[Federal Register Volume 73, Number 237 (Tuesday, December 9, 2008)]
[Rules and Regulations]
[Pages 74898-74921]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-28660]



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Part IV





Department of Health and Human Services





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Administration for Children and Families



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45 CFR Parts 301, 302, 303 and 304



Child Support Enforcement Program; Final Rule

  Federal Register / Vol. 73 , No. 237 / Tuesday, December 9, 2008 / 
Rules and Regulations  

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Administration for Children and Families

45 CFR Parts 301, 302, 303 and 304

RIN 0970-AC24


Child Support Enforcement Program

AGENCY: Office of Child Support Enforcement (OCSE), Administration for 
Children and Families (ACF), Department of Health and Human Services

ACTION: Final rules.

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SUMMARY: These rules implement provisions of title IV-D of the Social 
Security Act (the Act) as amended by the Deficit Reduction Act of 2005, 
Public Law 109-171 (DRA). The rules address use of the Federal tax 
refund offset program to collect past-due child support on behalf of 
children who are not minors, mandatory review and adjustment of child 
support orders for families receiving Temporary Assistance for Needy 
Families (TANF), reduction of the Federal matching rate for laboratory 
costs incurred in determining paternity, States' option to pay more 
child support collections to former-assistance families, and the 
mandatory annual $25 fee in certain child support enforcement (IV-D) 
cases in which the State has collected and disbursed at least $500 of 
support to the family. The rules also make other conforming changes 
necessary to implement changes to the distribution and disbursement 
requirements.

DATES: Effective Dates: These rules are effective February 9, 2009.

FOR FURTHER INFORMATION CONTACT: Paige Hausburg, Policy Specialist, 
OCSE, 202-401-5635, 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:

I. Statutory Authority

    These final rules are published under the authority granted to the 
Secretary of the U.S. Department of Health and Human Services (the 
Secretary) by section 1102 of the Act, 42 U.S.C. 1302. Section 1102 
authorizes the Secretary to publish rules that may be necessary for the 
efficient administration of the functions for which he is responsible 
under the Act. The Deficit Reduction Act of 2005 (DRA), Title VII, 
Subtitle C--Child Support, sections 7301-7311 amends title IV-D of the 
Act.
    Section 7301(b) of the DRA amends section 457 of the Act and the 
requirements for distribution of support payments to allow States to 
opt to increase child support payments to families and simplify child 
support distribution rules. We made minor conforming changes to the 
distribution requirements in these rules.
    Section 7301(f) of the DRA amends section 464 of the Act to 
eliminate the restriction of access to the Federal tax refund offset 
program to disabled adult children and to allow States to collect past-
due child support certified for offset to the Secretary of the Treasury 
on behalf of all children in the IV-D program who are not minors.
    Section 7302 of the DRA amends section 466(a)(10) of the Act to 
require States to review and, if appropriate, adjust child support 
orders in cases receiving TANF at least once every three years. 
Previously, States needed only to review orders and adjust them, if 
appropriate, upon the request of either parent or, if there is an 
assignment of rights, upon the request of the State agency.
    Section 7308 of the DRA amends section 455(a)(1)(C) of the Act to 
reduce the Federal reimbursement for the costs of genetic testing 
incurred in determining paternity from 90 percent to 66 percent of 
State IV-D program expenditures, effective October 1, 2006.
    Section 7310 of the DRA amends section 454(6)(B) of the Act to 
require States to impose an annual fee of $25 in the case of an 
individual who has never received assistance under a State program 
funded under title IV-A of the Act and for whom the State has collected 
at least $500 of support. These rules also excludes from the fee those 
individuals who are receiving or have received Tribal IV-A assistance. 
This will have a minor impact on the program and it is consistent with 
the intent of the $25 fee that it not be imposed on the families who 
are the most at risk, i.e., those who have received assistance under 
title IV-A of the Act. As discussed later in this preamble, Tribal IV-A 
assistance is not explicitly mentioned in the statute but is authorized 
under title IV-A of the Act. In addition, we amended these rules to 
prohibit collection of the $25 annual fee from individuals who are 
required to cooperate with the IV-D program as a condition of Food 
Stamp eligibility as defined at 7 CFR 273.11(o) and (p). In these 
cases, the fee would need to be collected from the non-Food Stamp 
eligible parent or to be paid by the State.

