[Federal Register Volume 59, Number 178 (Thursday, September 15, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-22793]


[[Page Unknown]]

[Federal Register: September 15, 1994]


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DEPARTMENT OF LABOR

Office of the Secretary

29 CFR Part 20

 

Federal Claims Collection; Collection of Debts by Federal Income 
Tax Refund Offset

AGENCY: Office of the Secretary, Labor.

ACTION: Interim rule with request for comments.

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SUMMARY: The Department of Labor is supplementing its regulations 
implementing the Debt Collection Act of 1982 to reflect the requirement 
of the Cash Management Improvement Act Amendments of 1992 that Federal 
agencies refer delinquent debt to the Internal Revenue Service (IRS) 
for collection by offset from a Federal income tax refund that may be 
due to the delinquent debtor. These regulations are necessary for the 
Department's participation in the IRS offset program. The IRS offset 
program has proven to be a cost-effective mechanism for collection of 
delinquent debt.

DATES: Effective Date: These regulations are effective September 15, 
1994. Comments: Comments must be submitted on or before November 14, 
1994.

ADDRESSES: Send comments to Robert Barnhard, Division of Planning and 
Internal Control, Office of Financial Integrity, Office of the Chief 
Financial Officer, Department of Labor, Room S-4502, 200 Constitution 
Avenue NW., Washington, DC 20210.

FOR FURTHER INFORMATION CONTACT:
Robert Barnhard, (202) 219-8184.

SUPPLEMENTARY INFORMATION: The Department of Labor published in the 
Federal Register on February 6, 1985 and February 5, 1987 final 
regulations implementing the Debt Collection Act of 1982 (DCA). Subpart 
A implements the credit reporting provisions of the DCA; Subpart B, 
administrative offset; Subpart C, assessment of interest, penalties and 
administrative costs; and Subpart D, salary offset. These regulations 
were duly published in the Federal Register as proposed rules, with 
comments considered and discussed during final rule-making.
    In 1992 the Congress passed and the President signed into law the 
Cash Management Improvement Act Amendments of 1992, which requires 
Federal agencies to participate in the IRS income tax refund offset 
program. This interim rule establishes a new Subpart E, and specifies 
the procedures the Department of Labor will follow with regard to 
referral by its constituent offices, administrations and bureaus of 
past-due legally enforceable debts to IRS for collection by income tax 
refund offset. This interim rule also establishes a new title for 29 
CFR Part 20: Federal Claims Collection.

Publication in Final

    The Department of Labor has determined, pursuant to 5 U.S.C. 
553(b)(B), that good cause exists for waiving public comment prior to 
implementation of this interim rule. This waiver is based upon the need 
to have the regulations in place by January 5, 1995, in order for the 
Department to participate in the IRS income tax refund offset program 
for the 1995 offset year. The Department finds that the public interest 
will be served by participation in the program, and accordingly, good 
cause exists for waiving public comment. In addition, the Department 
finds that public comment is unnecessary because this rule merely 
implements a definite statutory scheme and the requirements contained 
in the regulations promulgated by the IRS.

Effective Date

    This document will become effective upon publication pursuant to 5 
U.S.C. 553(d)(3). In order to participate in the IRS income tax refund 
offset program for the 1995 offset year, the Department must promulgate 
regulations that are effective by January 5, 1995. Therefore, pursuant 
to 5 U.S.C. 553(d)(3), good cause is found for making this rule 
effective immediately.

Executive Order 12866

    This interim rule is not classified as a ``significant rule'' under 
Executive Order 12866 on Federal regulations, because it will not 
result in (1) an annual effect on the economy of $100 million or more; 
(2) a major increase in costs or prices for consumers, individual 
industries, Federal, State, or local government agencies, or geographic 
regions; or (3) significant adverse effects on competition, employment, 
investment, productivity, innovation, or on the ability of United 
States-based enterprises to compete with foreign-based enterprises in 
domestic or foreign markets. Accordingly, no regulatory impact 
assessment is required.

Regulatory Flexibility Act

    Because no notice of proposed rule-making is required for interim 
rules, the requirements of the Regulatory Flexibility Act (5 U.S.C. 601 
et seq.) pertaining to regulatory flexibility analysis do not apply to 
this rule.

Paperwork Reduction Act

    This interim rule is not subject to Section 3504(h) of the 
Paperwork Reduction Act (44 U.S.C. 3501) since it does not contain any 
new information collection requirements.

