[Federal Register Volume 62, Number 136 (Wednesday, July 16, 1997)]
[Rules and Regulations]
[Pages 38018-38026]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-18696]


=======================================================================
-----------------------------------------------------------------------

INTERNATIONAL TRADE COMMISSION

19 CFR Part 201


Debt Collection--Procedural Rules for Salary Offset, 
Administrative Offset, and Tax Refund Offset

AGENCY: International Trade Commission.

ACTION: Interim rules with request for comments.

-----------------------------------------------------------------------

SUMMARY: The U.S. International Trade Commission (the Commission) is 
issuing interim regulations setting forth procedures for the collection 
of debts owed the Commission. The Debt Collection Improvement Act of 
1996, as well as earlier Federal statutes on debt collection, require 
agencies to promulgate regulations on this subject. In these interim 
regulations, the Commission sets forth the procedures it plans to 
follow in collecting debts through salary offset, administrative 
offset, and tax refund offset.

DATES: These regulations are effective July 16, 1997. Comments must be 
submitted on or before September 15, 1997.

ADDRESSES: Written comments (original and 14 copies) may be submitted 
to the Secretary, U.S. International Trade Commission, 500 E Street, 
SW., Washington, D.C. 20436.

FOR FURTHER INFORMATION CONTACT: Gail S. Usher, Office of the General 
Counsel, telephone (202) 205-3152. Hearing-impaired individuals are 
advised that information on this matter can be obtained by contacting 
the Commission's TDD terminal at (202) 205-1810.

[[Page 38019]]

SUPPLEMENTARY INFORMATION:

Background

    These rules take into account changes to the law made by the Debt 
Collection Improvement Act of 1996. Moreover, the rules are consistent 
with regulations on salary offset promulgated by the Office of 
Personnel Management (5 CFR part 550, subpart K); the Federal Claims 
Collection Standards (4 CFR part 102); and with regulations on tax 
refund offset promulgated by the Internal Revenue Service (26 CFR 
301.6402-6).
    In issuing these interim regulations, in addition to the legal 
authorities cited herein, the Commission is acting pursuant to 19 
U.S.C. 1335 which authorizes the Commission to adopt such reasonable 
regulations as it deems necessary to carry out its functions and 
duties.
    The Commission has determined that these rules are interpretative 
and pertain to agency practice and procedure. Accordingly, the rules 
are not subject to the notice and comment requirements of the 
Administrative Procedures Act (APA). 5 U.S.C. 553(b). Moreover, the 
Commission has an urgent need to have regulations in place. The 
Commission has outstanding debts that it seeks to collect through 
offset. As a consequence, the rules are exempt from the notice and 
comment requirements of the APA for the additional reason that 
providing the notice and comment period prior to having effective 
regulations in place would not be in the public interest. 5 U.S.C. 
553(b).
    For the same reasons, the rules can be made effective immediately. 
Specifically, the fact that the rules are interpretative and pertain to 
agency practice and procedure and that the Commission has an urgent 
need to have regulations in place to effect offset for debts currently 
pending excepts the agency from the APA's requirement that rules be 
published at least 30 days before their effective date. 5 U.S.C. 
553(d).
    While no notice and comment period is required prior to the 
issuance of the interim rules, the Commission does invite comments on 
these rules which it will take into consideration in promulgating its 
final rules.

Salary Offset

    When an agency determines that an employee of the agency is 
indebted to the United States, or when the agency is notified of such a 
debt by another agency, the debt may be collected by deductions from 
the current pay account of the individual. 5 U.S.C. 5514(a)(1). Salary 
offset is a form of administrative offset governed by statute (5 U.S.C. 
5514) and by regulations issued by the Office of Personnel Management 
(5 CFR part 550, subpart K). The statute (5 U.S.C. 5514(b)(1)) requires 
agencies to promulgate their own regulations. Before final regulations 
can become effective, they must be approved by the Office of Personnel 
Management (5 CFR 550.1105(a)(1)).

Administrative Offset

    Pursuant to 31 U.S.C. 3716, an agency may collect debts owed the 
agency through administrative offset. Under this method of collection, 
an agency collects a debt owed to it by an employee, organization, or 
entity by withholding money payable by the Government or held by the 
Government for the debtor. Generally, the offset is accomplished 
against monies other than salaries. Agencies must promulgate 
regulations on the procedures used in administrative offset. 4 CFR 
102.3(b)(1).

Tax Refund Offset

    Where collection by salary offset or administrative offset is not 
feasible, an agency must seek to recover monies owed the agency by 
requesting that the Department of the Treasury (Treasury) reduce a tax 
refund to a debtor by the amount of the debt and pay such monies to the 
agency. 31 U.S.C. 3720A; 26 CFR 301.6402-6. The IRS, which presently 
administers this program, requires that the agency promulgate its own 
regulations on salary offset, administrative offset, and tax refund 
offset. 26 CFR 301.6402-6(b). (See 31 U.S.C. 3720A(b)(4)).

Executive Order 12866

    These interim rules are not classified as ``significant rules'' 
under Executive Order 12866 (58 FR 51735 (Oct. 4, 1994)) because they 
will not result in (1) an annual effect on the economy of $100 million 
or more; (2) a major increase in costs or prices for consumers, 
individual industries, Federal, State, or local government agencies, or 
geographic regions; or (3) significant adverse effects on competition, 
employment, investment, productivity, innovation, or on the ability of 
United States-based enterprises to compete with foreign-based 
enterprises in domestic or foreign markets. Accordingly, no regulatory 
impact assessment is required.

Regulatory Flexibility Act

    Pursuant to 5 U.S.C. 605(b), the Commission hereby certifies that 
the rules set forth in this notice are not likely to have a significant 
economic impact on a substantial number of small business entities. 
This conclusion is premised on the past experience of the Commission of 
rarely having debts owed to it. Moreover, those debts that have been 
owed to the Commission have generally been owed by individual persons, 
not business entities.