II. Summary Description of Regulatory Provisions and Changes Made in 
Response to Comments

    The following is a summary of the regulatory provisions included in 
this final rule. The Notice of Proposed Rulemaking (NPRM) was published 
in the Federal Register on January 24, 2007 (72 FR 3093). The comment 
period ended March 26, 2007.
    Changes made in response to comments are discussed in more detail 
under the Response to Comments section of this preamble.

PART 301--STATE PLAN APPROVAL AND GRANT PROCEDURES

Section 301.1--General Definitions

    Under Sec.  301.1, the definition of past-due support and qualified 
child were amended. The changes in the definitions implement revised 
section 464(c) of the Act to eliminate the restriction of access to the 
Federal tax refund offset program to disabled adult children and to 
allow States to collect past-due child support certified for offset to 
the Secretary of the Treasury on behalf of all children in the IV-D 
program who are not minors. The definition of past-due support now 
reads: ``Past-due support means the amount of support 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, which has not been paid. 
Through September 30, 2007, for purposes of referral for Federal tax 
refund offset of support due an individual who is receiving services 
under Sec.  302.33 of this chapter, past-due support means support owed 
to or on behalf of a qualified child, or a qualified child and the 
parent with whom the child is living if the same support order includes 
support for the child and the parent.''
    The definition of qualified child now reads: ``Qualified child, 
through September 30, 2007, means a child who is a minor or who, while 
a minor, was determined to be disabled under title II or XVI of the 
Act, and for whom a support order is in effect.''

PART 302--STATE PLAN APPROVAL REQUIREMENTS

Section 302.32--Collection and Disbursement of Support Payments by the 
IV-D Agency

    These rules make conforming changes to language in Sec.  302.32 for 
consistency with certain changes made to sections 454 and 457 of the 
Act. Under new

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section 454(34) of the Act, effective October 1, 2009, or up to a year 
earlier at State option, States have a choice to distribute collections 
first to satisfy support owed to families in IV-D cases. The rules make 
technical changes in Sec. Sec.  302.32(b)(2)(iv) and (3)(ii) to delete 
reference to a specific statutory requirement for payments to families 
to simplify the language.

Section 302.33--Services to Individuals Not Receiving IV-A Assistance

    Section 7310 of the DRA adds a new requirement in section 
454(6)(B)(iii) of the Act to require States to impose an annual fee of 
$25 in the case of an individual who has never received assistance 
under a State program funded under title IV-A of the Act and for whom 
the State has collected at least $500 of support.
    Under the proposed rule, Sec.  302.33(e)(1) required that in the 
case of an individual who has never received assistance under a State 
or Tribal program funded under title IV-A of the Act and for whom the 
State has collected at least $500 of support in any given Federal 
fiscal year, an annual fee of $25 for each case in which services are 
furnished be imposed by the State. The structure of paragraph (e)(1) 
has been changed for clarity and a number of changes were made to 
(e)(1) in response to comments. We clarified in paragraph (e)(1)(i) 
that the first condition for the fee requirement is that the State has 
``collected and'' disbursed at least $500 of support to the family. The 
proposed rule at Sec.  302.33(e) did not specify that the State 
``collected'' the money prior to disbursement to the family. In 
response to comments, we clarified in Sec.  302.33(e)(1)(ii) that 
``assistance'' includes former AFDC program assistance, assistance 
under a State TANF program as defined in the TANF rules at 45 CFR 
260.31, and assistance under a Tribal TANF program is defined in the 
TANF rules at 45 CFR 286.10.
    We also amended these rules at Sec.  302.33(e)(3)(i) to prohibit 
collection of the $25 annual fee from a foreign obligee in an 
international case receiving IV-D services under section 454(32)(C) of 
the Act and individuals who are required to cooperate with the IV-D 
program as a condition of Food Stamp eligibility as defined at 7 CFR 
273.11(o) and (p). In response to comments that the Federal statute 
allows a fee, charged to the noncustodial parent, to be retained from 
the collection, we revised paragraph (e)(3)(i) to cross-reference Sec.  
302.51(a)(5) which specifies the conditions under which the 
noncustodial parent may be charged the fee and the fee retained from a 
child support collection. Therefore, with respect to the collection of 
the $25 fee, a noncustodial parent need not have designated a portion 
of the support payment as the fee. We also amended Sec.  
302.33(e)(3)(ii) and (iii) to prohibit collection of the fee from 
individuals who are required to cooperate with the IV-D program as a 
condition of Food Stamp eligibility as defined at 7 CFR 273.11(o) and 
(p).

