[Federal Register Volume 68, Number 243 (Thursday, December 18, 2003)]
[Rules and Regulations]
[Pages 70444-70447]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-31043]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

45 CFR Part 31


Tax Refund Offset

AGENCY: Department of Health and Human Services.

ACTION: Final rule.

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SUMMARY: The Department of Health and Human Services (HHS) is amending 
its tax refund offset regulation to reflect amendments to 31 U.S.C. 
3720A made by tax refund offset provisions of the Debt Collection 
Improvement Act of 1996 (DCIA). The amended regulation changes the 
process by which HHS certifies and refers past-due debt to the 
Department of Treasury for tax refund offset to satisfy debt owed to 
the HHS.

EFFECTIVE DATE: December 18, 2003.

FOR FURTHER INFORMATION CONTACT: Katherine M. Drews, Associate General 
Counsel, General Law Division, Office of the General Counsel, Cohen 
Building, Room 4760, Washington DC 20201, 202-619-0150.

SUPPLEMENTARY INFORMATION:

Background

    This final rule implements the tax refund offset provisions of the 
Debt Collection Improvement Act of 1996 (DCIA), Pub. L. 104-134, 110 
Stat. 1321-358, codified at 31 U.S.C. 3720A. As required by the tax 
refund offset provisions of the DCIA, a Federal agency owed a past-due 
debt must notify the Secretary of the Treasury of such debt for 
collection by tax refund offset in accordance with regulations 
promulgated by the Secretary of the Treasury. The Financial Management 
Service (FMS), a bureau of the Department of the Treasury (Treasury), 
is responsible for promulgating the regulations implementing this and 
other debt collection tools established by the DCIA. The Treasury Final 
Rule, as amended, is published in section 285.2 of title 31 of the Code 
of Federal Regulations.

Basic Provisions

    In accordance with the requirements of the DCIA and the 
implementing regulations issued by the Department of the Treasury at 31 
CFR 285.2, the rule establishes the rules and procedures for certifying 
and referring a past-due debt to FMS for tax refund offset, correcting 
and updating referral information transmitted to FMS, and providing the 
debtor with written notice at least 60 days before the Department 
refers a debt to FMS. This written notice informs the debtor of the 
nature and amount of the debt, that the debt is past-due and legally 
enforceable, that the Department intends to enforce collection by 
referring the debt to the Department of the Treasury for tax refund 
offset, and that the debtor has a right to inspect and copy Department 
records relating to the debt, enter into a repayment agreement, and 
request review and present evidence that all or part of the debt is not 
past-due or legally enforceable.

Rules and Procedures

    Except for minor changes to make the provisions agency-specific, 
the final rule is substantially identical to the Treasury Final Rule. 
In accordance with the substantive and procedural requirements of the 
DCIA and the Treasury Final Rule, the final rule establishes HHS rules 
and procedures for:
    1. Certifying and referring a past-due debt to FMS for tax refund 
offset.
    2. Correcting and updating referral information transmitted to FMS.
    3. Providing the debtor with written notice at least 60 days before 
referring a debt to FMS. This written notice must inform the debtor of 
the nature and amount of the debt, that the debt is past-due and 
legally enforceable, that the Department intends to enforce collection 
by referring the debt to the Department of the Treasury for tax refund 
offset, and that the debtor has a right to inspect and copy Department 
records relating to the debt, enter into a repayment agreement, and 
request review and present evidence that all or part of the debt is not 
past-due or legally enforceable.

Analysis of and Responses to Public Comments

    No public comments were received.

Economic Impact

    We have examined the impact of this rule as required by Executive 
Order 12866 (September 1993, Regulatory Planning and Review), as 
amended by Executive Order 13258 (February 2002, Amending Executive 
Order 12866 on Regulatory Planning and Review) and

