[Federal Register Volume 59, Number 163 (Wednesday, August 24, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-20780]


[[Page Unknown]]

[Federal Register: August 24, 1994]


                                                   VOL. 59, NO. 163

                                         Wednesday, August 24, 1994

DEPARTMENT OF AGRICULTURE

Agricultural Stabilization and Conservation Service

7 CFR Part 792

Commodity Credit Corporation

7 CFR Part 1403

RIN 0560-AD78

 

Debt Settlement Policies and Procedures

AGENCIES: Agricultural Stabilization and Conservation Service and 
Commodity Credit Corporation, USDA.

ACTION: Proposed rule.

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SUMMARY: This proposed rule would amend the Commodity Credit 
Corporation's (CCC's) debt settlement policies and procedures to remove 
references to Internal Revenue Service Notices of Levy, except to 
exempt them from coverage, and to revise the rate of interest to be 
charged on delinquent debts. This proposed rule would also amend the 
Agricultural Stabilization and Conservation Service's (ASCS') and CCC's 
debt settlement policies and procedures to provide for offset of a 
debtor's pro rata share of payments due any entity which the debtor 
participates in, either directly or indirectly. This regulation is 
necessary to protect the financial integrity of many Federal 
agricultural programs by ensuring the Government will be able to 
collect, or otherwise settle, debts owed it by any person, 
organization, corporation, or other legal entity.

DATES: Comments must be received by September 23, 1994 in order to be 
assured of consideration.

ADDRESSES: Comments concerning this proposed rule should be addressed 
to Director, Financial Management Division, ASCS, U.S. Department of 
Agriculture, P.O. Box 2415, Washington, DC 20013-2415. All comments 
submitted in response to this proposed rule will be available for 
public inspection in room 1206, Park Office Center, 3101 Park Center 
Drive, Alexandria, VA, between 8:30 a.m. and 4:00 p.m., Monday through 
Friday, except holidays.

FOR FURTHER INFORMATION CONTACT: Paula Roney, Debt Management and 
Contract Procedures Branch, Financial Management Division, ASCS, at 
703-305-1424.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

    This proposed rule has been reviewed in conformance with Executive 
Order 12866 and has been determined to be a significant regulatory 
action.

Paperwork Reduction Act

    This action will not increase the Federal paperwork burden for 
individuals, small businesses, and others and will not have a 
significant impact on a substantial number of small entities.

Regulatory Flexibility Act

    Neither ASCS nor CCC is required by 5 U.S.C. 553 or any other 
provision of law to publish a notice of proposed rulemaking with 
respect to the subject matter of this final rule. Therefore this action 
is exempt from the provision of the Regulatory Flexibility Act and no 
Regulatory Flexibility Analysis was prepared.

Executive Order 12778

    This proposed rule has been reviewed in accordance with Executive 
Order 12778. It is not retroactive and preempts State and local laws. 
Before any judicial action may be brought regarding the provisions of 
this rule, administrative appeal remedies set forth at 7 CFR parts 24 
and 780 must be exhausted.

Executive Order 12372

    This action will not have a significant impact specifically upon 
area and community development; therefore, review as established by 
Executive Order 12372 (July 14, 1982) was not used to assure that units 
of local government are informed of this action.

Background

    The Federal Claims Collection Act of 1966, as amended by the Debt 
Collection Act of 1982 (31 U.S.C. 3711, et seq.), and the joint 
regulations promulgated thereunder by the Comptroller General and the 
Attorney General (4 CFR parts 101-105) provide minimum standards for 
the administrative collection of claims by the United States. The Act 
also provides that nothing therein shall diminish the existing 
authority of the head of an agency to settle, compromise, or close 
claims. The CCC Charter Act, as amended (15 U.S.C. 714, et seq.), 
provides that CCC shall have the authority to make final and conclusive 
settlement and adjustment of any claims by or against it irrespective 
of the amount at issue. CCC is, therefore, not subject to the 
provisions of the Federal Claims Collection Act of 1966 or its 
implementing regulations. However, it has been CCC policy to follow the 
Federal Claims Collection Standards (FCCS) to the maximum practicable 
extent. The FCCS require each Federal agency to take aggressive action 
to collect debts owed it.

