[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.
-----------------------------------------------------------------------
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