Contract With America Advancement Act of 1996

    Pursuant to the Contract With America Advancement Act of 1996 (Pub. 
L. 104-121), the Commission has submitted a report to the General 
Accounting Office and to each House of Congress describing these debt 
collection regulations and attaching the text of the regulations.

Paperwork Reduction Act

    These interim rules are not subject to section 3504(h) of the 
Paperwork Reduction Act (44 U.S.C. 3501) since they do not contain any 
new information collection requirements.

List of Subjects in 19 CFR Part 201

    Administrative practice and procedure; Debt collection.

    For the reasons set out in the preamble, the U.S. International 
Trade Commission hereby amends 19 CFR part 201 by adding subpart H to 
read as follows:

PART 201--RULES OF GENERAL APPLICATION

Sec

Subpart H--Debt Collection

201.201  Definitions.
201.202  Purpose and scope of salary and administrative offset 
rules.
201.203  Delegation of authority.
201.204  Salary offset.
201.205  Salary adjustments.
201.206  Administrative offset.
201.207  Administrative offset against amounts payable from Civil 
Service Retirement and Disability Fund.
201.208  Tax refund offset.

    Authority: 19 U.S.C. 1335; 5 U.S.C. 5514(b)(1); 31 U.S.C. 
3716(b); 31 U.S.C. 3720A(b)(4); 4 CFR 102.3(b)(1); 26 CFR 301.6402-
6(b).


Sec. 201.201  Definitions.

    Except where the context clearly indicates otherwise or where the 
term is defined elsewhere in this section, the following definitions 
shall apply to this subpart.
    (a) Agency means a department, agency, court, court administrative 
office, or instrumentality in the executive, judicial, or legislative 
branch of Government, including government corporations.
    (b) Certification means a written statement received by a paying 
agency from a creditor agency that requests the paying agency to offset 
the salary of an employee and specifies that required

[[Page 38020]]

procedural protections have been afforded the employee.
    (c) Chairman means the Chairman of the Commission.
    (d) Compromise means the settlement or forgiveness of a debt.
    (e) Creditor agency means an agency of the Federal government to 
which the debt is owed.
    (f) Director means the Director, Office of Finance and Budget of 
the Commission or an official designated to act on the Director's 
behalf.
    (g) Disposable pay means that part of current basic pay, special 
pay, incentive pay, retired pay, retainer pay, and, in the case of an 
employee not entitled to basic pay, other authorized pay, remaining for 
each pay period after the deduction of any amount required by law to be 
withheld. The Commission shall allow the following deductions in 
determining the amount of disposable pay that is subject to salary 
offset:
    (1) Federal employment taxes;
    (2) Amounts mandatorily withheld for the United States Soldiers' 
and Airmen's Home;
    (3) Fines and forfeiture ordered by a court-martial or by a 
commanding officer;
    (4) Amounts deducted for Medicare;
    (5) Federal, state, or local income taxes to the extent authorized 
or required by law, but no greater than would be the case if the 
employee claimed all dependents to which he or she is entitled and such 
additional amounts for which the employee presents evidence of a tax 
obligation supporting the additional withholding;
    (6) Health insurance premiums;
    (7) Normal retirement contributions, including employee 
contributions to the Thrift Savings Plan;
    (8) Normal life insurance premiums (e.g., Serviceman's Group Life 
Insurance and ``Basic Life'' Federal Employee's Group Life Insurance 
premiums), not including amounts deducted for supplementary coverage.
    (h) Employee means a current employee of the Commission or other 
agency, including a current member of the Armed Forces or a Reserve of 
the Armed Forces of the United States.
    (i) Federal Claims Collection Standards (FCCS) means standards 
published at 4 CFR chapter II.
    (j) Hearing official means an individual responsible for conducting 
any hearing with respect to the existence or amount of a debt claimed 
and for rendering a decision on the basis of such hearing. A hearing 
official may not be under the supervision or control of the Chairman 
when the Commission is the creditor agency but may be an administrative 
law judge.
    (k) Notice of Intent to Offset or Notice of Intent means a written 
notice from a creditor agency to an employee, organization, or entity 
stating that the debtor is indebted to the creditor agency and 
apprising the debtor of certain procedural rights.
    (l) Notice of Salary Offset means a written notice from the paying 
agency to an employee after a certification has been issued by a 
creditor agency, informing the employee that salary offset will begin 
at the next officially established pay interval.
    (m) Office of Finance and Budget means the Office of Finance and 
Budget of the Commission.
    (n) Paying agency means the agency of the Federal government that 
employs the individual who owes a debt to an agency of the Federal 
government. In some cases, the Commission may be both the creditor 
agency and the paying agency.


Sec. 201.202  Purpose and scope of salary and administrative offset 
rules.

    (a) Purpose. The purpose of Secs. 201.201 through 201.207 is to 
implement 5 U.S.C. 5514, 31 U.S.C. 3716, and 31 U.S.C. 3720A which 
authorize the collection by salary offset, administrative offset, or 
tax refund offset of debts owed by persons, organizations, or entities 
to the Federal government. Generally, however, a debt may not be 
collected by such means if it has been outstanding for more than ten 
years after the agency's right to collect the debt first accrued. These 
proposed regulations are consistent with the Office of Personnel 
Management regulations on salary offset, codified at 5 CFR part 550, 
subpart K, and with regulations on administrative offset codified at 4 
CFR part 102.
    (b) Scope. (1) Sections 201.201 through 201.207 establish agency 
procedures for the collection of certain debts owed the Government.
    (2) Sections 201.201 through 201.207 apply to collections by the 
Commission from:
    (i) Federal employees who are indebted to the Commission;
    (ii) Employees of the Commission who are indebted to other 
agencies; and
    (iii) Other persons, organizations, or entities that are indebted 
to the Commission.
    (3) Sections 201.201 through 201.207 do not apply:
    (i) To debts or claims arising under the Internal Revenue Code of 
1986 (26 U.S.C. et seq.), the Social Security Act (42 U.S.C. 301 et 
seq.), or the tariff laws of the United States;
    (ii) To a situation to which the Contract Disputes Act (41 U.S.C. 
601 et seq.) applies; or
    (iii) In any case where collection of a debt is explicitly provided 
for or prohibited by another statute (e.g., travel advances in 5 U.S.C. 
4108).
    (4) Nothing in Secs. 201.201 through 201.207 precludes the 
compromise, suspension, or termination of collection actions where 
appropriate under the standards implementing the Federal Claims 
Collection Act (31 U.S.C. 3711 et seq.), namely, 4 CFR chapter II.


