[Federal Register Volume 60, Number 170 (Friday, September 1, 1995)]
[Rules and Regulations]
[Pages 45990-46001]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-21780]
[[Page 45989]]
_______________________________________________________________________
Part V
Department of Agriculture
_______________________________________________________________________
Food and Consumer Service
_______________________________________________________________________
7 CFR Part 271, et al.
Food Stamp Program; Collecting Food Stamp Recipient Claims From Federal
Income Tax Refunds and Federal Salaries; Final Rule
Federal Register / Vol. 60, No. 170 / Friday, September 1, 1995 /
Rules and Regulations
[[Page 45990]]
DEPARTMENT OF AGRICULTURE
Food and Consumer Service
7 CFR Parts 271, 272 and 273
[Amdt. No. 367]
RIN 0584-AB89
Food Stamp Program: Collecting Food Stamp Recipient Claims From
Federal Income Tax Refunds and Federal Salaries
AGENCY: Food and Consumer Service, USDA.
ACTION: Final rule.
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SUMMARY: This rule establishes methods of collecting two types of Food
Stamp Program (FSP) recipient claims from Federal income tax refunds
and from Federal salaries. The two types of recipient claims are
inadvertent household error (IHE) and intentional Program violation
(IPV) claims. These claims represent amounts of benefits which
households received but to which they were not entitled. Under this
rule claims of these types will be collected from individuals who are
no longer participating in the FSP. This rule establishes operating
procedures, due-process notices, and appeal rights and other rights and
responsibilities of individuals.
DATES: This final rule is effective and must be implemented by October
2, 1995 except that State agencies currently participating in the
Federal Income Tax Refund Offset Program (FTROP) must implement 7 CFR
272.2(d)(1)(xii) no later than November 30, 1995.
FOR FURTHER INFORMATION CONTACT: James I. Porter, Supervisor, Issuance
and Accountability Section, State Administration Branch, Program
Accountability Division, Food Stamp Program, 3101 Park Center Drive,
Room 907, Alexandria, Virginia 22302, telephone (703) 305-2385.
SUPPLEMENTARY INFORMATION:
Executive Order 12866
This final rule has been determined to be significant and was
reviewed by the Office of Management and Budget under Executive Order
12866.
Executive Order 12372
The Food Stamp Program is listed in the Catalog of Federal Domestic
Assistance under No. 10.551. For the reasons set forth in the final
rule and related notice to 7 CFR 3015, Subpart V (48 FR 29115), this
Program is excluded from the scope of Executive Order 12372 which
requires intergovernmental consultation with State and local officials.
Regulatory Flexibility Act
This final action has been reviewed with regard to the requirements
of the Regulatory Flexibility Act of 1980 (Pub. L. 96-354, 94 Stat.
1164, September 19, 1980). William E. Ludwig, Administrator of the Food
and Consumer Service, has certified that this rule does not have a
significant economic impact on a substantial number of small entities.
This rule affects the State and local agencies which administer the
Food Stamp Program and certain individuals who have received excess
food stamp benefits. Half of substantially all State and local
administrative costs for administering the Food Stamp Program are
reimbursed by the Department.
Executive Order 12778
This rulemaking has been reviewed under Executive Order 12778,
Civil Justice Reform. This rule is intended to have preemptive effect
with respect to any State or local laws, regulations or policies which
conflict with its provisions or which would otherwise impede its full
implementation. This rule is not intended to have retroactive effect.
Prior to any judicial challenge to the provisions of this rule or the
application of its provisions, all applicable administrative procedures
must be exhausted.
Paperwork Reduction Act
The information collection requirements in this rule were approved
by the Office of Management and Budget (OMB) in connection with the
test of FTROP and were assigned OMB Control #0584-0446. This rule makes
some changes in those requirements. An estimate of the revised burden
associated with this collection will be submitted to OMB according to
the requirements of the Paperwork Reduction Act. Comments regarding the
information collection requirements in this rule, including suggestions
to reduce this burden may be sent to: U.S. Department of Agriculture,
Clearance Officer, OIRM, Room 404-W, Washington, DC 20250 and to the
Office of Management and Budget, Paperwork Reduction Project (OMB
#0584-0446), Washington, DC 20503.
Background
A. General
The Department published a proposed rule on FTROP and the Federal
Salary Offset Program (salary offset) on June 28, 1995 at 60 FR 33612.
A total of nine comment letters were received on this proposed rule,
eight from State agencies and one from a research and action group
concerned with nutrition and related issues (an action group). Those
comments are discussed below.
The abbreviated citations in the subheadings of section B of this
preamble correspond to paragraphs in section 272.18(g)(5), the
subheadings in part C correspond to paragraphs in section 273.18(g)(6).
Three State agencies expressed concern that there would not be
sufficient time to implement a final rule for the 1996 offset year and
recommended that the final rule be phased in for 1997. With the
exception of the 60-day notice, the Department believes that State
agencies can implement the requirements of the final rule within the
30-day implementation period. As discussed later in this preamble, for
October 1, 1995 State agencies which cannot implement the 60-day notice
specified in the proposed rule and made final here may use the format
and contents for the 60-day notice as used during the test of FTROP.
B. Federal Income Tax Refund Offset Program (FTROP)
Types of claims referable under FTROP--(ii)(A)(1): The action group
objected to the inclusion of IHE claims as a type of claim subject to
FTROP because it believes such inclusion conflicts with the Food Stamp
Act (7 U.S.C. Sec. 2011, et seq.) (the Act). In B.2.c. of the preamble
to the proposed rule, the Department explained that Section 13 of the
Act authorizes State agencies to use ``other means of collection'' such
as FTROP for both IHE and IPV claims when households do not pay them
through voluntary allotment reduction, a cash repayment schedule or
involuntary allotment reduction. Consequently, under the final rule IHE
claims continue to be subject to collection under FTROP.
Properly established claims--(ii)(A)(1): One State agency supported
the deletion of the term ``delinquency'' in favor of listing criteria
for determining claims past due and legally enforceable, and cited
support for the deletion of the three-month ``delinquency period.'' One
State agency objected to the proposed requirement that claims be
properly established, including the requirement that additional demand
letters be provided prior to initiating other collection actions. The
State agency believed that this language required additional work for
State agencies and was ineffective. The requirement as proposed was
intended only to incorporate current requirements for recipient claim
[[Page 45991]]
demand letters. Claims for which applicable FSP requirements were met
would be considered properly established, and no greater number of
demand letters would be required for them to be considered subject to
FTROP than are required under current food stamp regulations. To avoid
confusion on this point, the final rule deletes the reference to
additional demand letters from section 273.18(g)(5)(ii)(A)(1).
The action group objected that the proposed rule did not set a
minimum period for which a claim must be overdue before it could be
referred for offset. The group suggested 90 days, since in some cases,
such as where demand letters are hand delivered, the group contended
that required notices might be delivered and after only a few days a
determination made that the debt was past due. Regardless of how
delivered, demand letters provide the household with 90 days to request
a fair hearing. In addition to this 90-day period, as the action group
acknowledges in its comment, under proposed FTROP procedures, at least
60 more days will elapse before a claim can actually be referred for
offset, since under FTROP individuals have 60 days to request a State
agency review. Furthermore, just prior to when offsets actually begin
in late January, State agencies are required to submit lists of claims
to be deleted from IRS offset files due to payments and other
adjustments made after the end of the 60-day period. Consequently,
individuals have ample opportunity to challenge the intended offset
under the procedures as proposed, and the final rule does not specify a
90-day minimum ``delinquency period.''
Joint and several liability--(ii)(A)(2): The proposed rule required
that, for claims to be considered past due and legally enforceable
(referable under FTROP), State agencies must verify that there is no
individual who is jointly and severally liable for the claim also
currently participating in the FSP in the State. One State agency
supported this requirement, stating that such verification is a part of
their on-line claims tracking system. Another State agency objected
because they did not have the capability for such verification. While
food stamp regulations do not specify a method for such verification, 7
CFR 273.18(a) is clear that State agencies are required to establish
claims against all households which received more food stamp benefits
than they were entitled to receive or which have a household member who
received an overissuance as part of another household. Current food
stamp regulations at 7 CFR 273.18(d) specify that households which
otherwise fail to pay IHE and IPV claims will have their allotments
reduced. Consequently, the verification criteria stated in the proposed
rule should be information available to State agencies as part of their
ongoing claims collection activities.
