[House Report 112-630]
[From the U.S. Government Publishing Office]


112th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 2d Session                                                     112-630

======================================================================

 
 AMENDING TITLE 5, UNITED STATES CODE, TO MAKE CLEAR THAT ACCOUNTS IN 
   THE THRIFT SAVINGS FUND ARE SUBJECT TO CERTAIN FEDERAL TAX LEVIES

                                _______
                                

 July 30, 2012.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

   Mr. Issa, from the Committee on Oversight and Government Reform, 
                        submitted the following

                              R E P O R T

                        [To accompany H.R. 4365]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Oversight and Government Reform, to whom 
was referred the bill (H.R. 4365) to amend title 5, United 
States Code, to make clear that accounts in the Thrift Savings 
Fund are subject to certain Federal tax levies, having 
considered the same, report favorably thereon with an amendment 
and recommend that the bill as amended do pass.

                                CONTENTS

                                                                   Page
Committee Statement and Views....................................     2
Section-by-Section...............................................     3
Explanation of Amendments........................................     3
Committee Consideration..........................................     3
Application of Law to the Legislative Branch.....................     3
Statement of Oversight Findings and Recommendations of the 
  Committee......................................................     4
Statement of General Performance Goals and Objectives............     4
Federal Advisory Committee Act...................................     4
Unfunded Mandate Statement.......................................     4
Committee Estimate...............................................     4
Budget Authority and Congressional Budget Office Cost Estimate...     4
Changes in Existing Law Made by the Bill as Reported.............     6

    The amendment is as follows:
    At the end of the bill, add the following:

SEC. 2. DISPOSITION OF AMOUNTS.

  Any potential revenue gain attributable to the enactment of 
this Act, as determined by the Director of the Congressional 
Budget Office--
          (1) shall be deposited in the general fund of the 
        Treasury of the United States; and
          (2) shall be used solely for purposes of deficit 
        reduction.

                     Committee Statement and Views


                          PURPOSE AND SUMMARY

    H.R. 4365 provides the Internal Revenue Service (IRS) 
explicit authority to levy an individual's Thrift Savings Plan 
(TSP) account. Levy is the IRS's administrative authority to 
seize a taxpayer's property, or right to property, to pay the 
taxpayer's liability. The legislation would bring the TSP in 
line with private sector 401(k) savings plans, which are 
already subject to levy.

                  BACKGROUND AND NEED FOR LEGISLATION

    Failure to pay federal taxes is a violation of the 
Government Code of Ethics, which prescribes that federal 
employees ``satisfy in good faith their obligations as good 
citizens, including all just financial obligations, especially 
those such as Federal, State or local taxes that are imposed by 
law.''\1\
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    \1\5 CFR 2635.809.
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    Despite this requirement to comply with federal tax law, 
279,000 federal employees owed $3.4 billion in federal taxes by 
the end of 2010.\2\ When an employee in the private sector is 
delinquent on his or her taxes, the IRS can levy the person's 
401(k) account. Levy is the legal process by which the IRS 
orders a third party to turn over property in its possession 
that belongs to the delinquent taxpayer named in a notice of 
levy.\3\ The IRS may establish a levy by attaching a tax lien 
to a taxpayer's property as long as that property is not exempt 
from levy, the IRS has provided notice of its intent to levy, 
and the IRS provides notice to the taxpayer of his or her right 
to an administrative hearing at least 30 days before it applies 
the levy.
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    \2\Internal Revenue Service, Federal Employee/Retiree Delinquency 
Initiative (FERDI), Civilian/Military/Retiree Detail Report (2010).
    \3\26 U.S.C. Sec. 6331(a).
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    The TSP's governing statute includes an anti-alienation 
provision that protects funds from execution, levy attachment, 
garnishment, or other legal process, except to provide for 
child support, alimony payments, restitution orders, certain 
forfeitures, or certain obligations of the TSP Executive 
Director.\4\ The anti-alienation provision does not 
specifically mention the authority for the IRS to levy an 
individual's TSP account. In the absence of such explicit 
authorization in title 5, the Federal Retirement Thrift 
Investment Board has not honored notice of levies against TSP 
accounts.\5\
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    \4\5 U.S.C. Sec. 8437(e)(3).
    \5\Statement of Gregory T. Long, Executive Director, Federal 
Retirement Thrift Investment Board, Before the House Subcommittee on 
Federal Workforce, U.S. Postal Service and Labor Policy, 112th Cong., 
1-12 (July 27, 2011). Print.
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    The IRS has asserted that IRS levies on TSP accounts should 
be honored. In May 2010, the Department of Justice Office of 
Legal Counsel provided a formal opinion which states the IRS is 
allowed to levy TSP accounts under the Internal Revenue Code, 
notwithstanding the anti-alienation provision in title 5 that 
governs TSP accounts.\6\
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    \6\Office of Legal Counsel, U.S. Department of Justice, 
Applicability of Tax Levies Under 26 U.S.C. Sec. 6334 To Thrift Savings 
Plan Accounts, 34 Opinions of Legal Counsel, (May 3, 2010).
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    H.R. 4365 amends Section 8437(e)(3) of title 5, United 
States Code to clarify that monies in the Thrift Savings Fund 
accounts of federal employees are subject to IRS levy for 
payment of delinquent taxes, in addition to the other 
provisions currently enumerated.