List of Subjects in 29 CFR Part 20

    Government employees, Loan programs, Credit, Administrative 
practice and procedure, Claims.

    Accordingly, Part 20 of title 29 of the Code of Federal Regulations 
is amended as set forth below.

PART 20--FEDERAL CLAIMS COLLECTION

    1. The authority citation for Part 20 is revised to read as 
follows:

    Authority: 31 U.S.C. 3711 et seq.; Subpart D is also issued 
under 5 U.S.C. 5514; Subpart E is also issued under 31 U.S.C. 3720A.

    2. The heading for Part 20 is revised to read as follows:

PART 20--FEDERAL CLAIMS COLLECTION

    3. Part 20 is amended by adding Subpart E to read as follows:

Subpart E--Federal Income Tax Refund Offset

Sec.
20.101  Purpose and scope.
20.102  Redelegation of authority.
20.103  Definitions.
20.104  Agency responsibilities.
20.105  Minimum referral amount.
20.106  Relation to other collection efforts.
20.107  Debtor notification.
20.108  Agency review of the obligation.
20.109  Prior provision of rights with respect to debt.
20.110  Referral to IRS for tax refund offset.
20.111  Administrative cost charges.

Subpart E--Federal Income Tax Refund Offset


Sec. 20.101  Purpose and scope.

    The regulations in this subpart establish procedures to implement 
31 U.S.C. 3720A. This statute together with implementing regulations of 
the Internal Revenue Service (IRS) at 26 CFR 301.6402-6, authorizes the 
IRS to reduce a tax refund by the amount of a past-due legally 
enforceable debt owed to the United States. The regulations apply to 
past-due legally enforceable debts owed to the Department by 
individuals and business entities. The regulations are not intended to 
limit or restrict debtor access to any judicial remedies to which he/
she may otherwise be entitled.


Sec. 20.102  Redelegation of authority.

    Authority delegated by statute or IRS regulation to the Secretary 
or Department is redelegated to the heads of the Department's 
constituent agencies. This authority may be further redelegated as 
necessary to ensure the efficient implementation of these regulations.


Sec. 20.103  Definitions.

    For purposes of this subpart:
    (a) Tax refund offset refers to the IRS income tax refund offset 
program operated under authority of 31 U.S.C. 3720A.
    (b) Past-due legally enforceable debt is a delinquent debt 
administratively determined to be valid, whereon no more than 10 years 
have lapsed since the date of delinquency, and which is not discharged 
under a bankruptcy proceeding or subject to an automatic stay under 11 
U.S.C. 362.
    (c) Agency refers to the constituent offices, administrations and 
bureaus of the Department of Labor.
    (d) Individual refers to a taxpayer identified by a social security 
number (SSN).
    (e) Business entity refers to an entity identified by an employer 
identification number (EIN).
    (f) Taxpayer mailing address refers to the debtor's current mailing 
address as obtained from IRS.
    (g) Memorandum of understanding refers to the agreement between the 
Department and IRS outlining the duties and responsibilities of the 
respective parties for participation in the tax refund offset program.


Sec. 20.104  Agency responsibilities.

    (a) As authorized and required by law, each Department of Labor 
agency may refer past-due legally enforceable debts to IRS for 
collection by offset from any overpayment of income tax that may 
otherwise be due to be refunded to the taxpayer.
    (b) Prior to actual referral of a past-due legally enforceable debt 
for tax refund offset, the DOL agency heads (or their designees) must 
take the actions specified in Sec. 20.107 and, as appropriate, 
Sec. 20.106 and Sec. 20.108.
    (c) DOL agency heads must ensure the confidentiality of taxpayer 
information as required by IRS in its Tax Information Security 
Guidelines.


Sec. 20.105  Minimum referral amount.

    The minimum amount of a debt otherwise eligible for referral is $25 
for individual debtors and $100 for business debtors. The amount 
referred may include the principal portion of the debt, as well as any 
accrued interest, penalties and/or administrative cost charges.


Sec. 20.106  Relation to other collection efforts.

    (a) Tax refund offset is intended to be an administrative 
collection remedy of last resort, consistent with IRS requirements for 
participation in the program, and the costs and benefits of pursuing 
alternative remedies when the tax refund offset program is readily 
available. To the extent practical, the requirements of the program 
will be met by merging IRS requirements into the Department's overall 
requirements for delinquent debt collection.
    (b) Debts of $100 or more will be reported to a consumer or 
commercial credit reporting agency, as appropriate, before referral for 
tax refund offset.
    (c) Debts owed by individuals will be screened for salary and 
administrative offset potential using the most current information 
reasonably available to the Department, and will not be referred for 
tax refund offset where such other offset potential is found to exist.