Sec. 201.203  Delegation of authority.

    Authority to conduct the following activities is hereby delegated 
to the Director:
    (a) Initiate and effectuate the administrative collection process;
    (b) Accept or reject compromise offers and suspend or terminate 
collection actions where the claim does not exceed $100,000 or such 
higher amount as the Chairman may from time to time prescribe, 
exclusive of interest, administrative costs, and penalties as provided 
herein, as set forth in 31 U.S.C. 3711(a)(2);
    (c) Report to consumer reporting agencies certain data pertaining 
to delinquent debts;
    (d) Use offset procedures to effectuate collection; and
    (e) Take any other action necessary to facilitate and augment 
collection in accordance with the policies contained herein and as 
otherwise provided by law.


Sec. 201.204  Salary offset.

    (a) Notice requirements before offset where the Commission is the 
creditor agency. Deductions under the authority of 5 U.S.C. 5514 will 
not be made unless the Commission provides the employee with a written 
Notice of Intent to Offset a minimum of 30 calendar days before salary 
offset is initiated. The Notice of Intent shall state:
    (1) That the Director has reviewed the records relating to the 
claim and has determined that a debt is owed;
    (2) The Director's intention to collect the debt by means of 
deduction from the employee's current disposable pay account until the 
debt and all accumulated interest is paid in full;
    (3) The amount of the debt and the facts giving rise to the debt;
    (4) A repayment schedule that includes the amount, frequency, 
proposed beginning date, and duration of the intended deductions;
    (5) The opportunity for the employee to propose an alternative 
written schedule for the voluntary repayment of the debt, in lieu of 
offset, on terms acceptable to the Commission. The employee shall 
include a justification in the request for the alternative schedule.

[[Page 38021]]

The schedule shall be agreed to and signed by both the employee and the 
Director;
    (6) An explanation of the Commission's policy concerning interest, 
penalties, and administrative costs, including a statement that such 
assessments must be made unless excused in accordance with the Federal 
Claims Collection Standards;
    (7) The employee's right to inspect and copy all records of the 
Commission not exempt from disclosure pertaining to the debt claimed or 
to receive copies of such records if the debtor is unable personally to 
inspect the records, due to geographical or other constraints;
    (8) The name, address, and telephone number of the Director to whom 
requests for access to records relating to the debt must be sent;
    (9) The employee's right to a hearing conducted by an impartial 
hearing official (an administrative law judge or other hearing official 
not under the supervision or control of the Chairman) with respect to 
the existence and amount of the debt claimed or the repayment schedule 
(i.e., the percentage of disposable pay to be deducted each pay 
period), so long as a request is filed by the employee as prescribed in 
paragraph (c)(1) of this section;
    (10) The name, address, and telephone number of the Director to 
whom a proposal for voluntary repayment must be sent and who may be 
contacted concerning procedures for requesting a hearing;
    (11) The method and deadline for requesting a hearing;
    (12) That the timely filing of a request for a hearing on or before 
the 15th calendar day following receipt of the Notice of Intent will 
stay the commencement of collection proceedings;
    (13) The name and address of the office to which the request should 
be sent;
    (14) That the Commission will initiate certification procedures to 
implement a salary offset not less than 30 days from the date of 
receipt of the Notice of Intent to Offset, unless the employee files a 
timely request for a hearing;
    (15) That a final decision on whether a hearing will be held (if 
one is requested) will be issued at the earliest practical date;
    (16) That any knowingly false or frivolous statements, 
representations, or evidence may subject the employee to:
    (i) Disciplinary procedures appropriate under 5 U.S.C. Chapter 75, 
5 CFR part 752, or any other applicable statutes or regulations;
    (ii) Penalties under the False Claims Act, 31 U.S.C. 3729-3731, or 
under any other applicable statutory authority; or
    (iii) Criminal penalties under 18 U.S.C. 286, 287, 1001, and 1002 
or under any other applicable statutory authority;
    (17) Any other rights and remedies available to the employee under 
statutes or regulations governing the program for which the collection 
is being made;
    (18) That unless there are applicable contractual or statutory 
provisions to the contrary, amounts paid on or deducted from debts that 
are later waived or found not to be owed to the United States will be 
promptly refunded to the employee; and
    (19) That proceedings with respect to such debt are governed by 5 
U.S.C. 5514.
    (b) Review of Commission records related to the debt. (1) An 
employee who desires to inspect or copy Commission records related to a 
debt owed to the Commission must send a letter to the Director as 
designated in the Notice of Intent requesting access to the relevant 
records. The letter must be received in the office of the Director 
within 15 calendar days after the employee's receipt of the Notice of 
Intent.
    (2) In response to a timely request submitted by the debtor, the 
Director will notify the employee of the location and time when the 
employee may inspect and copy records related to the debt.
    (3) If the employee is unable personally to inspect the records, 
due to geographical or other constraints, the Director shall arrange to 
send copies of such records to the employee.
    (c) Opportunity for a hearing where the Commission is the creditor 
agency.--(1) Request for a hearing. (i) An employee who requests a 
hearing on the existence or amount of the debt held by the Commission 
or on the offset schedule proposed by the Commission must send such 
request to the Director. The request for a hearing must be received by 
the Director on or before the 15th calendar day following receipt by 
the employee of the notice.
    (ii) The employee must specify whether an oral hearing is 
requested. If an oral hearing is desired, the request should explain 
why the matter cannot be resolved by review of the documentary evidence 
alone. The request must be signed by the employee and must fully 
identify and explain with reasonable specificity all the facts, 
evidence, and witnesses, if any, that the employee believes support his 
or her position.
    (2) Failure to timely submit. If the employee files a request for 
hearing after the expiration of the 15-calendar-day period provided for 
in paragraph (c)(1) of this section, the Director may accept the 
request if the employee can show that the delay was the result of 
circumstances beyond his or her control or that he or she failed to 
receive actual notice of the filing deadline.
    (3) Obtaining the services of a hearing official. (i) When the 
debtor is not a Commission employee and the Commission cannot provide a 
prompt and appropriate hearing before an administrative law judge or 
other hearing official, the Commission may request a hearing official 
from an agent of the paying agency, as designated in 5 CFR part 581, 
appendix A, or as otherwise designated by the paying agency.
    (ii) When the debtor is a Commission employee, the Commission may 
contact any agent of another agency, as designated in 5 CFR part 581, 
appendix A, or as otherwise designated by the agency, to request a 
hearing official.
    (4) Procedure. (i) Notice. After the employee requests a hearing, 
the hearing official shall notify the employee of the form of the 
hearing to be provided. If the hearing will be oral, the notice shall 
set forth the date, time, and location of the hearing, which must occur 
no more than 30 calendar days after the request is received, unless the 
employee requests that the hearing be delayed. If the hearing will be 
conducted by examination of documents, the employee shall be notified 
within 30 calendar days that he or she should submit evidence and 
arguments in writing to the hearing official.
    (ii) Oral hearing. An employee who requests an oral hearing shall 
be provided an oral hearing if the hearing official determines that the 
matter cannot be resolved by review of documentary evidence alone 
(e.g., when an issue of credibility or veracity is involved). The 
hearing need not be an adversarial adjudication, and rules of evidence 
need not apply. Witnesses who testify in oral hearings shall do so 
under oath or affirmation. Oral hearings may take the form of, but are 
not limited to:
    (A) Informal conferences with the hearing official in which the 
employee and agency representative are given full opportunity to 
present evidence, witnesses, and argument;
    (B) Informal meetings in which the hearing examiner interviews the 
employee; or

