[Federal Register Volume 69, Number 206 (Tuesday, October 26, 2004)]
[Rules and Regulations]
[Pages 62413-62415]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-23953]



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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Administration for Children and Families

45 CFR Part 303

RIN 0970-AC09


Child Support Enforcement Program Federal Tax Refund Offset

AGENCY: Administration for Children and Families, Department of Health 
and Human Services (HHS).

ACTION: Final rule.

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SUMMARY: This final rule responds to comments received on the interim 
final rule with comment period, published on June 26, 2003, that 
amended regulations on collecting child support arrears through the 
Federal Tax Refund Offset process. The interim final rule reflected 
changes in OCSE's data processing protocols with the Department of the 
Treasury and incorporated current business practices and requests from 
State Child Support Enforcement agencies.

DATES: These regulations are effective October 26, 2004.

FOR FURTHER INFORMATION CONTACT: Yvette Hilderson Riddick, Division of 
Policy, OCSE, 202-401-4885, e-mail: [email protected]. Deaf and 
hearing-impaired individuals may call the Federal Dual Party Relay 
Service at 1-800-877-8339 between 8 a.m. and 7 p.m. eastern time.

SUPPLEMENTARY INFORMATION:

Statutory Authority

    This regulation is issued under the authority granted to the 
Secretary of Health and Human Services (the Secretary) by section 1102 
of the Social Security Act (the Act), 42 U.S.C. 1302. Section 1102 of 
the Act authorizes the Secretary to publish regulations that may be 
necessary for the efficient administration of the functions for which 
he is responsible under the Act.

Interim Final Regulatory Provisions

    The interim final rule amending 45 CFR 303.72, Requests for 
collection of past-due support by Federal tax refund offset, did not 
impose new requirements or burdens on States, but rather removed 
administrative requirements and burdens, principally the requirement 
that the support be three months delinquent before the debt is referred 
for Federal tax refund offset. The rule also removed the requirement 
for States to submit written notices to OCSE; i.e., to transmit paper 
responses or to submit referrals by magnetic tape. Under the new 
procedures, notices and referrals are sent to OCSE electronically, 
which is much simpler for the States. Finally, the rule incorporated 
several policies that were already in effect in order to have all the 
information pertaining to the submission of Federal tax refund offset 
cases in one place.

Response to Comments and Changes to the Interim Final Rule

    We received comments from four State IV-D agencies about the 
changes proposed in the interim final rule. The comments and our 
responses are discussed below.
    1. Comment: One commenter said that, in the interim final rule, 
OCSE's use of the term ``non-IV-A cases'' is misleading or inaccurate. 
For example, a person may have been on assistance, but is currently not 
on assistance, yet has assigned arrears. Is this a IV-A case or not? 
The commenter suggested we use the terms ``cases with support assigned 
to the State'' and ``cases with no support assigned to the State''.
    Response: The term ``non-IV-A cases'' was not added or changed in 
the interim final rule. The reference to ``non-IV-A cases'' covers any 
cases that have unassigned past-due support which is being submitted 
for offset. ``IV-A cases'' cover any cases that have assigned past-due 
support which is being submitted for offset, such as the example in the 
comment. The language that the commenter suggests changing is 
longstanding language that was not added or changed by the interim 
final regulation and thus, is not a proper subject for modification in 
the final rule. The regulatory language at Sec.  303.72(a) lays out the 
rules for how support is submitted for offset. It differentiates past-
due support qualifying for offset according to whether it is past-due 
support assigned to the State or past-due support that is not assigned 
to the State, but owed to the family. Assigned support and support owed 
to the family must meet different criteria for submittal, as outlined 
in paragraph (a). Thus, in a former assistance case with arrears 
assigned to the State and arrears owed to the family, the State will 
specify two separate amounts of past-due support for offset. 
Additionally, this distinction is required under the Internal Revenue 
Code, 26 U.S.C. 6402(c), the section of the Code pertaining to tax 
refund offset for child support. Under this subsection, first priority 
is given to ``any past-due support which has been assigned to the 
State.'' Next priority is other Federal debts, followed by unassigned 
past-due support.
    2. Comment: One commenter asked: If Federal tax refund offset is a 
mandatory tool, as stated in the preamble to the interim final rule, 
are States required to certify all cases with assigned arrears of $150 
or more and, if so, by when? The commenter expressed concern that 
States may need to change laws, policies and procedures to meet this 
``new'' requirement. One commenter agreed with the regulatory changes, 
but pointed out that her State will need to make some programming 
changes that will take a few months to complete.
    Response: The requirement to certify all cases that meet the 
criteria for submittal for Federal tax refund offset under 45 CFR 
303.72 appears at Sec.  303.6(c)(3) and has not been changed. The 
timeframe for that submittal is ``according to the timeframes and in 
the manner specified by the Office in instructions'' (Sec.  
303.72(b)(1)). These instructions will be forthcoming in new guidance 
from the Federal Office of Child Support Enforcement. Currently, HHS 
requires States to update on at least a monthly basis, and recommends 
sending weekly updates if possible. OCSE will work closely with States 
before considering any changes to the timeframes and issuing 
instructions. OCSE does not contemplate instructions that will require 
changes to State law. The State may also use discretion to exclude a 
particular case as warranted, on a case-by-case basis.
    3. Comment: One commenter noted that OCSE mentioned, in the 
preamble to the interim final rule, that it amended Sec.  
303.72(d)(2),(f)(3) and (g)(4) to recognize that the amount to be 
offset may increase as well as decrease after the submittal, due to the 
transition from annual updates to a continuous data processing schedule 
or due to an administrative review. However, in the first two instances 
cited, the regulation was not changed.
    Response: We have corrected the regulation by replacing 
``decrease'' with ``change'' in paragraphs (d)(2) and (f)(3).
    4. Comment: Paragraph Sec.  303.72(g) sets forth procedures for 
contesting an offset in interstate cases. The amended Sec.  
303.72(g)(4) requires the State with the order to report changes 
resulting from an administrative review to the submitting State and the 
submitting State to notify OCSE. One commenter said that we should 
define ``State with the order'', because the State with the order may 
not be involved in the case if the order is not in the initiating or 
responding State.
    Response: The commenter is correct in noting that the State with 
the order may be neither the initiating nor the responding State 
involved in a IV-D

