[Federal Register Volume 62, Number 120 (Monday, June 23, 1997)]
[Proposed Rules]
[Pages 33778-33781]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-16132]


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SOCIAL SECURITY ADMINISTRATION

20 CFR Part 416

RIN 0960-AE67


Supplementary Security Income; Overpayment Recovery by Offset of 
Federal Income Tax Refund

AGENCY: Social Security Administration.

ACTION: Proposed rules.

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SUMMARY: These proposed regulations govern use of the Federal income 
tax refund offset program established under section 2653 of the Deficit 
Reduction Act of 1984, Pub. L. No. 98-369. They would permit the 
recovery of supplemental security income (SSI) overpayments through the 
withholding of amounts due to former SSI recipients as Federal income 
tax refunds. In these proposed rules, we reflect the provisions of the 
statute and explain the procedures that we will follow in referring SSI 
overpayments to the

[[Page 33779]]

Department of the Treasury for income tax refund offset (TRO).

DATES: To be sure your comments are considered, we must receive them no 
later than July 23, 1997.

ADDRESSES: Comments should be submitted in writing to the Commissioner 
of Social Security, P.O. Box 1585, Baltimore, Maryland 21235, sent by 
telefax to (410) 966-2830, sent by E-mail to ``[email protected],'' 
or delivered to the Division of Regulations and Rulings, Social 
Security Administration, 3-B-1 Operations Building, 6401 Security 
Boulevard, Baltimore, MD 21235 between 8:00 a.m. and 4:30 p.m. on 
regular business days. Comments may be inspected during these same 
hours by making arrangements with the contact person shown below.

FOR FURTHER INFORMATION CONTACT: Robert J. Augustine, Legal Assistant, 
Division of Regulations and Rulings, Social Security Administration, 
6401 Security Boulevard, Baltimore, MD 21235, (410) 966-5121. For 
information on eligibility or claiming benefits, call our national 
toll-free number, 1-800-772-1213.
SUPPLEMENTARY INFORMATION: Section 2653 of the Deficit Reduction Act of 
1984, codified at 31 U.S.C. 3720A and 26 U.S.C. 6402(d), authorized the 
Secretary of the Treasury, upon receiving notice from a Federal agency 
that a named individual owes the agency a past-due, legally enforceable 
debt, to withhold all or a part of any income tax refund that is due to 
the debtor and pay the amount withheld to the agency. Section 2653 
specifically precluded the use of these procedures to recover 
overpayments of Social Security benefits paid under title II of the 
Social Security Act (the Act). Under 31 U.S.C. 3720A, a Federal agency 
that is owed a past-due, legally enforceable debt by an individual may 
notify the Secretary of the Treasury of the debt in accordance with 
regulations issued by the Department of the Treasury. The applicable 
Treasury regulations are codified at 26 CFR 301.6402-6. Before an 
agency may refer a debt to Treasury, it must, under 31 U.S.C. 3720A, 
take the following actions: (1) Notify the debtor that the agency 
proposes to refer the debt for tax refund offset; (2) give the debtor 
at least 60 days to present evidence that all or part of the debt is 
not past-due or not legally enforceable; (3) consider all evidence the 
debtor presents in determining that all or a part of the debt is past-
due and legally enforceable; and (4) satisfy any other conditions that 
the Secretary of the Treasury may prescribe to ensure that the agency's 
findings are valid and that the agency has made reasonable efforts to 
obtain the payment of the debt.
    Although section 2653 gave us the authority to use the TRO 
provisions to recover overpayments made to recipients of supplemental 
security income (SSI) payments under title XVI of the Act, we elected 
not to do so at that time because we did not think it appropriate to 
use a procedure we were precluded from using to recover title II 
overpayments to recover overpayments made under the needs-based title 
XVI program.
    Section 5129 of the Omnibus Budget Reconciliation Act of 1990 (OBRA 
90) removed the restriction on using the TRO provisions to recover 
title II overpayments. Section 5129 added several additional conditions 
to the referral of title II overpayments for offset. These included: 
(1) The overpaid individual may not be currently entitled to Social 
Security benefits under title II of the Act; (2) the notice that we 
send to the overpaid individual concerning our intent to seek the 
offset must describe the conditions under which we are required to 
waive recovery of an overpayment under section 204(b) of the Act; and 
(3) if the overpaid individual requests that we waive recovery of the 
overpayment within the 60-day period allowed under the program for 
presenting evidence that the debt is not past due or not legally 
enforceable, we may not certify the overpayment to Treasury without 
first issuing a determination on the waiver request. We issued final 
regulations on October 21, 1991 (56 FR 52466) implementing these 
statutory changes.
    Since that time, we have been modifying our computer systems to 
extend the TRO provisions to various subgroups of former title II 
program beneficiaries. We now have the necessary systems modifications 
in place to permit us to extend the TRO provisions to the title XVI 
program, as well. These title XVI rules closely follow the existing 
rules for the title II program, including the same conditions that the 
OBRA 90 legislation required for the title II program. That is, these 
rules provide that (1) The overpaid individual may not currently be 
eligible to receive SSI payments under title XVI of the Act; (2) the 
notice we send to the overpaid individual concerning our intent to seek 
offset must describe the conditions under which we are required to 
waive recovery of an overpayment under section 1631(b)(1)(B) of the 
Act; and (3) if the overpaid individual requests that we waive recovery 
of the overpayment within the 60-day period allowed under the program 
for presenting evidence that the debt is not past due or legally 
enforceable, we may not certify the overpayment to Treasury without 
first issuing a determination on the waiver request.