The action group also suggested that if an individual begins
participating in the FSP after a claim is referred but before it is
actually offset, the State agency should be required to collect the
claim by implementing an allotment reduction and withdrawing the
referral. FCS agrees, which is one reason why the proposed rule at
section 273.18(g)(5)(ii)(A)(2) provided that a claim cannot be referred
under FTROP where any individual liable for the claim is participating
within the State. If the individual is (re)certified after the claim
has been referred but before it is offset, as stated in section
273.18(g)(5)(ix)(A), the State agency is obligated to delete the claim
from the IRS file. Should an overpayment occur because there is not
sufficient time to delete the claim, as stated in section
273.18(g)(5)(ix)(B), the State agency is required to refund any
resulting overpayment. The Department believes these provisions address
the concerns raised by the group.
The action group raised a number of other objections relating to
the impact of joint and several liability for food stamp overissuances
on the proposed rule. Section 13(a)(2) of the Act (7 U.S.C. 2022(a)(2))
provides that all adult members of a household at the time of an
overissuance are jointly and severally liable for the overissuance. The
group felt that in some instances the proposal to collect the claim
first by allotment reduction if any person liable for the claim is
currently participating in the program is unfair, for example, where a
nonparticipating former household member was actually culpable for the
overissuance. The action group stated that the equities favor
apportioning the claim against the nonparticipating party that actually
caused the overissuance. The Department believes that this issue was
decided by Congress in Section 13 of the Act when it established joint
and several liability for overissuances and the requirement that the
remaining household members must repay any overissuance by allotment
reduction. The Act makes allotment reduction mandatory for all IPV and
IHE claims unless the household agrees to an alternate form of
repayment. Moreover, Sections 6 and 13 of the Act clearly contemplate
that, in the case of an IPV, the culpable party will be disqualified
from participating in the FSP, leaving the claim to be paid by
remaining household members.
10-year period--(ii)(A)(4): The proposed rule provided several
criteria for determining if a claim was subject to FTROP. One such
criteria was that the initial claim demand letter must be dated within
10 years of January 31 of the offset year. As stated in B.3.b of the
preamble to the proposed rule, the Department believes that the demand
letter establishes when the right of action accrues on recipient
claims. Two State agencies stated that the 10-year period should be
measured back to the date of the last payment (assuming some were
made). The action group objected to the proposal because it felt that
it was inconsistent with what the group termed the statute of
limitation of six years for pursuing IPV claims and IHE claims. It
recommended that the period should begin with the date of the last
overpayment.
The Department believes the policy as stated in the proposed rule
is consistent with the concept of a ``right of action'' under the IRS
tax offset regulations, as that term has been interpreted by a number
of reviewing courts. See, e.g. Grider v. Cavasos, 911 F2d 1158 (5th
Cir., 1990); Jones v. Cavasos, 889 F.2d 1043 (11 Cir., 1989). The
courts have permitted tax offset for administrative claims not reduced
to judgment even where the judicial statute of limitations has already
expired, reasoning that the Federal Government's right of action does
not necessarily accrue until the claim is assigned to the Federal
Government, or where the judicial statue of limitation has expired but
the 10-year FTROP administrative limitation has not.
In addition, the Department believes the proposed rule is also
consistent with discovery-tolled statutes of limitation, such as that
in 28 U.S.C. 2416. Moreover, the IRS modified its FTROP regulations,
substituting the phrase ``right of action'' for ``date of
delinquency,'' in order to clarify that in cases such as defaulted
student loans, the 10 years for FTROP referral is counted from the date
the defaulted loan is assigned to the Federal Government, and not the
earlier date on which the actual default occurred. See 57 FR 13035,
13036. The State agency would still be required to establish and
calculate the claim by including only those overissuances which
occurred within six years of the discovery of the claim as required by
7 CFR 273.18(b) for IHE claims and 7 CFR 273.18(c)(2) for IPV claims.
Once the claim is established, however, the State would have 10 years
to try to collect it under FTROP. Accordingly, the final rule
[[Page 45992]]
makes no change in the language of the proposed rule on the matter of
the 10-year period for determining a claim subject to FTROP.
Voluntary payments--(ii)(A)(5): One State agency stated that
individuals often regularly pay on claims without signing an agreement
to do so. They believed such individuals are indicating willingness to
pay the claim as much as if they had signed an agreement. They
recommended that the rule language be revised to delete reference to 7
CFR 272.18(g)(2), where payment schedules are discussed. The Department
agrees that whether a written agreement exists is not as important as
whether a claim is being repaid and that State agencies should have the
flexibility to decide if claims are being repaid regularly and so are
not subject to FTROP. Accordingly, the final rule makes the recommended
change. For consistency, the adjective ``scheduled'' as applied in the
proposed rule to involuntary payments is replaced with ``regular.''
The proposed rule stated that claims for which the State agency has
received voluntary payments and scheduled, involuntary payments would
be considered past due and legally enforceable 30 days after the due
date for a regular payment which was not received. The action group
contended that the proposed 30-day period for a default on a payment
agreement does not permit sufficient time for the State agency to issue
the required notice of such default under section 273.18(g)(2). That
section of FSP regulations requires that State agencies provide
households notice when an installment payment is not received and an
opportunity to negotiate a new payment schedule before other collection
actions are initiated. These requirements apply to claims which State
agencies may want to refer for collection under FTROP. To clarify this
matter, in section 273.18(g)(5)(ii)(A)(5) this final rule replaces the
proposed 30-day default period with the provision that claims for which
State agencies have been receiving regular payments will be deemed past
due and legally enforceable if the individual does not respond to a
notice of default of a payment agreement and remedy the default as
specified in section 273.18(g)(2).
Combined claims/judgment claims--(ii)(B)(2): The proposed rule
stated that claims reduced to judgment cannot be combined with other
claims. The preamble explained the reason: the IRS requires that
judgment claims, which are not subject to the 10-year limit for
referral under FTROP, be identified as such. One State agency
recommended that the rule be changed to allow combining judgment claims
and other claims if the judgment claim is less than 10 years past due.
This cannot be done due to the IRS requirement that judgment claims be
separately identified. (See IRS Revenue Procedure, ``Magnetic Media
Reporting for Federal Income Tax Refund Offset Program (Debtor Master
File).)
Another State agency asked if, when an individual owes a judgment
claim and another claim and the judgment claim is referred, can the
other claim also be referred. In such a case, the other claim cannot be
referred for that individual. The IRS would identify those referrals as
duplicate records and both would be rejected. In these circumstances,
the State agency must refer either the judgment claim or the other
claim. Multiple, non-judgment claims may be consolidated.
One State agency asked for a definition of judgment, in particular
whether it refers to a civil or criminal action. The word ``judgment''
generally refers to debts resulting from civil actions but
restitutionary orders may also result from criminal actions. Since
circumstances vary and depend on State and local law, State agencies
should consult with their legal counsel if they have questions about
how a judgment on a recipient claim affects the 10-year period for
being subject to collection from FTROP.
The action group urged that FTROP be limited to collecting debts
reduced to judgment. However, the group acknowledged that Congress and
the courts have not required this. The group argued that to permit tax
offset of non-judgment debts is inconsistent with the Act, and in
particular with the provisions in Section 13(c)(2) (7 U.S.C.
2022(c)(2)) which provide for garnishment of State unemployment
benefits to recover FSP overissuances. That provision requires either
consent of the individual or a ``writ, order, summons, or other similar
process in the nature of a garnishment from a court * * *'' The
Department believes that the judicial process requirement in Section
13(c)(2) was intended to recognize that unemployment benefits are paid
by individual States from State funds, and that it is necessary to
follow State procedures to garnish them. In contrast, FTROP involves
funds held by another Federal agency, the IRS, for which Congress
itself has established the necessary requirements to effect a
``garnishment.'' The Department believes its proposed procedures meet
these requirements.
Undelivered 60-day notices--(iii)(D): The proposed rule stated that
claims for which 60-day notices are returned as undeliverable may be
referred for collection under FTROP. One State agency supported this
provision. The action group opposed it on the grounds that it violates
due process. As discussed in B.3.c. of the preamble to the proposed
rule, IRS regulations provide that the use of the most current address
for the debtor provided by the IRS constitutes a reasonable effort to
notify the individual about the intended referral for offset. As
mentioned in the background to the August 1991 General Notice, the IRS
requires that taxpayers notify the IRS of their current address. The
Department recognizes that taxpayers may not always comply with this
requirement and may move before a timely submitted change of address is
processed. For these reasons, among others, in B.3.d. of the preamble
to the proposed rule when discussing requests for review, the
Department pointed out that State agencies are required to refund over
collections if after the 60- day period for requesting such reviews
individuals document that a claim collected through FTROP is not past
due and legally enforceable. The proposed rule incorporated a reference
to this requirement at section 273.18(g)(5)(viii)(B). Consequently,
this final rule makes no change in the provision that claims for which
60-day notices are returned as undeliverable may be referred for
collection under FTROP.