[[Page 38022]]

    (C) Formal written submissions followed by an opportunity for oral 
presentation.
    (iii) Documentary hearing. If the hearing official determines that 
an oral hearing is not necessary, he or she shall make the 
determination based upon a review of the written record.
    (iv) Record. The hearing official shall maintain a summary record 
of any hearing conducted under this section.
    (5) Date of decision. The hearing official shall issue a written 
opinion stating his or her decision, based upon all evidence and 
information developed at the hearing, as soon as practicable after the 
hearing, but not later than 60 calendar days after the date on which 
the request was received by the Commission, unless the hearing was 
delayed at the request of the employee, in which case the 60 day 
decision period shall be extended by the number of days by which the 
hearing was postponed. The decision of the hearing official shall be 
final.
    (6) Content of decision. The written decision shall include:
    (i) A summary of the facts concerning the origin, nature, and 
amount of the debt;
    (ii) The hearing official's findings, analysis, and conclusions; 
and
    (iii) The terms of any repayment schedules, if applicable.
    (7) Failure to appear. If, in the absence of good cause shown 
(e.g., illness), the employee or the representative of the Commission 
fails to appear, the hearing official shall proceed with the hearing as 
scheduled, and make his or her determination based upon the oral 
testimony presented and the documentation submitted by both parties. At 
the request of both parties, the hearing official may schedule a new 
hearing date. Both parties shall be given reasonable notice of the time 
and place of this new hearing.
    (d) Certification where the Commission is the creditor agency. (1) 
The Director shall issue a certification in all cases where:
    (i) The hearing official determines that a debt exists; or
    (ii) The employee admits the existence and amount of the debt, for 
example, by failing to request a hearing.
    (2) The certification must be in writing and must state:
    (i) That the employee owes the debt;
    (ii) The amount and basis of the debt;
    (iii) The date the Government's right to collect the debt first 
accrued;
    (iv) That the Commission's regulations have been approved by OPM 
pursuant to 5 CFR part 550, subpart K;
    (v) If the collection is to be made by lump-sum payment, the amount 
and date such payment will be collected;
    (vi) If the collection is to be made in installments, the number of 
installments to be collected, the amount of each installment, and the 
date of the first installment, if a date other than the next officially 
established pay period; and
    (vii) The date the employee was notified of the debt, the action(s) 
taken pursuant to the Commission's regulations, and the dates such 
actions were taken.
    (e) Voluntary repayment agreements as alternative to salary offset 
where the Commission is the creditor agency. (1) In response to a 
Notice of Intent, an employee may propose to repay the debt in 
accordance with scheduled installment payments. Any employee who wishes 
to repay a debt without salary offset shall submit in writing a 
proposed agreement to repay the debt. The proposal shall set forth a 
proposed repayment schedule. Any proposal under paragraph (e) of this 
section must be received by the Director within 15 calendar days after 
receipt of the Notice of Intent.
    (2) In response to a timely proposal by the debtor, the Director 
shall notify the employee whether the employee's proposed written 
agreement for repayment is acceptable. It is within the discretion of 
the Director to accept, reject, or propose to the debtor a modification 
of the proposed repayment agreement.
    (3) If the Director decides that the proposed repayment agreement 
is unacceptable, the employee shall have 15 calendar days from the date 
he or she received notice of the decision in which to file a request 
for a hearing.
    (4) If the Director decides that the proposed repayment agreement 
is acceptable or the debtor agrees to a modification proposed by the 
Director, the agreement shall be put in writing and signed by both the 
employee and the Director.
    (f) Special review where the Commission is the creditor agency. (1) 
An employee subject to salary offset or a voluntary repayment agreement 
may, at any time, request a special review by the Director of the 
amount of the salary offset or voluntary payment, based on materially 
changed circumstances, including, but not limited to, catastrophic 
illness, divorce, death, or disability.
    (2) In determining whether, as a result of materially changed 
circumstances, an offset would prevent the employee from meeting 
essential subsistence expenses (costs incurred for food, housing, 
clothing, transportation, and medical care), the employee shall submit 
to the Director a detailed statement and supporting documents for the 
employee, his or her spouse, and dependents indicating:
    (i) Income from all sources;
    (ii) Assets;
    (iii) Liabilities;
    (iv) Number of dependents;
    (v) Expenses for food, housing, clothing, and transportation;
    (vi) Medical expenses; and
    (vii) Exceptional expenses, if any.
    (3) If the employee requests a special review under paragraph (f) 
of this section, the employee shall file an alternative proposed offset 
or payment schedule and a statement, with supporting documents, showing 
why the current salary offset or payments result in extreme financial 
hardship to the employee.
    (4) The Director shall evaluate the statement and supporting 
documents and determine whether the original offset or repayment 
schedule imposes extreme financial hardship on the employee. The 
Director shall notify the employee in writing within 30 calendar days 
of such determination, including, if appropriate, his or her acceptance 
of a revised offset or payment schedule.
    (5) If the special review results in a revised offset or repayment 
schedule, the Director shall provide a new certification to the paying 
agency.
    (g) Notice of salary offset where the Commission is the paying 
agency. (1) Upon issuance of a proper certification by the Director 
(for debts owed to the Commission) or upon receipt of a proper 
certification from another creditor agency, the Office of Finance and 
Budget shall send the employee a written notice of salary offset. Such 
notice shall advise the employee:
    (i) Of the certification that has been issued by the Director or 
received from another creditor agency;
    (ii) Of the amount of the debt and of the deductions to be made; 
and
    (iii) Of the initiation of salary offset at the next officially 
established pay interval or as otherwise provided for in the 
certification.
    (2) The Office of Finance and Budget shall provide a copy of the 
notice to the creditor agency and advise such agency of the dollar 
amount to be offset and the pay period when the offset will begin.
    (h) Procedures for salary offset where the Commission is the paying 
agency.--(1) Generally. (i) The Director shall coordinate salary 
deductions under this section.
    (ii) The Director shall determine the amount of an employee's 
disposable pay and the amount of the salary offset subject to the 
requirements in this paragraph.