Explanation of Changes to Regulations

    We propose to add new Secs. 416.580 through 416.586 to our 
regulations to explain our rules on recovery of title XVI overpayments 
through the withholding of amounts due to former SSI recipients as 
Federal income tax refunds. Section 416.580 would provide general 
information about the tax refund offset program and explain that we may 
pursue collection of an overpayment through this program if the 
overpaid individual is not eligible for benefits. This new regulatory 
section also explains that we will not initiate the tax refund offset 
to collect an overpayment more than 10 years after our right to collect 
the overpayment first accrued.
    Section 416.581 would explain that, before we refer an overpayment 
to the Treasury Department, we will notify the overpaid individual of 
our intention to do so. This notice will advise the individual of the 
amount of the overpayment and the conditions under which we will waive 
recovery of an overpayment under section 1631(b)(1)(B) of the Act. The 
notice will also explain that unless, within 60 days from the date of 
our notice, the overpaid individual repays the overpayment, presents 
evidence that the overpayment is not past due or not legally 
enforceable, or requests a waiver of the overpayment, we will refer the 
overpayment to the Department of the Treasury to offset any tax refund 
payable to the overpaid individual. The notice additionally will advise 
the individual of the right to inspect and copy our records related to 
the overpayment.
    Sections 416.582 and 416.583 would explain our procedures for 
reviewing and making findings when an overpaid individual submits 
evidence that an overpayment is not past due or not legally 
enforceable.
    Section 416.584 would explain our procedures for the overpaid 
individual who wishes to review our records related to the overpayment.
    Section 416.585 would explain that if, within 60 days after the 
date of our notice of intent to seek an offset, an individual presents 
evidence that the overpayment is not past due or not legally 
enforceable or asks us to waive collection of the overpayment, we will 
suspend our referral of the overpayment to the Department of the 
Treasury for offset until we issue written findings

[[Page 33780]]

that affirm that all or a part of the overpayment is past due and 
legally enforceable and, where appropriate, determine that waiver of 
the overpayment is unwarranted.
    Section 416.586 would set out our intention, in cases where a tax 
refund is insufficient in a tax year to satisfy the amount of the 
overpayment, to continue to offset in succeeding years any amount of 
the overpayment that remains, as long as the remainder of the 
overpayment continues to meet the criteria for referral under the tax 
refund offset program in succeeding years. This differs from our title 
II rules on TRO which provide that, where a tax refund is insufficient 
to recover an overpayment in a given year, we will recertify the 
remainder for offset in the following year. This proposed section 
reflects the fact that the Department of the Treasury has the systems 
capability to retain the overpaid amount in their records for offset 
against future tax refunds the individual may be due. We are developing 
a separate proposed rule dealing with title II overpayments that will 
make this same change in the title II TRO rules.
    We also propose to add to Sec. 416.1403(a) a new paragraph (17) 
that would include in the list of administrative actions that are not 
initial determinations findings on whether we can collect an SSI 
overpayment by using the Federal income tax refund offset procedure. 
Administrative actions that are not initial determinations may be 
reviewed by us, but they are not subject to the administrative review 
process provided by subpart N of our regulations, and they are not 
subject to judicial review.

Electronic Version

    The electronic file of this document is available on the Federal 
Bulletin Board (FBB) at 9:00 a.m. on the date of publication in the 
Federal Register. To download the file, modem dial (202) 512-1387. The 
FBB instructions will explain how to download the file and the fee. 
This file is in WordPerfect and will remain on the FBB during the 
comment period.