Contents of the 60-day notice--(iv): Two State agencies supported
the inclusion of information and instructions about requesting reviews.
One State agency included recommendations for certain editorial changes
and reorganization. We considered those recommendations and as a result
modified the final rule in section 273.18(g)(5)(iv)(I) to replace the
acronym ``FTROP'' with the phrase ``the Federal Income Tax Refund
Offset Program.'' The action group also suggested some editorial
changes to the proposed 60-day notice language. We are adopting their
suggestion to move the second sentence of section 273.18(g)(5)(iv)(D)
so it becomes the first sentence of section 273.18(g)(5)(iv)(E) in the
final rule. We agree that this change improves the clarity of the
notice.
One State agency opposed the proposed 60-day notice on the grounds
that the notice would be two pages long and in their experience
individuals did not read the information provided in the shorter notice
during the test of FTROP. The Department believes that the additional
information should be provided for the reasons stated in B.3.d. of the
preamble to the proposed rule.
[[Page 45993]]
The action group recommended other changes and additions to the 60-
day notice, specifically that it contain a statement of the standard
for when offset is proper, an explicit offer to renegotiate an
installment plan, and a list of possible defenses to offset. As
discussed above, the final rule clarifies that current FSP regulations
on renegotiating installment plans apply to determining if claims may
be referred for collection under FTROP. As the action group
acknowledges, the Department proposed the addition of a substantive
amount of information to help individuals determine why their claim is
considered subject to FTROP and how to request a review of the intended
collection action. (The reasons for the additional information were
discussed in B.3.d. of the preamble to the proposed rule with respect
to the contents of the 60-day notice in general and documenting that a
claim is not referrable under FTROP.) The Department has reviewed the
action group's suggestions and believes that the additions would not
improve the 60-day notice with respect to helping individuals
understand the basis for the intended collection action or how to
request a review. For example, the action group suggests defining
``jointly and severally liable'' and emphasizing that the notice
recipient had to be an adult household member at the time of the
overissuance in order to be liable for the claim. The proposed rule at
section 273.18(g)(5)(iv)(D) required that the 60-day notice state that
all adults who were household members when excess food stamp benefits
were issued to the household are jointly and severally liable for the
value of those benefits, and that collection of claims for such
benefits may be pursued against all such individuals. The language
clearly states the policy of liability with respect to adult household
members, and the Department believes that stating that ``collection of
claims for such benefits may be pursued against all such individuals''
is sufficient explanation of ``joint and several liability'' for
purposes of the 60-day notice. Consequently, the final rule makes no
changes in the proposed rule with respect to this provision. The
Department has carefully reviewed all of the action group's suggestions
and believes that they would unnecessarily lenghten the 60-day notice.
Accordingly, the Department is not adopting them.
One State agency commented that if this rule were published thirty
days after the end of the comment period, there would be insufficient
time to revise the content of the 60-day notice in time for mailing
prior to October 1, 1995. The Department recognizes that this may be a
problem for some State agencies and has decided to allow State agencies
which cannot make the necessary changes in time to use the same notice
format used during the test of FTROP in previous years for offset year
1996. Section 273.18(g)(5)(iii)(A) has been revised to reflect this
option. While the Department believes that the previous notice format
was sufficient to provide adequate notice to persons potentially
subject to offset, because the new format is an improvement in that it
provides more information, the Department urges all State agencies to
use the new format for the 1996 offset year if possible. All State
agencies will be required to use the new format for the 1997 and
subsequent offset years.
Tax refunds subject to offset--(iv)(B): The action group asserted
that tax refunds which represent an Earned Income Tax Credit (EITC)
should not be subject to offset because such an action is at cross
purposes with the EITC. As discussed in B.2.c. of the preamble to the
proposed rule, the Department does not agree with this position since
Congress has not enacted legislation excluding EITC from such debt
collection as FTROP. Additionally, the Department wishes to point out
that the Supreme Court resolved this issue by holding in Sorenson v.
Secretary of the Treasury, 475 U.S. 851 (1986), that an EITC refund is
subject to offset under FTROP.
Offset fee--(iv)(C): The proposed rule stated that the 60-day
notice must advise individuals that a charge for the administrative
cost of collection would be added to their claims and that amount would
also be deducted if the claim, or any portion of the claim, was
deducted from their tax refund. Two State agencies supported this
proposal. The action group opposed it on the grounds that it is
burdensome, that the IRS could increase the amount of the charge, and
that there is no authority for it in the Act. As stated in B.3.d. of
the preamble to the proposed rule, individuals can avoid paying the fee
by paying the claim voluntarily. The IRS bases the amount of the offset
fee on the cost of operating FTROP. Section 13(a) of the Act (5 U.S.C.
2022(a)) gives the Secretary general authority with respect to
recipient claims, and the Department believes that this entails
authority to impose reasonable administrative charges for collecting
claims. Accordingly, the final rule makes no change in this provision
for assessing offset fees against individuals.
There are instances during a particular offset year when more than
one offset for a food stamp claim is made against a tax refund due an
individual. One State agency asked whether in such cases the IRS
charges a second offset fee. The IRS currently charges an offset fee
each time it makes an offset, and they deduct that fee from the amount
offset before sending funds to FCS. FCS will add the amount of the IRS
fee to a claim referred under FTROP only once for a particular offset
year. The Department will advise State agencies about funding
additional offset fees.
One State agency commented that notifying individuals about the
amount of the offset fee would be burdensome to State agencies and
increase Federal costs. The proposed rule required that State agencies
notify individuals about the amount of the offset fee when they notify
them about the amount of any offset. (See section
273.18(g)(5)(viii)(A).) As stated in the preamble to the proposed rule,
FCS will advise State agencies of the amount of the fee. FCS expects to
so in December or early January. This should give State agencies
sufficient time to insert the amount in offset notices to be sent to
individuals. State agencies would need to redesign current offset
notices to accommodate this information. State agencies should be able
to use their current offset notices to inform individuals about any
second offsets made.
One State agency suggested that IRS should be able to determine the
amount of the fee in time for it to be included in the 60-day notice or
that a flat $10 fee be charged. FCS will not know the amount of the fee
in time to provide it to State agencies for those notices. As a result,
the Department believes the 60-day notice should advise individuals of
the approximate amount of the fee. Accordingly, the final rule requires
that 60-day notices include such information. For the foreseeable
future, the amount to be used is $10.00. FCS will advise State agencies
should that amount need to be changed.
In light of State agency comments indicating that implementation of
the offset fee would be difficult to accomplish for the 1996 offset
year and the fact that this final rule is being published later in the
tax cycle than was originally hoped, the Department has decided to
delay implementation of the offset fee until the 1997 offset year.
State agencies which elect to utilize the new 60-day notice as
discussed above will be required to delete any reference in the notice
to the collection of the fee.
Toll-free/collect phone numbers--(iv)(E) and (vii)(B): The proposed
rule required that, because of IRS requirements, the telephone number
of
[[Page 45994]]
the State agency contact in both the 60-day notice and the notice to
individuals about offsets must be either toll-free or collect. One
State agency objected to these requirements. The final rule retains
them because of the IRS requirements.
Review requests--(iv)(F): The proposed rule required that 60-day
notices advise individuals that review requests must be in writing. One
State agency supported that requirement. The action group favored
allowing oral requests. The group stated that requiring written
requests imposes a burden on people with limited literacy skills. As
discussed in B.3.d. of the preamble to the proposed rule, we continue
to believe that review requests must be submitted in writing to avoid
the difficulty of discerning whether an oral or telephonic contact is
simply to inquire about the claim or constitutes a formal review
request. Individuals with limited literacy skills could obtain
assistance from whomever helps with their other written communications.
They might also advise State agencies about their difficulty so that a
solution appropriate to the particular circumstances could be worked
out.