[[Page 38023]]

    (iii) Deductions shall begin the pay period following the issuance 
of the certification by the Director or the receipt by the Office of 
Finance and Budget of the certification from another agency or as soon 
thereafter as possible.
    (2) Types of collection.--(i) Lump-sum payment. If the amount of 
the debt is equal to or less than 15 percent of the employee's 
disposable pay, such debt ordinarily will be collected in one lump-sum 
payment.
    (ii) Installment deductions. Installment deductions will be made 
over a period not greater than the anticipated period of employment. 
The size and frequency of installment deductions will bear a reasonable 
relation to the size of the debt and the employee's ability to pay. 
However, the amount deducted for any pay period will not exceed 15 
percent of the disposable pay from which the deduction is made unless 
the employee has agreed in writing to the deduction of a greater 
amount. The installment payment should normally be sufficient in size 
and frequency to liquidate the debt in no more than three years. 
Installment payments of less than $50 should be accepted only in the 
most unusual circumstances.
    (iii) Lump-sum deductions from final check. In order to liquidate a 
debt, a lump-sum deduction exceeding 15 percent of disposable pay may 
be made pursuant to 31 U.S.C. 3716 from any final salary payment due a 
former employee, whether the former employee was separated voluntarily 
or involuntarily.
    (iv) Lump-sum deductions from other sources. Whenever an employee 
subject to salary offset is separated from the Commission, and the 
balance of the debt cannot be liquidated by offset of the final salary 
check, the Commission, pursuant to 31 U.S.C. 3716, may offset any later 
payments of any kind to the former employee to collect the balance of 
the debt.
    (3) Multiple debts. Where two or more creditor agencies are seeking 
salary offset, or where two or more debts are owed to a single creditor 
agency, the Office of Finance and Budget may, at its discretion, 
determine whether one or more debts should be offset simultaneously 
within the 15 percent limitation.
    (4) Order of precedence for recovery of debts owed the Government. 
(i) For Commission employees, subject to paragraph (h)(3) of this 
section and (paragraph (h)(4)(ii) of this section, offsets to recover 
debts owed the United States Government shall be made from disposable 
pay in the following order of precedence:
    (A) Indebtedness due the Commission;
    (B) Indebtedness due other agencies.
    (ii) In the event that a debt to the Commission is certified while 
an employee is subject to salary offset to repay another agency, the 
Office of Finance and Budget may, at its discretion, determine whether 
the debt to the Commission should be repaid before the debt to the 
other agency, repaid simultaneously, or repaid after the debt to the 
other agency.
    (iii) A levy pursuant to the Internal Revenue Code of 1986 shall 
take precedence over other deductions under this section, as provided 
in 5 U.S.C. 5514(d).
    (i) Coordinating salary offset with other agencies.--(1) 
Responsibility of the Commission as the creditor agency. (i) The 
Director shall be responsible for:
    (A) Arranging for a hearing upon proper request by a Federal 
employee;
    (B) Preparing the Notice of Intent to Offset consistent with the 
requirements of paragraph (a) of this section;
    (C) Obtaining hearing officials from other agencies pursuant to 
paragraph (c)(3) of this section; and
    (D) Ensuring that each certification of debt is sent to a paying 
agency pursuant to paragraph (d)(2) of this section.
    (ii) Upon completion of the procedures established in paragraphs 
(a) through (f) of this section, the Director shall submit a certified 
debt claim and an installment agreement or other instruction on the 
payment schedule, if applicable, to the employee's paying agency.
    (iii) If the employee is in the process of separating from 
Government employment, the Commission shall submit its debt claim to 
the employee's paying agency for collection by lump-sum deduction from 
the employee's final check. The paying agency shall certify the total 
amount of its collection and furnish a copy of the certification to the 
Commission and to the employee.
    (iv) If the employee is already separated and all payments due from 
his or her former paying agency have been paid, the Commission may, 
unless otherwise prohibited, request that money due and payable to the 
employee from the Federal Government be administratively offset to 
collect the debt.
    (v) When an employee transfers to another paying agency, the 
Commission shall not repeat the procedures described in paragraphs (a) 