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case. The State with the order refers to the State with the order 
``upon which the referral for offset is based''. We have added this 
language to paragraph (g)(4) for clarification. The provision allowing 
``the State with the order'' to conduct an administrative review is not 
a change to the regulation.
    5. Comment: Paragraph Sec.  303.72(h)(6) was amended to specify 
that collections from offset may only be applied ``to cases'' that were 
being enforced by the IV-D agency at the time the advance notice 
described in paragraph (e)(1) of this section was sent. The prior 
paragraph (h)(6) had provided that collections from offset could be 
applied only against the ``past-due support amount'' that was specified 
in the advance notice to the obligor. One commenter asked: If a 
collection came in during a transitional period before an update was 
processed by OCSE to make the case a non-IV-D case, could the money be 
kept and applied to the arrears on that case?
    Response: Regulations at 45 CFR 303.11 contain case closure 
requirements. If the State closes a case before the date of offset, 
consistent with case closure requirements, the offset amount would have 
to be returned to the Treasury, since past-due support that qualifies 
for offset must be past-due support owed in a IV-D case.
    6. Comment: The change to paragraph (h)(6) narrows the past-due 
support to which collections from Federal income tax refund offsets may 
be applied. Under the regulations, the State, or OCSE at the State's 
request, sends the obligor a pre-offset notice specifying the obligor's 
right to contest that past-due support is owed and the right to an 
administrative review. The notice specifies that further arrears may be 
added to the obligor's debt without further notice. This past-due 
support could have already included debt from more than one case 
involving that obligor. States may also offer an opportunity for a due 
process hearing at the point of offset. States that provide that 
additional due process protection at offset, and not just at the pre-
offset stage, should have flexibility in applying collections to past-
due support owed by an obligor. If a State's due process has met State 
constitutional and due process requirements, the Federal regulation 
should continue to allow application of collections to all cases, 
similar to the handling of income withholding collections.
    Response: We have not changed this provision for the following 
reasons. Section 464 of the Act authorizes the collection of past-due 
support from Federal tax refunds only if certain conditions are met. 
First, the individual due the tax refund must owe past-due support 
which has been assigned to the State or which the State has agreed to 
collect for a child on whose behalf an application for services has 
been submitted. The statute defines ``past-due support'' as ``the 
amount of a delinquency, determined under a court order, or an order of 
an administrative process established under State law, for support and 
maintenance of a child, or of a child and the parent with whom the 
child is living.'' Second, the State must notify the Secretary of the 
Treasury that the individual owes past-due support in accordance with 
the procedures established by the Secretary of the Treasury. Third, 
prior to notifying the Secretary of the Treasury that the individual 
owes past-due support, the State must send a notice to the individual 
informing him or her that amounts will be withheld from any refund 
payable. The notice must also inform the individual of the steps that 
may be taken to contest the State's determination that past-due support 
is owed or the amount of such past-due support and must comply with the 
regulations established by the Secretary of HHS. The regulation 
governing the advance notice that must be provided appears at Sec.  
303.72(e). Under this regulation, the required advance notice must 
inform the individual of four things, including the right to a review 
by the submitting State or the State with the order upon which the 
referral is based and the procedures and timeframe for contacting the 
IV-D agency of the submitting State to request a review.
    The purpose of the advance notice provisions is to inform the 
individual of the IV-D agency's determination that he or she owes an 
amount of past-due support and to afford the individual an opportunity 
to contest the IV-D agency's determination that such past-due support 
is owed before the case is submitted for tax refund offset. In order to 
accomplish the purpose of the advance notice provisions and to comply 
with the statutory and regulatory provisions, an individual must be 
provided sufficient information concerning the past-due support claimed 
to be owed so as to enable a decision whether or not to request a 
review. An individual cannot contest a determination of past-due 
support about which he or she has not been notified.
    7. Comment: The OCSE automated system for Federal tax refund offset 
cannot send a second advance notice that would include a second 
family's past-due support without first decertifying the first family's 
past-due support, which creates a burden on families whose support has 
already been submitted by the State.
    Response: OCSE is programming a new transaction that will allow 
States to generate new pre-offset notices on an ad hoe basis without 
decertifying a case. It is expected to be available very soon.
    8. Comment: The obligor's debt is offset at the amount that is 
certified as of the date of offset. Define ``date of offset.''
    Response: The ``date of offset'' is the date that Treasury's 
Financial Management Services actually offsets the tax refund. This 
date is sent to the State with the payment file.
    9. Comment: One commenter mentioned a missing reference to 
paragraph (f)(3) in the amendatory language in the interim final rule.
    Response: We have corrected that omission in this final rule. In 
addition, we have identified several other typographical and technical 
errors in the text of the interim final rule that we have corrected in 
this final document. These corrections appear in paragraph (b)(1), 
where we corrected the placement of the parentheses; in paragraph 
(b)(2), where we added the word ``delinquency'' which had been left out 
in error; in paragraph (d)(1), where we changed ``of' to ``for'' in the 
phrase ``referring past-due support of offset''; and in paragraph 
(i)(1), where we added ``U.S.'' to the term ``Department of Treasury'' 
and we added the words ``of the'' between ``amount'' and ``offset''.