[[Page 70445]]

the Regulatory Flexibility Act (RFA) (September 19, 1980; Pub. L. 96-
354), the Unfunded Mandated Reform Act of 1995 (Pub. L. 104-4), and 
Executive Order 13132 (August 1999, Federalism).
    Executive Order 12866 (the Order), as amended by Executive Order 
13258, directs agencies to assess all costs and benefits of available 
regulatory alternatives and, if regulation is necessary, to select 
regulatory approaches that maximize the benefits (including potential 
economic, environmental, public health and safety effects, distributive 
impacts, and equity). A regulatory impact analysis (RIA) must be 
prepared for major rules with economically significant effects ($100 
million or more in 1 year). We have determined that the final rule is 
consistent with the principles set forth in the Order, and we find that 
the final rule would not have an effect on the economy that exceeds 
$100 million in any one year. In addition, this rule is not a major 
rule as defined at 5 U.S.C. 804(2). In accordance with the provisions 
of the Order, the rule was reviewed by the Office of Management and 
Budget.
    It is hereby certified under the RFA that this final rule will not 
have a significant economic impact on a substantial number of small 
entities. This final rule applies only to individuals with past-due 
debts owed to the United States.
    Section 202 of the Unfunded Mandates Reform Act of 1995 also 
requires that agencies assess anticipated costs and benefits before 
issuing any rule that may result in expenditure of in any 1 year by 
State, local, or tribunal governments, in the aggregate, or by the 
private sector, of $100 million. As noted above, we find that the final 
rule would not have an effect of this magnitude on the economy.
    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a proposed rule (and subsequent 
final rule) that imposes substantial direct requirement costs on State 
and local governments, preempts State law, or otherwise has Federalism 
implications. We have reviewed the final rule under the threshold 
criteria of Executive Order 13132, Federalism, and have determined that 
this final rule would not have substantial direct impact on States, or 
on the distribution of power and responsibilities among the various 
levels of government. As there are no Federalism implications, a 
Federalism impact statement is not required.
    For purposes of the Paperwork Reduction Act, 44 U.S.C. chapter 35, 
this final rule will impose no new reporting or record-keeping 
requirements on any member of the public.

List of Subjects in 45 CFR Part 31

    Administrative practice and procedure, Taxes, Claims, and Debts.


0
For the reasons set forth in the preamble, HHS amends 45 CFR Subtitle A 
as follows: Revise part 31 to read as follows:

PART 31--TAX REFUND OFFSET

Sec.
31.1 Purpose and scope.
31.2 Definitions.
31.3 General rule.
31.4 Certification and referral of debt.
31.5 Notice.
31.6 Review of Departmental records.
31.7 Review of a determination that a debt is past-due and legally 
enforceable.

    Authority: 31 U.S.C. 3720A, 31 CFR 285.2, E.O. 12866, E.O. 
13258.


Sec.  31.1  Purpose and scope.

    (a) Purpose. This part prescribes the Department's standards and 
procedures for submitting past-due, legally enforceable debts to the 
Department of the Treasury for collection by tax refund offset.
    (b) Authority. These standards and procedures are authorized under 
the tax refund offset provision of the Deficit Reduction Act of 1984, 
as amended by the Debt Collection Improvement Act of 1996, codified at 
31 U.S.C. 3720A, and the implementing regulations issued by the 
Department of the Treasury at 31 CFR 285.2.
    (c) Scope. (1) This part applies to all Departmental Operating 
Divisions and Regional Offices that administer a program that gives 
rise to a past-due non-tax debt owed to the United States, and to all 
officers or employees of the Department authorized to collect such 
debt. This part does not apply to any debt or claim owed to the 
Department of Health and Human Services by another Federal agency.
    (2) Nothing in this part precludes the Department from pursuing 
other debt collection procedures, including administrative wage 
garnishment under part 32 of this title, to collect a debt that has 
been submitted to the Department of the Treasury under this part. The 
Department may use such debt collection procedures separately or in 
conjunction with the offset collection procedures of this part.


Sec.  31.2  Definitions.