through (f) of this section in order to resume collecting the debt. 
Instead, the Commission shall review the debt upon receiving the former 
paying agency's notice of the employee's transfer and shall ensure that 
collection is resumed by the new paying agency.
    (2) Responsibility of the Commission as the paying agency.--(i) 
Complete claim. When the Commission receives a certified claim from a 
creditor agency, the employee shall be given written notice of the 
certification, the date salary offset will begin, and the amount of the 
periodic deductions. Deductions shall be scheduled to begin at the next 
officially established pay interval or as otherwise provided for in the 
certification.
    (ii) Incomplete claim. When the Commission receives an incomplete 
certification of debt from a creditor agency, the Commission shall 
return the debt claim with notice that procedures under 5 U.S.C. 5514 
and 5 CFR 550.1104 must be followed and that a properly certified debt 
claim must be received before action will be taken to collect from the 
employee's current pay account.
    (iii) Review. The Commission is not authorized to review the merits 
of the creditor agency's determination with respect to the amount or 
validity of the debt certified by the creditor agency.
    (iv) Employees who transfer from one paying agency to another 
agency. If, after the creditor agency has submitted the debt claim to 
the Commission, the employee transfers to an agency outside the 
Commission before the debt is collected in full, the Commission must 
certify the total amount collected on the debt. One copy of the 
certification shall be furnished to the employee and one copy shall be 
sent to the creditor agency along with notice of the employee's 
transfer. If the Commission is aware that the employee is entitled to 
payments from the Civil Service Retirement and Disability Fund, or 
other similar payments, it must provide written notification to the 
agency responsible for making such payments that the debtor owes a debt 
(including the amount) and that the requirements set forth herein and 
in the Office of Personnel Management's regulation (5 CFR part 550) 
have been fully met.
    (j) Interest, Penalties, and Administrative Costs. Where the 
Commission is the creditor agency, it shall assess interest, penalties, 
and administrative costs pursuant to 31 U.S.C. 3717 and 4 CFR 102.13.
    (k) Refunds. (1) Where the Commission is the creditor agency, it 
shall promptly refund any amount deducted under the authority of 5 
U.S.C. 5514 when:
    (i) The debt is compromised or otherwise found not to be owing to 
the United States; or

[[Page 38024]]

    (ii) An administrative or judicial order directs the Commission to 
make a refund.
    (2) Unless required by law or contract, refunds under this 
paragraph (k) shall not bear interest.
    (l) Request from a creditor agency for the services of a hearing 
official. (1) The Commission may provide a hearing official upon 
request of the creditor agency when the debtor is employed by the 
Commission and the creditor agency cannot provide a prompt and 
appropriate hearing before a hearing official furnished pursuant to 
another lawful arrangement.
    (2) The Commission may provide a hearing official upon request of a 
creditor agency when the debtor works for the creditor agency and that 
agency cannot arrange for a hearing official.
    (3) The Director shall arrange for qualified personnel to serve as 
hearing officials.
    (4) Services rendered under this paragraph (l) shall be provided on 
a fully reimbursable basis pursuant to 31 U.S.C. 1535.
    (m) Non-waiver of rights by payments. A debtor's payment, whether 
voluntary or involuntary, of all or any portion of a debt being 
collected pursuant to this section shall not be construed as a waiver 
of any rights that the debtor may have under any statute, regulation, 
or contract except as otherwise provided by law or contract.
    (n) Exception to due process procedures. The procedures set forth 
in this section shall not apply to adjustments described in 5 U.S.C. 
5514(a)(3).


Sec. 201.205  Salary adjustments.

    Any negative adjustment to pay arising out of an employee's 
election of coverage, or a change in coverage, under a Federal benefits 
program requiring periodic deductions from pay shall not be considered 
collection of a ``debt'' for the purposes of this section if the amount 
to be recovered was accumulated over four pay periods or less. In such 
cases, the Commission need not comply with Sec. 201.204, but it will 
provide a clear and concise statement in the employee's earnings 
statement advising the employee of the previous overpayment at the time 
the adjustment is made.


Sec. 201.206  Administrative offset.