                          LEGISLATIVE HISTORY

    The Federal Employees' Retirement System Act of 1986\7\ 
(FERSA) provides that ``[e]xcept as provided in paragraph (3), 
sums in the Thrift Savings Fund may not be assigned or 
alienated and are not subject to execution, levy, attachment, 
garnishment, or other legal process. . . .''\8\ FERSA excepted 
from this provision court orders for child support, alimony and 
enforcement of a judgment for physical, sexual, or emotional 
abuse of a child.\9\ FERSA contained one other exception to the 
anti-alienation prohibition outside of paragraph 5 U.S.C. 
8437(e)(3), for a court ordered property settlement in 
connection with a divorce, legal separation, or annulment.\10\ 
FERSA was subsequently amended to allow for forfeiture of 
employer contributions and attributable earnings of TSP 
accounts of employees convicted of a national security 
offense.\11\ The Thrift Savings Plan Enhancement Act of 2009 
made clear that Mandatory Victims' Restitution Act orders may 
be satisfied from TSP accounts.\12\
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    \7\P.L. 99-335, 100 Stat. 514.
    \8\5 U.S.C. 8437(e)(2).
    \9\5 U.S.C. 8437(e)(3).
    \10\5 U.S.C. 8467(a)(1).
    \11\P.L. 104-93, 109 Stat. 961, 965.
    \12\P.L. 111-31, 123 Stat. 2815, 1856.
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                           Section-by-Section


Section 1. Amendments

    This section makes clear that the Internal Revenue Service 
may issue a levy against an individual's Thrift Savings Plan 
account.

Section 2. Disposition of amounts

    This section requires any increase in revenue resulting 
from enactment of H.R. 4363 be deposited in the general fund of 
the U.S. Treasury and used solely for deficit reduction.

                       Explanation of Amendments

    Mr. Cummings offered an amendment directing that any 
revenue gain attributable to enactment of H.R. 4365 be 
deposited in the general fund of the U.S. Treasury for purposes 
of deficit reduction. The amendment was agreed to by voice 
vote.

                        Committee Consideration

    On April 18, 2012, the Committee met in open session and 
ordered reported favorably the bill, H.R. 4365, as amended, by 
voice vote, a quorum being present.

              Application of Law to the Legislative Branch

    Section 102(b)(3) of Public Law 104-1 requires a 
description of the application of this bill to the legislative 
branch where the bill relates to the terms and conditions of 
employment or access to public services and accommodations. 
This bill provides the Internal Revenue Service explicit 
authority to levy an individual's Thrift Savings Plan (TSP) 
account. As such this bill does not relate to employment or 
access to public services and accommodations.

  Statement of Oversight Findings and Recommendations of the Committee

    In compliance with clause 3(c)(1) of rule XIII and clause 
(2)(b)(1) of rule X of the Rules of the House of 
Representatives, the Committee's oversight findings and 
recommendations are reflected in the descriptive portions of 
this report.

         Statement of General Performance Goals and Objectives

    In accordance with clause 3(c)(4) of rule XIII of the Rules 
of the House of Representatives, the Committee's performance 
goals and objectives are reflected in the descriptive portions 
of this report.

                     Federal Advisory Committee Act

    The Committee finds that the legislation does not establish 
or authorize the establishment of an advisory committee within 
the definition of 5 U.S.C. App., Section 5(b).

                       Unfunded Mandate Statement

    Section 423 of the Congressional Budget and Impoundment 
Control Act (as amended by Section 101(a)(2) of the Unfunded 
Mandates Reform Act, P.L. 104-4) requires a statement as to 
whether the provisions of the reported bill include unfunded 
mandates. In compliance with this requirement the Committee has 
received a letter from the Congressional Budget Office included 
herein.

                         Earmark Identification

    H.R. 4365 does not include any congressional earmarks, 
limited tax benefits, or limited tariff benefits as defined in 
clause 9 of rule XXI.

                           Committee Estimate

    Clause 3(d)(2) of rule XIII of the Rules of the House of 
Representatives requires an estimate and a comparison by the 
Committee of the costs that would be incurred in carrying out 
H.R. 4365. However, clause 3(d)(3)(B) of that rule provides 
that this requirement does not apply when the Committee has 
included in its report a timely submitted cost estimate of the 
bill prepared by the Director of the Congressional Budget 
Office under section 402 of the Congressional Budget Act.