    In this part, unless the context otherwise requires:
    Administrative offset means withholding funds payable by the United 
States (including funds payable by the United States on behalf of a 
State government) to, or held by the United States for, a person to 
satisfy a claim.
    Day means calendar day. For purposes of computation, the last day 
of the period will be included unless it is a Saturday, Sunday, or a 
Federal legal holiday, in which case the next business day will be 
considered the last day of the period.
    Debt or claim means an amount of money, funds, or other property 
determined by an appropriate official to be owed to the United States 
from any individual, entity, organization, association, partnership, 
corporation, or State or local government or subdivision, except 
another Federal agency.
    Debtor means an individual, organization, association, partnership, 
corporation, or State or local government or subdivision indebted to 
the Government, or the person or entity with legal responsibility for 
assuming the debtor's obligation.
    Department means the Department of Health and Human Services, and 
each of its Operating Divisions and regional offices.
    Evidence of service means information retained by the Department 
indicating the nature of the document to which it pertains, the date of 
mailing of the document, and the address and name of the debtor to whom 
it is being sent. A copy of the dated and signed written notice of 
intent to offset provided to the debtor pursuant to this part may be 
considered evidence of service for purposes of this regulation. 
Evidence of service may be retained electronically so long as the 
manner of retention is sufficient for evidentiary purposes.
    FMS means the Financial Management Service, a bureau within the 
Department of the Treasury.
    IRS means the Internal Revenue Service, a bureau of the Department 
of the Treasury.
    Legally enforceable means that there has been a final agency 
determination that the debt, in the amount stated, is due and there are 
no legal bars to collection action.
    Operating division means each separate component, within the 
Department of Health and Human Services, including, but not limited to, 
the Administration for Children and Families, Administration on Aging, 
the Centers for Disease Control and Prevention, the Centers for 
Medicare & Medicaid Services, the Food and Drug Administration, the 
National Institutes of Health, and the Office of the Secretary.

[[Page 70446]]

    Past-due debt means a debt which the debtor does not pay or 
otherwise resolve by the date specified in the initial demand for 
payment, or in an applicable written repayment agreement or other 
instrument, including a post-delinquency repayment agreement.
    Secretary means the Secretary of the Department of Health and Human 
Services, or the Secretary's designee within any Operating Division or 
Regional Office.
    Taxpayer identifying number means the identifying number described 
under section 6109 of the Internal Revenue Code of 1986 (26 U.S.C. 
6109). For an individual, the taxpayer identifying number is the 
individual's social security number.
    Tax refund offset means withholding or reducing a tax refund 
payment by an amount necessary to satisfy a debt owed to the United 
States by the payee(s) of a tax refund payment.
    Tax refund payment means any overpayment of Federal taxes to be 
refunded to the person making the overpayment after the IRS makes the 
appropriate credits as provided in 26 U.S.C. 6402 for any liabilities 
for any tax on the part of the person who made the overpayment.


Sec.  31.3  General rule.

    (a) Any past-due, legally enforceable debt of at least $25, or such 
other minimum amount as determined by the Secretary of the Treasury, 
shall be submitted to FMS for collection by tax refund offset.
    (b) FMS will compare tax refund payment records, as certified by 
the IRS, with records of debts submitted by the Department under this 
part. A match will occur when the taxpayer identification number and 
name of a payment certification record are the same as the taxpayer 
identifying number and name control of a debtor record. When a match 
occurs and all other requirements for tax refund offset have been met, 
FMS will reduce the amount of any tax refund payment payable to a 
debtor by the amount of any past-due legally enforceable debt. Any 
amounts not offset will be paid to the payee(s) listed in the payment 
certification record.


Sec.  31.4  Certification and referral of debt.

    (a) Certification. The Secretary shall certify to FMS that:
    (1) The debt is past-due and legally enforceable in the amount 
submitted and that the Department will ensure that collections are 
properly credited to the debt;
    (2) Except in the case of a judgment debt or as otherwise allowed 
by law, the debt is referred within ten (10) years after the 
Department's right of action accrues;
    (3) The Department has made reasonable efforts to obtain payment of 
the debt, and has:
    (i) Submitted the debt to FMS for collection by offset and complied 
with the administrative offset provision of 31 U.S.C. 3716(a) and 
related regulations, to the extent that collection by administrative 
offset is not prohibited by statute;
    (ii) Notified, or made a reasonable attempt to notify, the debtor 
that the debt is past-due, and unless paid within 60 days of the date 
of the notice, the debt may be referred to Treasury for tax refund 
offset. For purposes of this regulation, the Department has made a 
reasonable attempt to notify the debtor if the agency uses the current 
address information contained in the Department's records related to 
the debt. If address validation is desired or necessary, the Department 
may obtain information from the IRS pursuant to 26 U.S.C. 6103(m)(2)(4) 
or (5).
    (iii) Given the debtor at least 60 days to present evidence that 
all or part of the debt is not past-due or not legally enforceable, 
considered any evidence presented by the debtor, and determined that 
the debt is past-due and legally enforceable; and
    (iv) Provided the debtor with an opportunity to make a written 
agreement to repay the debt; and
    (4) The debt is at least $25.
    (b) Referral. (1) The Secretary shall submit past-due, legally 
enforceable debt information for tax refund offset in the time and 
manner prescribed by the Department of the Treasury.
    (2) For each debt referred under this part, the Secretary will 
include the following information:
    (i) The name and taxpayer identifying number, as defined in 26 
U.S.C. 6109, of the debtor responsible for the debt;
    (ii) The amount of such past-due and legally enforceable debt;
    (iii) The date on which the debt became past-due; and
    (iv) The designation of the Department referring the debt.
    (c) Correcting and updating referral. (1) After referring a debt 
under this part, the Secretary shall promptly notify the Department of 
the Treasury if:
    (i) An error was made with respect to information transmitted to 
the Department of the Treasury;
    (ii) The Department receives a payment or credits a payment to the 
account of a debtor referred for tax refund offset; or
    (iii) The debt amount is otherwise incorrect.
    (2) The Department shall provide the certification required under 
paragraph (a) of this section for any increases to amounts owed.
    (d) Rejection of certification. If the Department of Treasury 
rejects a certification because it does not comply with the 
requirements of paragraph (a) of this section, upon notification of the 
rejection and the reason(s) for rejection, the Secretary will resubmit 
the debt with a corrected certification.