Regulatory Procedures

Executive Order 12866

    We have consulted with the Office of Management and Budget (OMB) 
and determined that these proposed rules do not meet the criteria for a 
significant regulatory action under Executive Order 12866. Thus, they 
were not subject to OMB review.
    In order to use the TRO provisions to recover title XVI 
overpayments from income tax refunds payable in 1998, the final rules 
must be effective in early October 1997, so that we can begin notifying 
individuals that we propose to refer their overpayments to the 
Department of the Treasury for offset. Any delay in sending the notices 
and referring these debts to Treasury will result in lost program 
savings of up to $6 million. For that reason, we are providing a 30-day 
(rather than the usual 60-day) public comment period. These proposed 
rules, which closely follow our existing TRO rules for the title II 
program and on which we received only minor public comments when 
promulgated in 1991, benefit the public while adequately safeguarding 
the rights of former SSI recipients by giving overpaid individuals the 
right to repay the amount, present evidence that the overpayment is not 
past due or not legally enforceable, or request us to waive collection 
of the overpayment, before referral to the Department of the Treasury 
is made. We will issue written findings affirming that all or part of 
the overpayment is past due and legally enforceable and, where 
appropriate, determine that waiver of the overpayment is unwarranted 
before making such a referral. In view of the above, we believe a 30-
day comment period provides ample opportunity for the public to review 
and comment on these rules.

Regulatory Flexibility Act

    We certify that these proposed regulations, if promulgated, will 
not have a significant economic impact on a substantial number of small 
entities because they affect only individuals. Thus, a regulatory 
flexibility analysis as provided in the Regulatory Flexibility Act, as 
amended, is not required.

Paperwork Reduction Act

    These proposed regulations will impose no additional reporting or 
recordkeeping requirements requiring OMB clearance.

(Catalog of Federal Domestic Assistance Programs: No. 96.006 
Supplemental Security Income)

List of Subjects in 20 CFR Part 416

    Administrative practice and procedure, Aged, Blind, Disability 
benefits, Public assistance programs, Reporting and recordkeeping 
requirements, Supplemental Security Income (SSI).

    Approved: June 12, 1997.
John J. Callahan,
Acting Commissioner of Social Security.

    Subparts E and N of Part 416 of Chapter III of Title 20 of the Code 
of Federal Regulations are proposed to be amended to read as follows:
    1. The authority citation for subpart E is revised to read as 
follows:

    Authority: Secs. 702(a)(5), 1601, 1602, 1611(c) and (e), and 
1631 (a)-(d) and (g) of the Social Security Act (42 U.S.C. 
902(a)(5), 1381, 1381a, 1382(c) and (e), and 1383(a)-(d) and (g)); 
31 U.S.C. 3720A.

    2. Sections 416.580, 416.581, 416.582, 416.583, 416.584, 416.585, 
and 416.586 are added to subpart E to read as follows:


Sec. 416.580  Referral of overpayments to the Department of the 
Treasury for tax refund offset--General.

    (a) The standards we will apply and the procedures we will follow 
before requesting the Department of the Treasury to offset income tax 
refunds due taxpayers who have an outstanding overpayment are set forth 
in Secs. 416.580 through 416.586 of this subpart. These standards and 
procedures are authorized by the Deficit Reduction Act of 1984 [31 
U.S.C. Sec. 3720A], as implemented through Department of the Treasury 
regulations at 26 CFR 301.6402-6.
    (b) We will use the Department of the Treasury tax refund offset 
procedure to collect overpayments that are certain in amount, past due 
and legally enforceable, and eligible for tax refund offset under 
regulations issued by the Secretary of the Treasury. We will use these 
procedures to collect overpayments only from individuals who are not 
currently entitled to monthly supplemental security income benefits 
under title XVI of the Act. We will refer an overpayment to the 
Secretary of the Treasury for offset against tax refunds no later than 
10 years after our right to collect the overpayment first accrued.


Sec. 416.581  Notice to overpaid individual.

    A request for reduction of a Federal income tax refund will be made 
only after we determine that an amount is owed and past due and provide 
the overpaid individual with 60 calendar days written notice. Our 
notice of intent to collect an overpayment through Federal income tax 
refund offset will state:
    (a) The amount of the overpayment;
    (b) That unless, within 60 calendar days from the date of our 
notice, the overpaid individual repays the overpayment, sends evidence 
to us at the address given in our notice that the overpayment is not 
past due or not legally enforceable, or asks us to waive collection of 
the overpayment under section 1631(b)(1)(B) of the Act, we intend to 
seek collection of the

[[Page 33781]]

overpayment by requesting that the Department of the Treasury reduce 
any amounts payable to the overpaid individual as refunds of Federal 
income taxes by an amount equal to the amount of the overpayment;
    (c) The conditions under which we will waive recovery of an 
overpayment under section 1631(b)(1)(B) of the Act;
    (d) That we will review any evidence presented that the overpayment 
is not past due or not legally enforceable;
    (e) That the overpaid individual has the right to inspect and copy 
our records related to the overpayment as determined by us and will be 
informed as to where and when the inspection and copying can be done 
after we receive notice from the overpaid individual that inspection 
and copying are requested.