     Budget Authority and Congressional Budget Office Cost Estimate

    With respect to the requirements of clause 3(c)(2) of rule 
XIII of the Rules of the House of Representatives and section 
308(a) of the Congressional Budget Act of 1974 and with respect 
to requirements of clause 3(c)(3) of rule XIII of the Rules of 
the House of Representatives and section 402 of the 
Congressional Budget Act of 1974, the Committee has received 
the following cost estimate for H.R. 4365 from the Director of 
Congressional Budget Office:

                                     U.S. Congress,
                               Congressional Budget Office,
                                     Washington, DC, July 19, 2012.
Hon. Darrell Issa,
Chairman, Committee on Oversight and Government Reform,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 4365, a bill to 
amend title 5, United States Code, to make clear that accounts 
in the Thrift Savings Fund are subject to certain federal tax 
levies.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Barbara 
Edwards.
            Sincerely,
                                              Douglas W. Elmendorf.
    Enclosure.

H.R. 4365--A bill to amend title 5, United States Code, to make clear 
        that accounts in the Thrift Savings Fund are subject to certain 
        federal tax levies

    H.R. 4365 would eliminate an apparent conflict that exists 
in current law between the Federal Employees' Retirement System 
Act of 1986 (FERSA) and the Internal Revenue Code. The Internal 
Revenue Code provides broad authority to the Internal Revenue 
Service to collect unpaid federal taxes by levy, a legal 
process that includes ordering a third party to turn over 
property in its possession that belongs to the taxpayer who has 
unpaid tax liabilities. FERSA includes a provision (as 
contained in U.S. Code, title 5, section 8437) that broadly 
protects assets in Thrift Savings Plan accounts from levy, with 
certain exceptions. Currently, those exceptions do not include 
federal tax levies, and the Federal Retirement Thrift 
Investment Board has refused to honor notices of such levies. 
H.R. 4365 would include federal tax levies in the list of 
exceptions.
    The staff of the Joint Committee on Taxation (JCT) 
estimates that enacting H.R. 4365 would increase revenues by 
$24 million over the 2012-2022 period. The entire revenue 
increase would result from an increase in on-budget revenues, 
and thus pay-as-you-go procedures apply. Enacting the bill 
would not affect direct spending.
    The Statutory Pay-As-You-Go Act of 2010 establishes budget-
reporting and enforcement procedures for legislation affecting 
direct spending or revenues. Enacting H.R. 4365 would result in 
revenue gains in each year from 2013 to 2022. The net reduction 
in the deficit is shown in the following table.

   CBO ESTIMATE OF PAY-AS-YOU-GO EFFECTS OF H.R. 4365, AS ORDERED REPORTED BY THE HOUSE COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM ON APRIL 18, 2012
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                              By fiscal year, in millions of dollars--
                                           -------------------------------------------------------------------------------------------------------------
                                             2012    2013    2014    2015    2016    2017    2018    2019    2020    2021    2022   2012-2017  2012-2022
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                       NET INCREASE OR DECREASE (-) IN THE DEFICIT

Statutory Pay-As-You-Go Impact............       0      -1      -2      -2      -2      -2      -3      -3      -3      -3      -3       -10       -24
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source: Staff of the Joint Committee on Taxation.
Note: Components may not sum to totals because of rounding.

    JCT has determined that the bill contains no 
intergovernmental or private-sector mandates as defined in the 
Unfunded Mandates Reform Act.
    The CBO staff contact for this estimate is Barbara Edwards. 
The estimate was approved by Frank Sammartino, Assistant 
Director for Tax Analysis.

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, existing law in which no change is 
proposed is shown in roman):

TITLE 5, UNITED STATES CODE

           *       *       *       *       *       *       *


PART III--EMPLOYEES

           *       *       *       *       *       *       *


SUBPART G--INSURANCE AND ANNUITIES

           *       *       *       *       *       *       *


CHAPTER 84--FEDERAL EMPLOYEES' RETIREMENT SYSTEM

           *       *       *       *       *       *       *


SUBCHAPTER III--THRIFT SAVINGS PLAN

           *       *       *       *       *       *       *


Sec. 8437. Thrift Savings Fund

  (a) * * *

           *       *       *       *       *       *       *

  (e)(1) * * *

           *       *       *       *       *       *       *

  (3) Moneys due or payable from the Thrift Savings Fund to any 
individual and, in the case of an individual who is an employee 
or Member (or former employee or Member), the balance in the 
account of the employee or Member (or former employee or 
Member) shall be subject to legal process for the enforcement 
of the individual's legal obligations to provide child support 
or make alimony payments as provided in section 459 of the 
Social Security Act (42 U.S.C. [659)] 659), the enforcement of 
an order for restitution under section 3663A of title 18, 
forfeiture under section 8432(g)(5) of this title, or an 
obligation of the Executive Director to make a payment to 
another person under section 8467 of this title[.], and shall 
be subject to a Federal tax levy under section 6331 of the 
Internal Revenue Code of 1986. For the purposes of this 
paragraph, an amount contributed for the benefit of an 
individual under section 8432(c)(1) (including any earnings 
attributable thereto) shall not be considered part of the 
balance in such individual's account unless such amount is 
nonforfeitable, as determined under applicable provisions of 
section 8432(g).

           *       *       *       *       *       *       *


                                  
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