Paperwork Reduction Act of 1995

    No new information collection requirements are imposed by these 
regulations, nor are any existing requirements changed as a result of 
their promulgation. Therefore, the requirements of the Paperwork 
Reduction Act of 1995 (44 U.S.C. 3507(d)), regarding reporting and 
record keeping, do not apply.

Regulatory Flexibility Analysis

    The Secretary certifies, under 5 U.S.C. 605(b), as enacted by the 
Regulatory Flexibility Act (Pub. L. 96-354), that this rule will not 
result in a significant impact on a substantial number of small 
entities. The primary impact is on State governments. State governments 
are not considered small entities under the Act.

Regulatory Impact Analysis

    This final rule responds to comments on amended regulations on 
collecting child support arrears through the Federal Tax Refund Offset 
process. The changes make it easier for States to determine which cases 
are eligible for referral by eliminating certain

[[Page 62415]]

requirements. Executive Order 12866 requires that regulations be 
reviewed to ensure that they are consistent with the priorities and 
principles set forth in the Executive Order. The Department has 
determined that this rule is consistent with these priorities and 
principles. This rule is considered a ``significant regulatory action'' 
under the Executive Order and therefore has been reviewed by the Office 
of Management and Budget.

Unfunded Mandates Reform Act of 1995

    Section 202 of the Unfunded Mandates Reform Act of 1995 requires 
that a covered agency prepare a budgetary impact statement before 
promulgating a rule that includes any Federal mandate that may result 
in the expenditure by State, local, and Tribal governments, in the 
aggregate, or by the private sector, of $100 million or more in any one 
year.
    The Department has determined that this rule would not impose a 
mandate that will result in the expenditure by State, local, and Tribal 
governments, in the aggregate, or by the private sector, of more than 
$100 million in any one year.