Sec. 20.107  Debtor notification.

    (a) The agency head (or designee) of the creditor Labor Department 
agency shall send appropriate written demands to the debtor in terms 
which inform the debtor of the consequences of failure to repay claims. 
In accordance with guidelines as may be established by the Department's 
Chief Financial Officer, a total of three progressively stronger 
written demands at not more than 30-day intervals will normally be made 
unless a response to the first or second demand indicates that a 
further demand would be futile and the debtor's response does not 
require rebuttal. In determining the timing of demand letters, agencies 
should give due regard to the need to act promptly so the ability to 
refer a debt for tax refund offset will not be unduly delayed.
    (b) Before the Department refers a debt to IRS for tax refund 
offset, it will make a reasonable attempt to notify the debtor that:
    (1) The debt is past-due;
    (2) Unless the debt is repaid or a satisfactory repayment agreement 
established within 60 days thereafter, it will be referred to IRS for 
offset from any overpayment of tax remaining after taxpayer liabilities 
of greater priority have been satisfied; and
    (3) The debtor will have a minimum of 60 days from the date of 
notification to present evidence that all or part of the debt is not 
past-due or legally enforceable, and the Department will consider this 
evidence in a review of its determination that the debt is past-due and 
legally enforceable. The debtor will be advised where and to whom 
evidence is to be submitted.
    (c) The Department will make a reasonable attempt to notify the 
debtor by using the most recent address information obtained from the 
IRS, unless written notification is received from the debtor that 
notices from the Department are to be sent to a different address.
    (d) The notification required by paragraph (b) of this section and 
sent to the address specified in paragraph (c) of this section may, at 
the option of the Department, be incorporated into demand letters 
required by paragraph (a) of this section.


Sec. 20.108  Agency review of the obligation.

    (a) The individual responsible for collection of the debt will 
consider any evidence submitted by the debtor as a result of the 
notification required by Sec. 20.107(b) and notify the debtor of the 
result. If appropriate, the debtor will also be advised where and to 
whom to request a review of any unresolved dispute.
    (b) The debtor will be granted at least 30 days from the date of 
the notification required by paragraph (a) of this section to request a 
review of the determination of the individual responsible for 
collection of the debt on any unresolved dispute. The debtor will be 
advised of the result.
    (c) The review required by paragraph (b) of this section will 
ordinarily be based on written submissions and documentation provided 
by the debtor. However, a reasonable opportunity for an oral hearing 
will be provided the debtor when the reviewing official determines that 
any remaining dispute cannot be resolved by review of the documentary 
evidence alone. Unless otherwise required by law, an oral hearing under 
this section is not required to be a formal evidentiary-type hearing, 
although the reviewing official should carefully document all 
significant matters discussed at the hearing.


Sec. 20.109  Prior provision of rights with respect to debt.

    To the extent that the rights of the debtor in relation to the same 
debt have been previously provided under some other statutory or 
regulatory authority, the Department is not required to duplicate those 
efforts before referring a debt for tax refund offset.


Sec. 20.110  Referral to IRS for tax refund offset.

    (a) By the date and in the manner prescribed by the IRS the 
Department will refer for tax refund offset the following information 
on past-due legally enforceable debts:
    (1) Whether the debtor is an individual or a business entity;
    (2) Name and taxpayer identification number (SSN or EIN) of the 
debtor who is responsible for the debt;
    (3) The amount of the debt;
    (4) The date on which the debt became past-due;
    (5) Department-level, sub-Department-level and (as appropriate) 
account identifiers.
    (b) As necessary to reflect changes in the status of debts/debtors 
referred for tax refund offset, the Department will submit updated 
information at the times and in the manner prescribed by IRS. The 
original submission described in paragraph (a) of this section will not 
be changed to increase the amount of the debt or to refer additional 
debtors.
    (c) Amounts erroneously offset will be refunded by the Department 
or IRS in accordance with the Memorandum of Understanding.


Sec. 20.111  Administrative cost charges.

    Costs incurred by the Department in connection with referral of 
debts for tax refund offset will be added to the debt and thus increase 
the amount of the offset.

    Signed at Washington, D.C., this 9th day of September 1994.
Robert B. Reich,
Secretary of Labor.
[FR Doc. 94-22793 Filed 9-14-94; 8:45 am]
BILLING CODE 4510-23-M