    (a) Collection. The Director may collect a claim pursuant to 31 
U.S.C. 3716 from a person, organization, or entity other than an agency 
of the United States Government by administrative offset of monies 
payable by the Government. Collection by administrative offset shall be 
undertaken where the claim is certain in amount, where offset is 
feasible and desirable and not otherwise prohibited, where the 
applicable statute of limitations has not expired, and where the offset 
is in the best interest of the United States.
    (b) Offset prior to completion of procedures. Prior to the 
completion of the procedures described in paragraph (c) of this 
section, the Commission may effect offset if:
    (1) Failure to offset would substantially prejudice the 
Commission's ability to collect the debt; and
    (2) The time before the payment is to be made does not reasonably 
permit completion of the procedures described in paragraph (c) of this 
section. Such prior offsetting shall be followed promptly by the 
completion of the procedures described in paragraph (c) of this 
section.
    (c) Debtor's rights. (1) Unless the procedures described in 
paragraph (b) of this section are used, prior to collecting any claim 
by administrative offset or referring such claim to another agency for 
collection through administrative offset, the Director shall provide 
the debtor with the following:
    (i) Written notification of the nature and amount of the claim, the 
intention of the Director to collect the claim through administrative 
offset, and a statement of the rights of the debtor under this 
paragraph;
    (ii) An opportunity to inspect and copy the records of the 
Commission not exempt from disclosure with respect to the claim;
    (iii) An opportunity to have the Commission's determination of 
indebtedness reviewed by the Director. Any request for review by the 
debtor shall be in writing and be submitted to the Commission within 30 
calendar days of the date of the notice of the offset. The Director may 
waive the time limit for requesting review for good cause shown by the 
debtor. The Commission shall provide the debtor with a reasonable 
opportunity for an oral hearing when:
    (A) An applicable statute authorizes or requires the Commission to 
consider waiver of the indebtedness involved, the debtor requests 
waiver of the indebtedness, and the waiver determination turns on an 
issue of credibility or veracity; or
    (B) The debtor requests reconsideration of the debt and the 
Commission determines that the question of the indebtedness cannot be 
resolved by review of the documentary evidence, for example, when the 
validity of the debt turns on an issue of credibility or veracity. 
Unless otherwise required by law, an oral hearing under this section is 
not required to be a formal evidentiary hearing, although the 
Commission shall document all significant matters discussed at the 
hearing. In those cases where an oral hearing is not required by this 
section, the Commission shall nevertheless accord the debtor a ``paper 
hearing,'' (i.e., the Commission will make its determination on the 
request for waiver or reconsideration based upon a review of the 
written record); and
    (iv) An opportunity to enter into a written agreement for the 
repayment of the amount of the claim at the discretion of the 
Commission.
    (2) If the procedures described in paragraph (b) of this section 
are employed, the procedures described in this paragraph shall be 
effected after offset.
    (d) Interest. Pursuant to 31 U.S.C. 3717 and 4 CFR 102.3, the 
Commission shall assess interest, penalties and administrative costs on 
debts owed to the United States. The Commission is authorized to assess 
interest and related charges on debts that are not subject to 31 U.S.C. 
3717 to the extent authorized under the common law or other applicable 
statutory authority.
    (e) Refunds. Amounts recovered by offset but later found not to be 
owed to the Government shall be promptly refunded.
    (f) Requests for offset to other Federal agencies. The Director may 
request that a debt owed to the Commission be administratively offset 
against funds due and payable to a debtor by another Federal agency. In 
requesting administrative offset, the Commission, as creditor, will 
certify in writing to the Federal agency holding funds of the debtor:
    (1) That the debtor owes the debt;
    (2) The amount and basis of the debt; and
    (3) That the Commission has complied with the requirements of its 
own administrative offset regulations and the applicable provisions of 
4 CFR part 102 with respect to providing the debtor with due process.
    (g) Requests for offset from other Federal agencies. Any Federal 
agency may request that funds due and payable to its debtor by the 
Commission be administratively offset in order to collect a debt owed 
to such Federal agency by the debtor. The Commission shall initiate the 
requested offset only upon:
    (1) Receipt of written certification from the creditor agency:
    (i) That the debtor owes the debt;

[[Page 38025]]

    (ii) The amount and basis of the debt;
    (iii) That the agency has prescribed regulations for the exercise 
of administrative offset; and
    (iv) That the agency has complied with its own administrative 
offset regulations and with the applicable provisions of 4 CFR part 
102, including providing any required hearing or review.
    (2) A determination by the Commission that collection by offset 
against funds payable by the Commission would be in the best interest 
of the United States as determined by the facts and circumstances of 
the particular case and that such offset would not otherwise be 
contrary to law.


Sec. 201.207  Administrative offset against amounts payable from Civil 
Service Retirement and Disability Fund

    (a) Unless otherwise prohibited by law, the Commission may request 
that moneys which are due and payable to a debtor from the Civil 
Service Retirement and Disability Fund be administratively offset in 
reasonable amounts in order to collect in one full payment or a minimal 
number of payments debt owed to the Commission by the debtor. Such 
requests shall be made to the appropriate officials of the Office of 
Personnel Management in accordance with such regulations as may be 
prescribed by the Director of that Office.
    (b) When making a request for administrative offset under paragraph 
(a) of this section, the Commission shall include a written 
certification that:
    (1) The debtor owes the Commission a debt, including the amount of 
the debt;
    (2) The Commission has complied with the applicable statutes, 
regulations, and procedures of the Office of Personnel Management; and
    (3) The Commission has complied with the requirements of 4 CFR 
102.3, including any required hearing or review.
    (c) Once the Commission decides to request administrative offset 
under paragraph (a) of this section, it shall make the request as soon 
as practical after completion of the applicable procedures. This will 
satisfy any requirement that offset be initiated prior to expiration of 
the applicable statute of limitations. At such time as the debtor makes 
a claim for payments from the Fund, if at least a year has elapsed 
since the offset request was originally made, the debtor shall be 
permitted to offer a satisfactory repayment plan in lieu of offset upon 
establishing that changed financial circumstances would render the 
offset unjust.
    (d) If the Commission collects part or all of the debt by other 
means before deductions are made or completed pursuant to paragraph (a) 
of this section, the Commission shall act promptly to modify or 
terminate its request for offset under paragraph (a) of this section.


Sec. 201.208  Tax refund offset.