Sec. 416.582  Review within SSA that an overpayment is past due and 
legally enforceable.

    (a) Notification by overpaid individual. An overpaid individual who 
receives a notice as described in Sec. 416.581 of this subpart has the 
right to present evidence that all or part of the overpayment is not 
past due or not legally enforceable. To exercise this right, the 
individual must notify us and present evidence regarding the 
overpayment within 60 calendar days from the date of our notice.
    (b) Submission of evidence. The overpaid individual may submit 
evidence showing that all or part of the debt is not past due or not 
legally enforceable as provided in paragraph (a) of this section. 
Failure to submit the notification and evidence within 60 calendar days 
will result in referral of the overpayment to the Department of the 
Treasury, unless the overpaid individual, within this 60-day time 
period, has asked us to waive collection of the overpayment under 
section 1631(b)(1)(B) of the Act and we have not yet determined whether 
we can grant the waiver request. If the overpaid individual asks us to 
waive collection of the overpayment, we may ask that evidence to 
support the request be submitted to us.
    (c) Review of the Evidence. After a timely submission of evidence 
by the overpaid individual, we will consider all available evidence 
related to the overpayment. We will make findings based on a review of 
the written record, unless we determine that the question of 
indebtedness cannot be resolved by a review of the documentary 
evidence.


Sec. 416.583  Findings by SSA.

    (a) Following the review of the record, we will issue written 
findings which include supporting rationale for the findings. Issuance 
of these findings concerning whether the overpayment or part of the 
overpayment is past due and legally enforceable is the final Agency 
action with respect to the past-due status and enforceability of the 
overpayment. If we make a determination that a waiver request cannot be 
granted, we will issue a written notice of this determination in 
accordance with the regulations in subpart E of this part. Our referral 
of the overpayment to the Department of the Treasury will not be 
suspended under Sec. 416.585 of this subpart pending any further 
administrative review of the waiver request that the individual may 
seek.
    (b) Copies of the findings described in paragraph (a) of this 
section will be distributed to the overpaid individual and the overpaid 
individual's attorney or other representative, if any.
    (c) If the findings referred to in paragraph (a) of this section 
affirm that all or part of the overpayment is past due and legally 
enforceable and, if waiver is requested and we determine that the 
request cannot be granted, we will refer the overpayment to the 
Department of the Treasury. However, no referral will be made if, based 
on our review of the overpayment, we reverse our prior finding that the 
overpayment is past due and legally enforceable or, upon consideration 
of a waiver request, we determine that waiver of our collection of the 
overpayment is appropriate.


Sec. 416.584  Review of our records related to the overpayment.

    (a) Notification by the overpaid individual. An overpaid individual 
who intends to inspect or copy our records related to the overpayment 
as determined by us must notify us stating his or her intention to 
inspect or copy.
    (b) Our response. In response to a notification by the overpaid 
individual as described in paragraph (a) of this section, we will 
notify the overpaid individual of the location and time when the 
overpaid individual may inspect or copy our records related to the 
overpayment. We may also, at our discretion, mail copies of the 
overpayment-related records to the overpaid individual.


Sec. 416.585  Suspension of offset.

    If, within 60 days of the date of the notice described in 
Sec. 416.581 of this subpart, the overpaid individual notifies us that 
he or she is exercising a right described in Sec. 416.582(a) of this 
subpart and submits evidence pursuant to Sec. 416.582(b) of this 
subpart or requests a waiver under Sec. 416.550 of this subpart, we 
will suspend any notice to the Department of the Treasury until we have 
issued written findings that affirm that an overpayment is past due and 
legally enforceable and, if applicable, make a determination that a 
waiver request cannot be granted.


Sec. 416.586  Tax refund insufficient to cover amount of overpayment.

    If a tax refund is insufficient to recover an overpayment in a 
given year, the case will remain with the Department of the Treasury 
for succeeding years, assuming that all criteria for certification are 
met at that time.
    3. The authority citation for subpart N is revised to read as 
follows:

    Authority: Secs. 702(a)(5), 1631, and 1633 of the Social 
Security Act (42 U.S.C. 902(a)(5), 1383, and 1383b); 31 U.S.C. 
3720A.

    4. Section 416.1403 is amended by deleting the word ``and'' at the 
end of paragraph (a)(15), replacing the period at the end of paragraph 
(a)(16) with ``; and'', and adding paragraph (a)(17) to read as 
follows:


Sec. 416.1403  Administrative actions that are not initial 
determinations.

    (a) * * *
    (17) Findings on whether we can collect an overpayment by using the 
Federal income tax refund offset procedure. (See Sec. 416.583).
* * * * *
[FR Doc. 97-16132 Filed 6-20-97; 8:45 am]
BILLING CODE 4190-29-P