(d) of such Code is amended by striking and (f) and inserting , (f), and (g). (3)Section 6402(h) of such Code, as so redesignated, is amended by striking or (f) and inserting (f), or (g). (4)Section 6402(j) of such Code, as so redesignated, is amended by striking or (f) and inserting (f), or (g). (d)

Effective date

The amendments made by this section shall apply to refunds payable after the date of the enactment of this Act.