The action group also questioned whether it is appropriate to
require documentation to be submitted along with the request for review
since it may take time for an individual to obtain the necessary
documentation and this could cause them to miss the 60-day deadline for
a review. The action group suggested that adjournment for good cause
should be allowed to provide time to obtain documents. As the
Department explained in B.3.e. of the preamble to the proposed rule,
DEFRA requires that the State agency consider any evidence that the
debt is not past due or legally enforceable which is submitted within
60 days of the notice. The 60-day limit in the proposed rule complies
with this requirement. Moreover, as the Department stressed in B.3.h.
of the proposed rule, if after the 60-day period the individual
produces documentation showing the claim is not past-due or legally
enforceable, existing FSP regulations require that any amount collected
on the claim be refunded. Accordingly, the final rule does not change
the requirement that documentation or evidence be submitted with the
review request.
Bankruptcy--(iv)(G): The proposed rule stated that the 60-day
notice must state that a claim is not legally enforceable if a
bankruptcy prevents collection of the claim. Under the August 1991
General Notice, the individual was required to document an assertion of
bankruptcy. Three State agencies commented on the proposed change. They
asked what the new language meant, objected to it on the grounds that
individuals' bankruptcy petitions were often denied, and stated that
individuals should be required to document bankruptcy. As discussed in
B.3.d. of the preamble to the proposed rule, bankruptcy law prohibits
requiring documentation of bankruptcy. If it is necessary to validate
an individual's assertion of bankruptcy, a State agency should check
the records of the appropriate bankruptcy court.
State agency action on review requests--(v): One State agency
reported that when a review request is received without documentation,
it reviews its case files to determine whether the claim is past due
and legally enforceable. They found this burdensome and difficult to
accomplish within the 60-day period. They recommended a two stage
response for such situations, the first a notice that adequate
documentation was not received, the second detailing information about
the claim from the case file.
The proposed rule provided for expanded guidance to individuals (in
60-day notices) about documenting the status of their claim, and stated
that State agencies must determine whether or not claims are past due
and legally enforceable based on a review of their records, and of
documentation, evidence or other information from the individual. The
proposed rule also stated that a reason for a determination that a
claim was past due and legally enforceable is the individual's failure
to provide documentation to the contrary. The Department expects that
the scope of State agency file review will be sufficient to respond to
the issues raised by the documentation, evidence and/or explanation
provided with the review request. One State agency supported the
requirement for stating the reason for the decision on the review,
including citing inadequate documentation. The final rule makes no
change in the requirement.
The action group contended that the review by the State agency of a
proposed tax refund offset must be a full hearing when an individual
alleges in the FTROP review process that they never received a demand
letter. As discussed above in connection with review requests, and as
discussed in B.3.d. of the preamble to the proposed rule, the
Department believes that the review rights provided in the proposed
rule comply with statutory and regulatory requirements. The group also
argued for an additional full fair hearing on the grounds that some
households which are not participating when they receive their fair
hearing notice do not respond because they believe the State agency has
no way to collect the overpayment except by allotment reduction if the
household again participates in the program. The Department does not
find that the equities in such a situation favor providing an
additional opportunity for a fair hearing merely because a household
now views the collection threat as credible.
One State agency stated that referring claims denied for lack of
documentation to FCS will be a waste of FCS time since in such
situations individuals will have no more documentation to provide FCS
than they did the State agency. Individuals, not State agencies,
request FCS reviews of State agency decisions. The opportunity for such
review is required in IRS rules as discussed in B.3.e. of the preamble
to the proposed rule. Accordingly, the requirement is retained in the
final rule.
October 31 cut-off--(v)(E): In the FTROP process there are two
important due-process time frames, the 60-day period individuals have
to request a State agency review and the 30-day period to request an
FCS review. To accommodate these time frames and to provide State
agencies time to prepare and submit certified files in early December
of each year, the proposed rule provided that State agencies could not
refer for offset a claim for which a timely State agency review request
is received unless by October 31 preceding the offset year the State
agency determined the claim past due and legally enforceable, and
notified the individual of that decision.
Two State agencies objected to the October 31 cut-off date because
of the number of claims for which review requests are received between
October 31 and November 30. The Department is concerned that the
October 31 cut-off will reduce the number of claims which might
otherwise be referable for collection under FTROP. Because more time is
needed to give due consideration to alternatives for dealing with this
matter, this rule makes no change in proposed rule with respect to the
cut-off. The Department intends to address the cut-off date in a later
rulemaking.
Actions on offsets--(viii): The action group urged the Department
to provide post-deprivation hearings in addition to the two pre-offset
reviews which are available, particularly to insure that claims which
are mistakenly offset are repaid promptly. The Department believes that
the proposed system of a State agency review followed by an FCS review
is sufficient to provide adequate
[[Page 45995]]
due process to individuals. Moreover, section 273.18(g)(5)(viii)(B) of
this rule references the provision at section 273.18(i)(4) of food
stamp regulations which requires that the State agency return
overpayments as soon as possible after the overpayment becomes known.
Reporting--(ix)(C): The proposed rule eliminated the management
report required by the August 1991 General Notice and replaced it with
a requirement that annually and no later than the tenth of October of
the year prior to the offset year State agencies report in writing to
the FCS regional office the number of 60-day notices mailed and the
total dollar value of the claims associated with those notices. One
State agency supported this change. To be consistent with change in the
mailing date of 60-day notices, this final rule requires that the
report be submitted no later than 10 days after 60-day notices are
mailed.
Alternate 60-day notice--(x): The required contents for this 60-day
notice are set forth in section 273.18(g)(5)(x). This section contains
the specifications from the August 1991 General Notice, updated to
reflect a statutory change and slightly modified in response to
experience during the test of FTROP. FCS has previously provided State
agencies language for this notice and has discussed it during training
sessions.
C. Federal Salary Offset
As stated in the proposed rule, the Department tested salary offset
under the authority of a General Notice published August 29, 1994 at 59
FR 44400. The Department received one formal comment on that General
Notice and is responding to that comment in this preamble. In addition,
the Department used experience from the test of salary offset as well
as comments received on the proposed rule in developing these final
salary offset regulations.
Claims subject to salary offset--(i): One State agency recommended
that, because of the overall work required of State agencies in
connection with salary offset, only those claims owed by Federal
employees which are not collected by offset from tax refunds should be
pursued through salary offset. All claims submitted for FTROP are
matched against Federal employee records to identify claims owed by
Federal employees. The IRS requires that all such claims be stripped
from the files of claims which will be referred for collection through
FTROP. Consequently, to the extent that they are identified by this
procedure, claims owed by Federal employees may not be referred for
collection by FTROP and are accordingly subject to the salary offset
procedures.
Two State agencies commented that State agencies should not be
required to participate in salary offset as a condition of
participating in tax offset. They argued that the salary collection
effort is burdensome and not cost effective. FCS is requiring State
agencies to participate to ensure that Federal employees are held to
the same standards of repayment as other citizens. Although FCS has not
changed the requirement in the proposed rule that State agencies
participating in tax offset also participate in salary offset, FCS
wants to clarify what the required participation entails for State
agencies. Particularly, FCS does not intend this rule to change current
policy at 7 CFR 273.18(d)(4)(iv), and 7 CFR 273.18 (e)(1) and (e)(2)
which allow State agencies to cease collection activities when they are
not cost effective.
FCS acknowledges that to date experience with salary offset is
limited. FCS intends to work with State agencies in partnership to
apply new experience and new technologies to develop the most cost
effective collection methods possible. In support of that goal, FCS
wants to clarify that just as State agencies would not be required to
pursue collection of every claim no matter how small, FCS will not
necessarily refer every claim identified as being owed by a Federal
employee to State agencies for the collection effort specified in the
salary offset regulation.
The action group was concerned that the State agency may collect an
amount which exceeds the claim by continuing other means of collection
while salary offset procedures are pending, including food stamp
allotment reductions. All claims referred for salary offset must also
meet the eligibility requirements for FTROP, including the requirements
in section 273.18(G)(5)(ii) that the portion of the claim referred
under FTROP or salary offset must not be simultaneously subject to
other forms of collection and that no individual liable for the claim
is currently participating in the FSP.
Confidentiality requirements--(ii)(C): One State agency stated
that, since personnel have been advised of the confidentiality
requirements for FTROP data, repeating the security agreements would
not serve a useful purpose. The IRS specifies data security
requirements for FTROP, the Department of Defense and the United States
Postal Service for salary offset. Security procedures for FTROP and
salary offset data may be identical in a State agency, but State
agencies should review the security procedures for salary offset to
make sure that they meet the requirements of this final rule and take
steps to assure that personnel understand that salary offset data must
be accorded the specified confidentiality and security protection.