Discussion of Proposed Rule

1. Impact of Interest Rate Change on ASCS and CCC and Affected Private 
Interests

    This rule would amend 7 CFR part 1403 to change the rate of 
interest which CCC charges on its delinquent debts from a rate equal to 
that assessed under the Prompt Payment Act, to a rate equal to the 
higher of the Treasury Department's current value of funds rate or the 
rate of interest assessed under the Prompt Payment Act. CCC currently 
charges interest on delinquent debts at a rate equal to that charged 
under the Prompt Payment Act. That rate was chosen because it was 
generally a higher rate than the current value of funds rate required 
under the Debt Collection Act, and would ensure that CCC, at a minimum, 
would always recoup the cost of CCC borrowing. It was also believed to 
be equitable since it is the same rate which CCC is required to pay 
when its payments are late. This proposed rule would amend the rate 
which CCC charges on delinquent debts to the higher of the Treasury 
Department's current value of funds rate or the rate assessed under the 
Prompt Payment Act. Concerning the difference in interest rates, over 
the past 10 years the current value of funds rate was higher than the 
Prompt Payment Act rate for only one 6-month period. The economic 
effect of this proposed rate change is likely to be minimal. This 
change, however, would allow the late payment interest rate assessed by 
CCC to conform to the late payment interest rate assessed by ASCS, as 
well as, conforming to the rate required by the Federal Claims 
Collection Act of 1966, as amended. As both CCC and ASCS programs are 
administered by the same offices, administrative costs should be 
reduced by having the same interest rates apply to both programs.

2. References to IRS Notices of Levy

    This rule would also amend 7 CFR part 1403 regarding references to 
Internal Revenue Service (IRS) Notices of Levy. It was the past policy 
of CCC to treat IRS Notices of Levy the same as requests for 
administrative offset from other Federal agencies. This was agreed to 
in 1970 by CCC and IRS, and was documented in former regulations 
dealing with offset at 7 CFR part 13. However, due to a change in 
policy by IRS, changes in our previous regulations, certain court 
decisions, and advice from the Office of the General Counsel, it has 
been determined that IRS Notices of Levy can no longer be treated as 
offset requests, but should be honored only as required by statute, 
including taking priority over assignments of ASCS and CCC payments. 
Therefore, this proposed rule would amend the CCC debt settlement 
regulations to remove all references to IRS Notices of Levy, except to 
specifically exempt them from coverage in 7 CFR 1403.7. This change 
should create little cost or benefit to CCC.

3. Expanded Offset

    Finally, this rule would amend 7 CFR parts 792 and 1403 to provide 
for an expanded ability to offset payments from debtors to collect 
delinquent debt. During 1993, ASCS and CCC collected approximately $76 
million, of which $32 million or 42 percent of the total was through 
administrative offset. As such, it is the most effective debt 
collection tool. However, in the past debtors have avoided offset of 
their program payments by reorganizing their farming operations, 
changing the name of their operations, transferring ownership of their 
operations, receiving payments under more than one entity, or by 
changing the payee in some other manner. In order to increase ASCS' and 
CCC's ability to collect delinquent debts, without adversely affecting 
other non-debtors, the regulations would be amended to provide for 
offset of a debtor's pro rata share of payments due any entity which 
the debtor participates in, either directly or indirectly.
    This rule would also provide for offset when ASCS or CCC determines 
that a debtor has established an entity, or transferred ownership of, 
reorganized, or changed in some other manner, his or her operations in 
order to avoid a debt. By allowing for this expanded ability to offset, 
ASCS and CCC should substantially increase their ability to collect 
delinquent debt in an efficient and effective manner. This would also 
help ensure that those owing delinquent debts are not continuing to 
receive government payments, without first satisfying their debts. 
While it is not feasible to estimate the exact amount by which ASCS and 
CCC collections would be increased, it is likely that these 
circumstances arise most often with debtors who have debts of $50,000 
or more. Therefore, increased collections could be sizeable in relation 
to past collections. There should be no cost to the government created 
by this proposed change.
    This regulation is necessary to protect the financial integrity of 
many Federal agricultural programs by ensuring the Government will be 
able to collect, or otherwise settle, debts owed it by any person, 
organization, corporation, or other legal entity.