Sec.  31.5  Notice.

    (a) Requirements. If not previously included in the initial demand 
letter provided under section 30.11, at least 60 days before referring 
a debt for tax refund offset, the Secretary shall mail, by first class 
mail to the debtor's last known address, written notice informing the 
debtor of:
    (1) The nature and amount of the debt;
    (2) The determination that the debt is past-due and legally 
enforceable, and unless paid within 60 days after the date of the 
notice, the Secretary intends to enforce collection by referring the 
debt the Department of the Treasury for tax refund offset; and
    (3) The debtor's rights to:
    (i) Inspect and copy Department records relating to the debt;
    (ii) Enter into written agreement to repay the amount of the debt;
    (iii) Request review and present evidence that all or part of the 
debt is not past-due or not legally enforceable.
    (b) The Secretary will retain evidence of service indicating the 
date of mailing of the notice. The notice may be retained 
electronically so long as the manner of retention is sufficient for 
evidentiary purposes


Sec.  31.6  Review of Departmental records.

    (a) To inspect or copy Departmental records relating to the debt, 
the debtor must send a written request to the address designated in the 
notice described in section 31.5. The request must be received by the 
Department within 60 days from the date of the notice.
    (b) In response to a timely request as described in paragraph (a) 
of this section, the designated Department official shall notify the 
debtor of the location and time when the debtor may inspect and copy 
such records. If the debtor is unable to personally inspect such 
records as the result of geographical or other constraints, the 
Department will arrange to send copies of the records to the debtor.

[[Page 70447]]

Sec.  31.7  Review of a determination that a debt is past-due and 
legally enforceable.

    (a) Requesting a review. (1) If the debtor believes that all or 
part of the debt is not past-due or not legally enforceable, the debtor 
may request a review by the Department by sending a written request to 
the address provided in the notice. The written request must be 
received by the Department within 60 days from the date of the notice 
or, if the debtor has requested to inspect the records, within 30 days 
from the debtor's inspection of the records or the Department's mailing 
of the records under section 31.6(b), whichever is later.
    (2) The request for review must be signed by the debtor, state the 
amount disputed, and fully identify and explain the evidence that the 
debtor believes supports the debtor's position. The debtor must submit 
with the request any documents that the debtor wishes to be considered, 
or the debtor must state in the request that additional information 
will be submitted within the above specified time period.
    (3) Failure to timely request a review will be deemed an admission 
by the debtor that the debt is past-due and legally enforceable, and 
will result in a referral of the debt to the Department of the Treasury 
without further action.
    (b) Review. Upon the timely submission of evidence by the debtor, 
the Department shall review the dispute and shall consider its records 
and any documentation and evidence submitted by the debtor. The 
Department shall make a determination based on the review of the 
written record, and shall send a written notice of its decision to the 
debtor. There is no administrative appeal of this decision.
    (c) A debt that previously has been reviewed pursuant to this part, 
or that has been reduced to a judgment, will not be reconsidered under 
this part unless the evidence presented by the debtor disputes payments 
made or events occurring subsequent to the previous review or judgment.

    Dated: September 22, 2003.
Tommy G. Thompson,
Secretary.
[FR Doc. 03-31043 Filed 12-17-03; 8:45 am]
BILLING CODE 4150-26-P