Notices--(iii) and (v)(E): The action group urged the Department to
require the same level of detail in what the group called the ``notice
of impending salary offset'' as in the 60-day notice used for FTROP. As
proposed, salary offset utilizes two notices. First, the proposed rule
requires State agencies to provide individuals with an ``advance notice
of salary offset.'' This notice is provided so that the State agency
may offer the debtor a chance to voluntarily pay the debt before it is
referred to FCS. The second notice is required by Departmental rules at
7 CFR 3.55 which details the contents of the ``Notice of Intent'' of
salary offset. The proposed rule specified that the FSP notice of
intent would comply with Departmental requirements subject to several
modifications. The Departmental regulations detail the information
which is required to be provided debtors in the notice of intent to
assure that, among other things, they have sufficient information about
appealing the intent salary offset. The Department believes that the
contents of these two notices provide ample information for debtors
about their rights and responsibilities with respect to salary offset.
Accordingly, the final rule makes no changes in the proposed
requirements for the two salary offset notices.
Referrals to FCS--(iii)(B): The proposed rule required that within
90 days of the date of the advance notice, the State agency refer to
FCS all claims for which the State agency does not receive timely and
adequate response as specified in the advance notice. The advance
notice gave debtors 30 days to respond to State agencies. Consequently,
State agencies had 60 days to refer ``no-response'' claims to FCS. One
State agency commented that this 60-day period was inconsistent with
the 30 days for determining a voluntary payment for a claim under FTROP
overdue. There was no inconsistency since the two time periods applied
to two different types of action.
The State agency commenting on the General Notice stated that the
requirements for documentation of salary offset claims referred to FCS
were excessive. This same concern was expressed during the test of
FTROP by State agencies in connection with the requirements for
documenting claims appealed to FCS regional offices. The proposed rule
modified the requirements for documentation in both
[[Page 45996]]
situations to allow for copies of electronic records of demand letters,
for example. One State agency commenting on the proposed rule stated
that the documentation requirements for salary offset claims were still
burdensome. The Department believes that the documentation requirements
for referred salary offset claims give State agencies significant
flexibility to provide documents and records in the way most feasible
for their paper and electronic record systems. Accordingly, the final
rule makes no change in the requirement as proposed.
$50 minimum--(iii)(C)(3): The action group suggested that the
proposed $50 per month minimum voluntary payment to avoid salary offset
is too high. They recommend $50 or 10 percent of disposable income,
whichever is less. The Department set the $50 level of payment to be
consistent with the standards for involuntary salary withholding
established at 7 CFR 3.64 of USDA regulations and for this reason has
retained the $50 minimum payment in this final rule.
Information encouraged in the advance notice--(iii)(C)(1): The
proposed rule encouraged State agencies to include certain information
about the specific claim in their advance notice to the debtor. One
State agency commented that including the encouraged information with
the advance notice would make automated notices impossible. Including
the information is not required. State agencies are encouraged to
include such information in order to demonstrate that the claim is
valid. Accordingly, the final rule includes the language unchanged.
Appeals to FCS--(iii)(C)(5): One State agency stated that providing
an appeal to FCS delays collection of the debts. The right to a Federal
level hearing is provided by statute (5 U.S.C. 5514(a)(2)), which also
provides that debtors must request such hearings within 30 days of
receipt of the notice of intent from FCS, and the hearing must be
concluded within 60 days of the date of the debtor's request. The final
rule makes no changes in the proposed regulations for hearings on
collections of recipient claims through salary offset.
FCS actions on referred claims--(v): The action group urged the
Department to adopt a ``post-taking hearing'' so that employees will
have an opportunity to appeal over collections from their salary which
may occur if collection continues beyond the amount of the claim, or if
collections are made and the employee did not receive the initial
notice of offset. With respect to collections beyond the amount of the
claim, Departmental regulations at 7 CFR 3.67 require that any over
collection be promptly refunded. Employees will have verified records
of their claim amounts and pay stubs reflecting the offsets from
salaries. Refunds of collections beyond the amount of the claims would
be made if employees bring any such errors to the attention of their
employing agency.
With respect to the action group's second comment, there may be
instances where employees do not receive the notice of intent from FCS.
Departmental regulations at 7 CFR 3.56(c) provide that appeals received
after the 30-day opportunity to make such appeals may be granted if the
employee shows that he or she did not receive the notice of intent.
Implementation
State agencies must implement this rule by October 2, 1995, except
that State agencies currently participating in FTROP must submit the
amendment to the Plan of Operation required at 7 CFR 272.2(d)(1)(xii)
no later than November 30, 1995.
List of Subjects
7 CFR Part 271
Administrative practice and procedures, Food stamps, Grant
programs--social programs.
7 CFR Part 272
Alaska, Civil rights, Food stamps, Grant programs--social programs,
Reporting and recordkeeping requirements.
7 CFR Part 273
Administrative practice and procedure, Aliens, Claims, Food stamps,
Fraud, Grant programs--social programs, Penalties, Records, Reporting
and recordkeeping requirements, Social Security, Students.
Accordingly, 7 CFR parts 271, 272 and 273 are amended as follows:
PART 271--GENERAL INFORMATION AND DEFINITIONS
1. The authority citation for parts 271, 272 and 273 continues to
read as follows:
Authority: 7 U.S.C. 2011-2032.
2. In Sec. 271.2, the definition of Offset year is added in
alphabetical order to read as follows:
Sec. 271.2 Definitions.
* * * * *
Offset year means the calendar year during which offsets may be
made to collect certain recipient claims from individuals' Federal
income tax refunds.
* * * * *
PART 272--REQUIREMENTS FOR PARTICIPATING STATE AGENCIES
3. In Sec. 272.1, a new paragraph (g)(143) is added to read as
follows:
Sec. 272.1 General terms and conditions.
* * * * *
(g) Implementation. * * *
(143) Amendment 367. The provisions of Amendment 367 must be
implemented no later than October 2, 1995 except that State agencies
currently participating in the Federal Income Tax Refund Offset Program
(FTROP) must implement section 272.2(d)(1)(xii), which relates to the
submission of the Plan of Operations, within November 30, 1995.
4. In Sec. 272.2, a new sentence is added to the end of paragraph
(a)(2) and a new paragraph (d)(1)(xii) is added to read as follows:
Sec. 272.2 Plan of operation.
(a) General Purpose and Content. * * *
(2) Content. * * * The Plan's attachments shall also include the
commitment to conduct the optional Federal Income Tax Refund Offset
Program and the Federal Salary Offset Program.
* * * * *
(d) Planning Documents.
(1) * * *
(xii) If the State agency chooses to implement the Federal Income
Tax Refund Offset Program and the Federal Salary Offset Program, the
Plan's attachments shall include a statement in which the State agency
states that it will comply with the provisions of Sections 273.18
(g)(5) and (g)(6) of this chapter.
* * * * *
PART 273--CERTIFICATION OF ELIGIBLE HOUSEHOLDS
5. In Sec. 273.18 new paragraphs (g)(5) and (g)(6) are added to
read as follows:
Sec. 273.18 Claims against households.
* * * * *
(g) Method of collecting payments. * * *
(5) Federal income tax refund offset program.
(i) General requirements. State agencies which choose to implement
the Federal income tax refund offset program (FTROP) shall:
(A) Submit an amendment to their Plan of Operation as specified in
Section 272.2(d)(1)(xii) of this chapter stating that they will comply
with the
[[Page 45997]]
requirements for FTROP and with the requirements for the Federal Salary
Offset Program (salary offset). Such amendments shall be submitted to
the appropriate FCS regional office no later than twelve months before
the beginning of a State agency's first offset year.
(B) Submit data for FTROP to FCS in the record formats specified by
FCS and/or the Internal Revenue Service (IRS), and according to
schedules and by means of magnetic tape, electronic data transmission
or other method specified by FCS.
(ii) Claims referable for offset. State agencies may submit for
collection from Federal income tax refunds recipient claims which are
past due and legally enforceable.
(A) Such claims must be:
(1) Only inadvertent household error claims or intentional Program
violation claims. These claims shall be properly established according
to the requirements of this section (which pertains to claims against
households) and the requirements of section 273.16 (which pertains to
disqualification for intentional Program violations). In addition,
these claims shall be properly established no later than the date the
State transmits its final request for IRS addresses for the particular
offset year. Furthermore, the State agency shall have electronic
records and/or paper documents showing that the claim was properly
established. These records and documents include such items as claim
demand letters, results of fair hearings, advance notices of
disqualification hearings, results of such hearings, and records of
payments.
(2) Claims for which the State agency has verified that no
individual who is jointly and severally liable as specified in
paragraph (a) of this section is also currently participating in the
FSP in the State.