List of Subjects

7 CFR Part 792

    Claims, Income taxes.

7 CFR Part 1403

    Claims, Income taxes, Loan programs-agriculture.

    Accordingly, 7 CFR parts 792 and 1403 are amended as follows:

PART 792--DEBT SETTLEMENT POLICIES AND PROCEDURES

    1. The authority citation for 7 CFR part 792 continues to read as 
follows:

    Authority: 31 U.S.C. 3701, 3711, 3716-3719, 3728; 4 CFR Parts 
101-105; 7 CFR 3.21(b).

    2. Section 792.7(l) is revised to read as follows:


Sec. 792.7  Collection by administrative offset.

* * * * *
    (l) Any action authorized by the provisions of this section may be 
taken:
    (1) Against a debtor's pro rata share of payments due any entity 
which the debtor participates in, either directly or indirectly, as 
determined by ASCS.
    (2) When ASCS determines that the debtor has established an entity, 
or reorganized, transferred ownership of, or changed in some other 
manner, their operation, for the purpose of avoiding the payment of the 
claim or debt.
* * * * *

PART 1403--DEBT SETTLEMENT POLICIES AND PROCEDURES

    3. The authority citation for 7 CFR part 1403 continues to read as 
follows:

    Authority: 7 U.S.C. 1445b-2(b); 15 U.S.C. 714b and 714c.

    4. Section 1403.7 is amended by:
    A. Removing the word ``and'' at the end of paragraph (a)(3),
    B. Removing the period at the end of paragraph (a)(4) and inserting 
a semicolon in its place and adding the word ``and'',
    C. Adding paragraph (a)(5),
    D. Removing paragraph (m)(4),
    E. Redesignating paragraphs (m)(5) and (m)(6) as paragraphs (m)(4) 
and (m)(5), respectively, and
    F. Revising paragraph (q) to read as follows:


Sec. 1403.7  Collection by administrative offset.

    (a) * * *
    (5) IRS Notices of Levy which shall be honored in accordance with 
IRS statutes and regulations.
* * * * *
    (q) Any action authorized by the provisions of this section may be 
taken:
    (1) Against a debtor's pro rata share of payments due any entity 
which the debtor participates in, either directly or indirectly, as 
determined by CCC.
    (2) When CCC determines that the debtor has established an entity, 
or reorganized, transferred ownership of, or changed in some other 
manner, their operation, for the purpose of avoiding the payment of the 
claim or debt.
* * * * *
    5. Section 1403.9(c) is revised to read as follows:


Sec. 1403.9   Late payment interest and administrative charges.

* * * * *
    (c) The late payment interest shall be expressed as an annual rate 
of interest which CCC charges on delinquent debts. The late payment 
interest rate shall be equal to the higher of the Treasury Department's 
current value of funds rate or the rate of interest assessed under the 
Prompt Payment Act, determined as of the date specified in paragraphs 
(d)(1) and (d)(2) of this section. The rate of interest assessed under 
the Prompt Payment Act was chosen as an alternative rate to ensure that 
the Government would recoup interest at a rate which was at least as 
high as that which it pays for late payments.
* * * * *
    Signed at Washington, DC, on August 11, 1994.
Bruce R. Weber,
Administrator, Agricultural Stabilization and Conservation Service, 
Executive Vice President, Commodity Credit Corporation.
[FR Doc. 94-20780 Filed 8-23-94; 8:45 am]
BILLING CODE 3410-05-P