Congressional Review

    This regulation is not a major rule as defined in 5 U.S.C. chapter 
8.

Assessment of Federal Regulations and Policies on Families

    Section 654 of the Treasury and General Government Appropriations 
Act of 1999 requires Federal agencies to determine whether a proposed 
policy or regulation may affect family well-being. If the agency's 
determination is affirmative, then the agency must prepare an impact 
assessment addressing seven criteria specified in the law. These 
regulations will not have an impact on family well-being as defined in 
the legislation.

Executive Order 13132

    Executive Order 13132 on federalism applies to policies that have 
federalism implications, defined as ``regulations, legislative comments 
or proposed legislation, and other policy statements or actions that 
have substantial direct effects on the States, or on the distributions 
of power and responsibilities among the various levels of government''. 
This rule does not have federalism implications for State or local 
governments as defined in the Executive Order.

List of Subjects in 45 CFR Part 303

    Child support, Grant programs/social programs.

(Catalog of Federal Domestic Assistance Programs No. 93.563, Child 
Support Enforcement Program)

    Dated: June 28, 2004.
Wade F. Horn,
Assistant Secretary for Children and Families,
    Date Approved: August 6, 2004.
Tommy G. Thompson,
Secretary of Health and Human Services.

0
For the reasons discussed above, title 45 CFR chapter III is amended as 
follows:

PART 303--STANDARDS FOR PROGRAM OPERATIONS

0
1. The authority citation for part 303 continues to read as follows:

    Authority: 42 U.S.C. 651 through 658, 660, 663, 664, 666, 667, 
1302, 1396a(a)(25), 1396b(d)(2), 1396b(o), 1396b(p) and 1396(k).


0
2. Amend Sec.  303.72 by revising paragraphs (b)(1), (b)(2) 
introductory text, (d)(1), (d)(2), (f)(3), (g)(4), and (i)(1) to read 
as follows:


Sec.  303.72  Requests for collection of past-due support by Federal 
tax refund offset.

* * * * *
    (b) * * *
    (1) A State IV-D agency shall submit a notification (or 
notifications) of liability for past-due support to the Office 
according to the timeframes and in the manner specified by the Office 
in instructions.
    (2) To the extent specified by the Office in instructions, the 
notification of liability for past-due support shall contain with 
respect to each delinquency:
* * * * *
    (d) * * *
    (1) The State referring past-due support for offset must, in 
interstate situations, notify any other State involved in enforcing the 
support order when it submits an interstate case for offset and when it 
receives the offset amount from the Secretary of the U.S. Treasury.
    (2) The State IV-D agency shall, within timeframes established by 
the Office in instructions, notify the Deputy Director of any deletion 
of, or any change in, the arrears balance, if the change is significant 
according to the guidelines developed by the State. The notification 
shall contain the information specified in paragraph (b) of this 
section.
* * * * *
    (f) * * *
    (3) If the administrative review results in a deletion of, or 
change in, the arrears balance, the IV-D agency must notify OCSE within 
timeframes established by the Office and include the information 
specified in paragraph (b) of this section.
* * * * *
    (g) * * *
    (4) If the administrative review results in a deletion of, or 
change in, the arrears balance, the State with the order upon which the 
referral for offset is based must notify the submitting State within 
timeframes established by the Office and include the information 
specified in paragraph (b) of this section. The submitting State must 
then notify the Office within timeframes established by the Office and 
include the information specified in paragraph (b) of this section.
* * * * *
    (i) * * *
    (1) A refund offset fee, in such amount as the Secretary of the 
U.S. Treasury and the Secretary of Health and Human Services have 
agreed to be sufficient to reimburse the U.S. Department of Treasury 
for the full cost of the offset procedure, shall be deducted from the 
offset amount and credited to the U.S. Department of Treasury 
appropriations which bore all or part of the costs involved in making 
the collection. The full amount of the offset must be credited against 
the obligor's payment record. The fee which the Secretary of the U.S. 
Treasury may impose with respect to non-IV-A submittals shall not 
exceed $25 per submittal.
* * * * *
[FR Doc. 04-23953 Filed 10-25-04; 8:45 am]
BILLING CODE 4184-01-P