(3) Claims which meet at least the minimum dollar amount
established by the IRS.
(4) Claims for which the date of the initial demand letter is
within 10 years of January 31 of the offset year, except that claims
reduced to final court judgments ordering individuals to pay the debt
are not subject to this 10-year limitation.
(5) Claims for which the State agency is receiving neither regular
voluntary payments nor regular, involuntary payments such as wage
garnishment. Claims for which a State agency has been receiving regular
payments under paragraph (g)(2) of this section are considered past due
and legally enforceable if the individual does not respond to a notice
of default as specified in paragraph (g)(2) of this section.
(6) Claims for which collection is not barred by a bankruptcy.
(7) Claims for which the State agency has provided the individual
with all of the notification and opportunities for review as specified
in paragraphs (g)(5)(iii), (g)(5)(iv), (g)(5)(v) and (g)(5)(vi) of this
section.
(B) In addition:
(1) All claims to be submitted for collection under FTROP shall be
reduced by any amounts subject to collection from State income tax
refunds or from other sources which may result in collections during
the offset year.
(2) If a claim to be submitted for collection under FTROP is a
combination of two or more recipient claims, the date of the initial
demand letter for each claim combined shall be within the 10-year range
specified in paragraph (g)(5)(ii)(A)(4) of this section. Claims reduced
to judgment shall not be combined with claims which are not reduced to
judgment.
(3) If a claim to be submitted under FTROP is apportioned between
two or more individuals who are jointly and severally liable for the
claim pursuant to paragraphs (a) and (f) of this section, the sum of
the amounts submitted shall not exceed the total amount of the claim.
(iii) 60-Day notice to individuals. (A) Prior to referring claims
for collection under FTROP, the State agency shall provide individuals
from whom it seeks to collect such claims with a notice, called a 60-
day notice. For offset year 1996, State agencies have the option of
providing the 60-day notice specified in paragraph (g)(5)(iv) of this
section or in paragraph (g)(5)(x) of this section. For offset year 1997
and subsequent years, State agencies shall provide the 60-day notice
specified in paragraph (g)(5)(iv).
(B) With the exception of such State-specific information as names
and job titles and information required for State agency contacts, a
State agency's 60-day notice shall contain only the information
specified in paragraph (g)(5)(iv) of this section. In the certification
letter required in paragraph (g)(5)(vii) of this section, the State
agency shall include a statement that its 60-day notice conforms to
this requirement. This requirement shall not apply to State agencies
which choose to use the 60-day specified in paragraph (g)(5)(x) of this
section for offset year 1996.
(C) Unless otherwise notified by FCS, the State agency shall mail
60-day notices for claims to be referred for collection through FTROP
no later than October 1 preceding the offset year during which the
claims would be offset.
(D) The State agency shall mail 60-day notices using the address
information provided by the IRS unless the State agency receives clear
and concise notification from the taxpayer that notices from the State
agency are to be sent to an address different from the address obtained
from the IRS. Such clear and concise notification shall mean that the
taxpayer has provided the State agency with written notification
including the taxpayer's name and identifying number (which is
generally the taxpayer's SSN), the taxpayer's new address, and the
taxpayer's intent to have notices from the State agency sent to the new
address. Claims for which 60-day notices addressed as required in this
paragraph are returned as undeliverable may be referred for collection
under FTROP.
(iv) Contents of the 60-day notice. Except that the language set
out in paragraph (g)(5)(iv)(C) of this section shall not be included in
the notice for offset year 1996, the State agency's 60-day notice shall
state that:
(A) [Name of the State agency or an equivalent phrase] has records
documenting that you, [the name of the individual], Social Security
Number: [the individual's Social Security Number] are liable for [the
unpaid balance of the recipient claim(s) the State agency intends to
refer] resulting from overissued food stamp benefits. [The name of the
State agency or equivalent phrase] has previously mailed or otherwise
delivered demand letters notifying you about the claim, including the
right to a fair hearing on the claim, and has made any other required
collection efforts.
(B) The Deficit Reduction Act of 1984, as amended, authorizes the
Internal Revenue Service (IRS) to deduct such debts from tax refunds if
they are past due and legally enforceable. [Name of the State agency or
an equivalent phrase] has determined that your debt is past due and
legally enforceable as specified by the Deficit Reduction Act of 1984,
the IRS regulations, and Food Stamp Program (FSP) regulations. We
intend to refer the claim for deduction from your Federal income tax
refund unless you pay the claim within 60 days of the date of the
notice or make other repayment arrangements acceptable to us.
(C) If we refer your claim to the IRS, a charge for the
administrative cost of collection will be added to your claim and that
amount will also be deducted if the claim, or any portion of the claim,
is deducted from your tax refund. This
[[Page 45998]]
charge will be approximately [the amount provided by FCS].
(D) All adults who were household members when excess food stamp
benefits were issued to the household are jointly and severally liable
for the value of those benefits, and collection of claims for such
benefits may be pursued against all such individuals.
(E) Our records do not show that the claim is being paid according
to either a voluntary agreement with us or through scheduled,
involuntary payments. To pay the claim voluntarily or to discuss it,
you should contact: [an office, administrative unit and/or individual,
the contact's street address or post office box, and a toll-free or
collect telephone number].
(F) You are entitled to request a review of the intended collection
action. We must receive your request for review within 60 days of the
date of this notice. Such a request must be written, must be submitted
to the address provided in this notice and must contain your Social
Security Number. We will not refer your claim for offset while our
review is pending.
(G) The claim is not legally enforceable if a bankruptcy prevents
collection of the claim.
(H) You may want to contact your local office of the IRS before
filing your Federal income tax return. This is true where you are
filing a joint return, and your spouse is not liable for the food stamp
claim and has income and withholding and/or estimated Federal income
tax payments. In such circumstances your spouse may be entitled to
receive his or her portion of any joint refund. Your own liability for
this claim, including any charge for administrative costs, may still be
collected from your share of such a joint refund.
(I) If you request a review of our intent to collect the claim from
your income tax refund, you should provide documentation showing that
at least one of the items listed below is incorrect for the claim cited
in this notice. If you do not have such documentation, for example a
cancelled check, you should explain in detail why you believe that the
claim is not collectible under the Federal Income Tax Refund Offset
Program.
(J) The claim cited in this notice is subject to collection from
your tax refund for the following reasons:
(1) The claim was properly established according to Food Stamp
Program regulations and was caused by an inadvertent household error or
an intentional Program violation;
(2) No individual who is jointly and severally liable for the claim
is also currently participating in the Food Stamp Program in [the name
of State initiating the collection action];
(3) The claim is for at least [the minimum dollar amount required
by the IRS];
(4) The date of the initial demand letter for the claim is within
10 years of January 31, [the offset year]. If the claim was reduced to
a final court judgment ordering you to pay the debt, this 10-year
period does not apply, and the date of the initial demand letter may be
older than 10 years; and
(5) We are neither receiving voluntary payments pursuant to an
agreed upon schedule of payments as provided in current Food Stamp
Program regulations nor are we receiving scheduled, involuntary
payments such as wage garnishment. Claims for which we have been
receiving regular payments under current Food Stamp Program regulations
are considered past due and legally enforceable if you did not respond
to a notice of default.
(K) In addition, collection of the claim is not barred by
bankruptcy.
(v) State agency action on requests for review. (A) For all written
requests for review received within 60 days of the date of the 60-day
notice, the State agency shall determine whether or not the subject
claims are past due and legally enforceable, and shall notify
individuals in writing of the result of such determinations.
(B) The State agency shall determine whether or not claims are past
due and legally enforceable based on a review of its records, and of
documentation, evidence or other information the individual may submit.
(C) If the State agency decides that a claim for which a review
request is received is past due and legally enforceable, it shall
notify the individual that:
(1) The claim was determined past due and legally enforceable, and
the reason for that determination. Acceptable reasons for such a
determination include the individual's failure to provide adequate
documentation that the claim is not past due or legally enforceable;
(2) The State agency intends to refer the claim to the IRS for
offset;
(3) The individual may ask FCS to review the State agency decision.
FCS must receive the request for review within 30 days of the date of
the State agency decision. FCS will provide the individual a written
response to such a request stating its decision and the reasons for its
decision. The claim will not be referred to the IRS for offset pending
the FCS decision; and
(4) A request for an FCS review must include the individual's SSN
and must be sent to the appropriate FCS regional office. The State
agency decision shall provide the address of that regional office,
including in that address the phrase ``Tax Offset Review.''