    (a) Scope. The provisions of 26 U.S.C. 6402(d) and 31 U.S.C. 3720A 
authorize the Secretary of the Treasury to offset a delinquent debt 
owed to the United States Government from the tax refund due a taxpayer 
when other collection efforts have failed to recover the amount due.
    (b) Definitions.--(1) Debt. Debt means money owed by an individual, 
organization or entity from sources which include loans insured or 
guaranteed by the United States and all other amounts due the United 
States from fees, leases, services, overpayments, civil and criminal 
penalties, damages, interest, fines, administrative costs, and all 
other similar sources. A debt becomes eligible for tax refund offset 
procedures if:
    (i) It cannot currently be collected pursuant to the salary offset 
procedures of 5 U.S.C. 5514(a)(1);
    (ii) the debt is ineligible for administrative offset under 31 
U.S.C. 3716(a) by reason of 31 U.S.C. 3716(c)(2) or cannot currently be 
collected by administrative offset under 31 U.S.C. 3716(a); and
    (iii) the requirements of this section are otherwise satisfied.
    (2) Dispute. A dispute is a written statement supported by 
documentation or other evidence that all or part of an alleged debt is 
not past due or legally enforceable, that the amount is not the amount 
currently owed, that the outstanding debt has been satisfied, or, in 
the case of a debt reduced to judgment, that the judgment has been 
satisfied or stayed.
    (3) Notice. Notice means the information sent to the debtor 
pursuant to Sec. 201.208(d). The date of the notice is the date shown 
on the notice letter as its date of issuance.
    (4) Past due. All judgment debts are past due for purposes of this 
section. Such debts remain past due until paid in full.
    (c) The Commission may refer any past due, legally enforceable non-
judgment debt of an individual, organization or entity to Treasury for 
offset if the Commission's or the referring agency's rights of action 
accrued more than three months but less than ten years before the 
offset is made. Debts reduced to judgment may be referred at any time. 
Debts in amounts lower than $25.00 are not subject to referral.
    (d) The Commission will provide the debtor with written notice of 
its intent to offset before initiating the offset. Notice will be 
mailed to the debtor at the current address of the debtor, as 
determined from information obtained from the IRS pursuant to 26 U.S.C. 
6103(m)(2), (4), (5) or from information regarding the debt maintained 
by the Commission. The notice sent to the debtor will state the amount 
of the debt and inform the debtor that:
    (1) The debt is past due;
    (2) The Commission intends to refer the debt to Treasury for offset 
from tax refunds that may be due to the taxpayer;
    (3) The Commission intends to provide information concerning the 
delinquent debt exceeding $100 to a consumer reporting bureau unless 
such debt has already been disclosed; and
    (4) The debtor has 65 calendar days from the date of notice in 
which to present evidence that all or part of the debt is not past due, 
that the amount is not the amount currently owed, that the outstanding 
debt has been satisfied, or, if a judgment debt, that the debt has been 
satisfied, or stayed, before the debt is reported to a consumer 
reporting agency, if applicable, and referred to Treasury for offset 
from tax refunds.
    (e) If the debtor neither pays the amount due nor presents evidence 
that the amount is not past due or is satisfied or stayed, the 
Commission will report the debt to a consumer reporting agency at the 
end of the notice period, if applicable, and refer the debt to Treasury 
for offset from the taxpayer's federal tax refund. The Commission shall 
certify to Treasury that reasonable efforts have been made by the 
Commission to obtain payment of such debt.
    (f) A debtor may request a review by the Commission if the debtor 
believes that all or part of the debt is not past due or is not legally 
enforceable, or, in the case of a judgment debt, that the debt has been 
stayed or the amount satisfied, as follows:
    (1) The debtor must send a written request for review to the 
Director at the address provided in the notice.
    (2) The request must state the amount disputed and the reasons why 
the debtor believes that the debt is not past due, is not legally 
enforceable, has been satisfied, or, if a judgment debt, has been 
satisfied or stayed.
    (3) The request must include any documents that the debtor wishes 
to be considered or state that additional

[[Page 38026]]

information will be submitted within the time permitted.
    (4) If the debtor wishes to inspect records establishing the nature 
and amount of the debt, the debtor must make a written request to the 
Director for an opportunity for such an inspection. The office holding 
the relevant records not exempt from disclosure shall make them 
available for inspection during normal business hours within one week 
from the date of receipt of the request.
    (5) The request for review and any additional information submitted 
pursuant to the request must be received by the Director at the address 
stated in the notice within 65 calendar days of the date of issuance of 
the notice.
    (6) The Commission will review disputes and shall consider its 
records and any documentation and arguments submitted by the debtor. 
The Commission's decision to refer to Treasury any disputed portion of 
the debt shall be made by the Chairman. The Commission shall send a 
written notice of its decision to the debtor. There is no 
administrative appeal of this decision.
    (7) If the evidence presented by the debtor is considered by a non-
Commission agent or other entities or persons acting on the 
Commission's behalf, the debtor will be accorded at least 30 calendar 
days from the date the agent or other entity or person determines that 
all or part of the debt is past-due and legally enforceable to request 
review by an officer or employee of the Commission of any unresolved 
dispute.
    (8) Any debt that previously has been reviewed pursuant to this 
section or any other section of this subpart, or that has been reduced 
to a judgment, may not be disputed except on the grounds of payments 
made or events occurring subsequent to the previous review or judgment.
    (g) The Commission will notify Treasury of any change in the amount 
due promptly after receipt of payments or notice of other reductions.
    (h) In the event that more than one debt is owed, the tax refund 
offset procedure will be applied in the order in which the debts became 
past due.

    Issued: July 10, 1997.

    By order of the Commission.
Donna R. Koehnke,
Secretary.
[FR Doc. 97-18696 Filed 7-15-97; 8:45 am]
BILLING CODE 7020-02-P