(D) If the State agency determines that the claim is not past due
or legally enforceable, in addition to notifying the individual that
the claim will not be referred for offset, the State agency shall take
any actions required by food stamp regulations with respect to
establishing the claim, including holding appropriate hearings and
initiating collection action.
(E) The State agency shall not refer for offset a claim for which a
timely State agency review request is received unless by October 31
preceding the offset year the State agency determines the claim past
due and legally enforceable, and notifies the individual of that
decision as specified in paragraphs (g)(5)(v)(C)(1), (g)(5)(v)(C)(2),
and (g)(5)(v)(C)(3) of this section.
(vi) FCS action on appeals of State agency reviews.
(A) FCS shall act on all timely requests for FCS reviews of State
agency review decisions as specified in paragraph (g)(5)(v)(C) of this
section. A request for FCS review is timely if it is received by FCS
within 30 days of the date of the State agency's review decision.
(B) If a timely request for FCS review is received, and the State
agency's decision is dated on or before October 31 of the year prior to
the offset year, FCS shall:
(1) Complete a review and notification as specified in paragraphs
(g)(5)(vi)(C), (g)(5)(vi)(D), and (g)(5)(vi)(E) of this section,
including providing State agencies and individuals the required
notification of its decision; or
(2) Notify the State agency that it has not completed its review
and that the State agency must delete the claims in question from files
to be certified to FCS according to paragraph (g)(5)(vii) of this
section. If FCS fails to timely notify the State agency and because of
that failure a claim is offset which FCS later finds does not meet the
criteria specified in paragraph (g)(5)(ii) of this section, FCS will
provide funds to the State agency for refunding the charge for the
offset fee.
(C) If a timely request for FCS review is received, and the State
agency's decision is dated after October 31 of the year prior to the
offset year, FCS shall complete a review as specified in paragraphs
(g)(5)(vi)(D), (g)(5)(vi)(E) and (g)(5)(vi)(F) of this section, but the
claim shall not be referred for offset as
[[Page 45999]]
specified in paragraph (g)(5)(v)(E) of this section.
(D) When FCS receives an individual's request to review a State
agency decision, FCS shall:
(1) Request pertinent documentation from the State agency about the
claim. Such documentation shall include such things as printouts of
electronic records and/or copies of claim demand letters, results of
fair hearings, advance notices of disqualification hearings, the
results of such hearings, records of payments, 60-day notices, review
requests and documentation, decision letters, and pertinent records of
such things as telephone conversations; and
(2) Decide whether the State agency correctly determined the claim
in question is past due and legally enforceable.
(E) If FCS finds that the State agency correctly determined that
the claim is past due and legally enforceable, FCS will notify the
State agency and individual of its decision, and the reason(s) for that
decision, including notice to the individual that any further appeal
must be made through the courts.
(F) If FCS finds that the State agency incorrectly determined that
the claim is past due and legally enforceable, FCS will notify the
State agency and individual of its decision, and the reason(s) for that
decision. FCS will also notify the State agency about any corrective
action the State agency must take with respect to the claim and related
procedures.
(vii) Referral of claims for offset. (A) State agencies shall
submit to FCS a certified file of claims for collection through FTROP
by the date specified by FCS in schedules which FCS will provide as
stated in paragraph (g)(5)(i) of this section. At the same time State
agencies shall also provide to their FCS regional office a letter which
specifically certifies that all claims contained in that certified file
meet the criteria for claims referable for FTROP as specified in
paragraph (g)(5)(ii) of this section, and that for all such claims a
notice and opportunity to request a review as required in paragraphs
(g)(5)(iii), (g)(5)(iv), (g)(5)(v) and (g)(5)(vi) of this section have
been provided. The certification letter shall also state that the State
agency has not included in the certified file of claims any claim
which, as provided in paragraph (g)(5)(vi) of this section, FCS
notified the State agency is not past due or is not legally
enforceable, or any claim for which FCS notified the State agency that
it has not completed a timely requested review, or for which the State
agency has not completed a timely requested review. Finally, the
certification letter shall also state that with the exception of State-
specific information such as names and positions and State-specific
information required for State agency contacts, the State agency's 60-
day notice contains only the information specified in paragraph
(g)(5)(iv) of this section.
(B) The State agency shall provide to FCS the name, address and
toll-free or collect telephone numbers of State agency contacts to be
included in IRS notices of offset. State agencies shall state in the
letter required in paragraph (g)(5)(vii)(A) of this section how they
determined that such information is accurate and shall provide FCS
updates of that information if and when that information changes.
(viii) State agency actions on offsets made. (A) Promptly after
receiving notice from FCS that offsets have been made, the State agency
shall notify affected individuals of offsets made, including the amount
charged for offset fees, and the status of the claims in question.
(B) As close in time as possible to the notice of offset required
in paragraph (g)(5)(viii)(A) of this section, the State agency shall
refund to the individual (as required by paragraph (i)(4) of this
section) any over collection which resulted from the offset of the
individual's Federal income tax refund.
(C) If an offset results from a State agency including in the
certified file of claims required by paragraph (g)(5)(vii)(A) of this
section a claim which does not meet the criteria specified in paragraph
(g)(5)(ii) of this section, the State agency shall refund the amount
offset to the individual, including any amounts collected to pay for
the offset fee charged by the IRS. The State agency may claim any such
latter amount as an allowable administrative cost under Part 277 of
this chapter. The State agency shall not be responsible for refunding
any portion of the charges for offset fees incurred for IRS reversals
of offsets when, for example, the IRS refunds amounts offset, including
offset fees, to taxpayers who properly notified the IRS that they are
not liable for claims which were collected in whole or part from their
share of a joint Federal income tax refund.
(ix) Monitoring and reporting offset activities. State agencies
shall monitor FTROP activities and shall take all necessary steps to:
(A) Update IRS files, reducing the amounts of or deleting claims
from those files to reflect payments made after referral to FCS, or
deleting claims which for other reasons no longer meet the criteria for
being collectible under FTROP.
(B) Promptly refund to the individual any over collection of claims
as required in paragraph (g)(5)(viii)(B) of this section.
(C) Annually and no later than the tenth of October of the year
prior to the offset year report in writing to the FCS regional office
the number of 60-day notices mailed and the total dollar value of the
claims associated with those notices.
(D) Submit data security and voluntary payment reports as required
by FCS and the IRS.
(E) Report collections of all recipient claims collected under the
procedures of paragraph (g)(5) of this section as required by paragraph
(i)(2) of this section.
(x) Contents of the alternate 60-day notice. As specified in
paragraph (g)(5)(iii)(A) of this section, for offset year 1996 State
agencies may use a 60-day notice specifying the following information:
(A) The State agency has records documenting that the individual,
identified with his or her Social Security Number, is liable for a
specified, unpaid balance of a claim for overissued food stamp
benefits, and that the State agency has notified the individual about
the claim and made prior collection efforts as required by the Food
Stamp Program. The notice must also state that the claim is past due
and legally enforceable.
(B) The Deficit Reduction Act of 1984, as amended by the Emergency
Unemployment Act of 1991, authorizes the Internal Revenue Service to
deduct such debts from tax refunds, and the State agency intends to
refer the claim for such deduction unless the individuals pays the
claim within 60 days of the date of the notice, or makes other
repayment arrangements acceptable to the State agency.
(C) Instructions about how to pay the claim, including the name,
address and telephone number of an office, administrative unit or
person in the State agency who can discuss the claim and the intended
offset with the individual.
(D) The following information about requesting a review of the
intended offset:
(1) The individual is entitled to request a review of the intended
referral for offset;
(2) The State agency will not act on review requests which it
receives later than 60 days after the date of the 60-day notice;
[[Page 46000]]
(3) Claims for which timely review requests have been received will
not be referred for offset while under review;
(4) A review request must provide evidence or documentation why the
individual believes that the claim is not past due or is not legally
enforceable;
(5) A review request is not considered received until the State
agency receives such evidence or documentation; and
(6) A review request must contain the individual's Social Security
Number.
(E) The individual should contact the State agency if he or she
believes that a bankruptcy proceeding prevents collection of the claim
or if the claim has been discharged in bankruptcy.
(F) The individual may want to contact the Internal Revenue Service
before filing his or her Federal income tax return if the individual is
married, filing a joint return, and if his or her spouse is not liable
for the food stamp claim and has income and withholding and/or
estimated Federal income tax payments. In such circumstances the spouse
may be entitled to receive his or her portion of any joint refund.
False claims concerning such liability may subject individuals to legal
action.
(G) All individuals are jointly and severally liable for
overpayment of food stamps if they were adult household members when
the food stamps were overissued.
(6) Federal salary offset program.
(i) Claims subject to salary offset. All recipient claims submitted
by State agencies participating in the Federal income tax refund offset
program (FTROP) shall be subject to the matching procedures specified
in this paragraph. Individuals identified by the match shall be subject
to the salary offset procedures specified in this paragraph.
(ii) Identification of recipient claims owed by Federal employees.
(A) FCS will match all recipient claims submitted by State agencies
participating in FTROP against Federal employment records maintained by
the Department of Defense and the United States Postal Service. FCS
will remove recipient claims matched during this procedure from the
list of recipient claims to be referred to the Internal Revenue Service
(IRS) for collection through FTROP.
(B) When FCS receives a list of Federal employees matched against
recipient claims for a particular State agency, it will notify the
State agency in writing accompanied by a data security and
confidentiality agreement containing the requirements specified in
paragraph (g)(6)(ii)(C) of this section for the State agency to sign
and return. When that agreement is returned, signed by an appropriate
official of the State agency, FCS will provide the list of matched
Federal employees to the State agency.
(C) State agencies which receive lists of matched employees shall
take the actions specified in this paragraph to ensure the security and
confidentiality of information about those employees and their apparent
debts, and shall ensure that any contractors or other non-State agency
entities to which the records may be disclosed also take these actions:
(1) By such means as card keys, identification badges and security
personnel, limit access to computer facilities handling the data to
persons who need to perform official duties related to the salary
offset procedures. By means of a security package, limit access to the
computer system itself to such persons;
(2) During off-duty hours, keep magnetic tapes and other hard copy
records of data in locked cabinets in locked rooms. During on-duty
hours, maintain those records under conditions that restrict access to
persons who need them in connection with official duties related to
salary offset procedures;
(3) Use the data solely for salary offset purposes as specified in
paragraph (g)(6) of this section, including not extracting, duplicating
or disseminating the data except for salary offset purposes;
(4) Retain the data only as long as needed for salary offset
purposes as specified in paragraph (g)(6) of this section, or as
otherwise required by FCS;
(5) Destroy the data by shredding, burning or electronic erasure;
and
(6) Advise all personnel having access to the data about the
confidential nature of the data and their responsibility to abide by
the security and confidentiality provisions stated in paragraph
(g)(6)(ii)(C) of this section.
(D) Prior to taking any action to collect recipient claims as
specified in paragraph (g)(6)(iii) of this section, State agencies
shall review the claims records of matched Federal employees to verify
the amount of the recipient claim owed, and to remove from the list of
claims any recipient claims which have been paid, which are being paid
according to an agreed to schedule, or which for other reasons are not
collectible.
(iii) State agency advance notice of salary offset. (A) Following
the review specified in paragraph (g)(6)(ii)(D) of this section, State
agencies shall provide each Federal employee verified as owing a
recipient claim (debtor) with an advance notice of salary offset
(advance notice). This advance notice shall be mailed to the debtor at
the address provided by FCS, or shall be otherwise provided, within 60
days of State agency receipt of the list specified in paragraph
(g)(6)(ii)(B) of this section.
(B) Within 90 days of the date of the advance notice, the State
agency shall refer to FCS all claims for which the State agency does
not receive timely and adequate response as specified in the advance
notice. Such referrals shall consist of a copy of the advance notice
sent to the debtor and copies of records relating to the recipient
claim. Records relating to the recipient claims include such things as
copies of printouts of electronic records and/or copies of claim demand
letters, results of fair hearings, advance notices of disqualification
hearings, the results of such hearings, records of payments, review
requests and documentation, decision letters, and pertinent records of
such things as telephone conversations.
(C) The advance notice shall state that:
(1) According to State agency records the debtor is liable for a
claim for a specified dollar amount due to receiving excess food stamp
benefits. State agencies are encouraged to include as much other
information about the claim as possible, including such things as
whether it was caused by household error or intentional Program
violation, the date of the initial demand letter, any hearings or court
actions which relate to the claim, and what, if any, payments have
reduced the amount of the original claim;
(2) Through a computer match the debtor was found to be employed by
[the name and address of the employing agency of the debtor]. The
computer match was conducted under the authority of and according to
procedures required by the Privacy Act of 1974, as amended;
(3) Collection from the wages of Federal and USPS employees for
debts such as food stamp recipient claims is authorized by the Debt
Collection Act of 1982. The claim will be referred to FCS for such
collection action unless within 30 days of the date of the advance
notice the State agency receives either:
(i) Payment of the claim in full. Claims of $50 or less shall be
paid in full within 30 days or they will be referred to FCS for
collection from the individual's Federal salary; or
(ii) The first installment payment for the claim. Claims of more
than $50, if not paid in full within 30 days, must be paid in
installments of at least $50 a month. Debtors may pay more than $50 on
any installment payment. The advance notice shall state the monthly due
date of installment payments and that if a monthly installment payment
of
[[Page 46001]]
at least $50 is not received by the due date, the claim will be
referred to FCS for offset from the individual's Federal salary with no
further opportunity to enter a voluntary repayment agreement;
(4) The name, address and a toll-free or collect telephone number
of a State agency contact (an individual or unit) for repayment and/or
discussion of the claim; and
(5) Debtors may submit documentation to State agencies showing such
things as payments of claims or other circumstances which would prevent
collection of claims. Unless the State agency receives such
documentation within 30 calendar days of the date of the advance notice
and the documentation clearly shows that the claim has been paid or is
not legally collectible, the State agency shall refer the claim to FCS
for collection from the debtor's salary. The State agency shall notify
debtors in writing when claims for which an advance notice was issued
will not be referred for collection from salaries. Debtors have the
right to a formal appeal to FCS. Notification about how to make such
appeals is required and will be provided to debtors before any
collection action from salaries is taken.
(iv) State agency retention and reporting of collections. (A) State
agencies shall retain collections of recipient claims paid voluntarily
to State agencies and to FCS through salary offsets at the rates
specified in paragraph (h) of this section for the appropriate
reporting period. From time to time as volume warrants, FCS will report
and transfer amounts collected from salaries to State agencies.
Collections by State agencies and by FCS on all such claims shall be
reported as appropriate.
(B) If a debtor fails to make an installment payment, within 60
days of the date the payment was due, State agencies shall refer the
claim to FCS, reporting the default, the dollar amount collected and
the balance due.
(v) FCS actions on claims referred by State agencies. Departmental
procedures at 7 CFR 3.51-3.68 shall apply to claims referred by State
agencies to FCS as required by paragraphs (g)(6)(iii)(B) and
(g)(6)(iv)(B) of this section subject to the following modifications:
(A) In addition to the definitions set forth at 7 CFR 3.52, the
term ``debts'' shall further be defined to include recipient claims
established according to this section; and the terms ``State agency''
and ``FCS'' shall be defined as set forth in section 271.2 of this
chapter.
(B) Pursuant to 7 CFR 3.34(c)(4) and 7 CFR 3.55(d), the Secretary
has determined that collection of interest, penalties and
administrative costs provided at 7 CFR 3.65 is not in the best
interests of the United States and hereby waives collection of such
charges.
(C) In addition to providing the right to inspect and copy
Departmental records as specified at 7 CFR 3.60(a), the Secretary shall
provide copies of records relating to the debt in response to timely
requests. For a request to be timely, FCS must receive it within 30
calendar days of the date of the notice of intent.
(D) Pursuant to 5 CFR 550.1104(d)(6), an opportunity to establish a
written repayment agreement provided at 7 CFR 3.61 shall not be
provided.
(E) The notice of intent for FSP salary offset shall comply with
the requirements of the Departmental notice of intent which are set
forth at 7 CFR 3.55, subject to the following modifications:
(1) In addition to the statement that the debtor has the right to
inspect and copy Departmental records relating to the debt, the notice
of intent shall state that if timely requested by the debtor, the
Secretary shall provide the debtor copies of such records. It shall
further advise, as required by 7 CFR 3.60(a), that to be timely such
requests must be received within 30 days of the date of the notice of
intent; and
(2) The statement of the right to enter a written repayment
agreement provided by 7 CFR 3.55(f) shall not be included.
* * * * *
Dated: August 29, 1995.
Ellen Haas,
Under Secretary for Food, Nutrition and Consumer Services.
[FR Doc. 95-21780 Filed 8-31-95; 8:45 am]
BILLING CODE 3410-30-U