Section 302.51--Distribution of Support Collections

    Section 7301(b) of the DRA amended section 457(a)(3) of the Act to 
require a State to pay to a family that has never received assistance 
under a title IV-A or IV-E program the portion of the amount collected 
that remains after withholding any $25 annual fee. This statutory 
requirement is addressed in this final rule by an amendment to Sec.  
302.51(a)(1) and by adding paragraph (a)(5).
    The State plan requirement in section 454(34) of the Act concerning 
collection and distribution of support payments by the IV-D agency that 
requires a State to certify which option for distribution it chooses 
for collections in former-assistance cases is in the final rule at 
Sec.  302.51(a)(3)(i) and (ii). In response to comments concerning an 
exemption from the fee for certain individuals required to cooperate 
with the IV-D program as a condition of Food Stamp eligibility, and the 
change to the rules at Sec.  302.33(e)(3) to allow an annual $25 fee to 
be charged to the noncustodial parent and retained from a support 
collection under certain circumstances, we also revised the language in 
proposed Sec.  302.51(a)(5) for consistency.

Section 302.70--Required State Laws

    Section 7302 of the DRA amended section 466(a)(10) of the Act to 
require States to enact laws requiring the use of procedures to review 
and, if appropriate, adjust at least once every three years, child 
support orders for families receiving TANF in which there is an 
assignment of support under title IV-A of the Act. For consistency with 
section 466(a)(10) of the Act, these rules revise Sec.  302.70(a)(10), 
under which the State must have in effect laws providing for the review 
and adjustment of child support orders. The requirements in current 
Sec. Sec.  302.70(a)(10)(i) and (ii) are rendered obsolete by this 
final rule.

PART 303--STANDARDS FOR PROGRAM OPERATIONS

Section 303.7--Provision of Services in Interstate Title IV-D Cases

    Section 454(6) of the Act as amended by section 7201 of the DRA 
does not specifically address which State is to impose and collect the 
$25 annual fee in accordance with the new requirement at Sec.  
302.33(e) in an interstate title IV-D case. Using the Secretary's 
rulemaking authority in section 1102 of the Act, this final rule amends 
Sec.  303.7(e) to require that the title IV-D agency in the initiating 
State impose the annual $25 fee in accordance with the new requirement 
in Sec.  302.33(e). The change is necessary to ensure consistency in 
the collection of the mandatory annual $25 fee in interstate cases.

Section 303.8--Review and adjustment of child support orders

    Section 7302 of the DRA revised section 466(a)(10) of the Act to 
require States to review and, if appropriate, adjust orders in State 
title IV-A cases at least once every three years. In response to 
comments we amended these rules at Sec.  303.8(b)(1) to clearly 
indicate that the time frame for the review of the order begins with 
the establishment of the order or the most recent review of the order, 
whichever is later.

Section 303.72--Request for Collection of Past-Due Support by Federal 
Tax Refund Offset

    Section 7301(f) of the DRA amended the definition of ``past-due 
support'' at section 464(c) of the Act to allow, effective October 1, 
2007, arrearages owed to adult children to be submitted for Federal tax 
refund offset. We amended the regulatory language at Sec.  
303.72(a)(3)(i), with respect to past-due support owed in cases in 
which the IV-D agency is providing services under Sec.  302.33, to 
allow support owed to or on behalf of a child, or a child and a parent 
with whom the child is living if the same support order includes 
support for the child and the parent, to be submitted for Federal tax 
refund offset effective October 1, 2007. Therefore, the prior 
restriction from submitting past-due support owed to adult children is 
no longer in effect.
    Section 7301(b)(2)(C) of the DRA amended section 454(34) of the 
Act, with respect to distribution options, to allow a State to choose 
either to apply amounts collected, including amounts offset from 
Federal tax refunds, to satisfy any support owed to the family first or 
to continue to distribute Federal tax refund offset amounts, as under 
current section 457(a)(2)(B)(iv), to

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satisfy any past-due support assigned to the State first. This final 
rule revises Sec.  303.72(h)(1) to refer simply to distribution in 
accordance with section 457 of the Act, and effective October 1, 2009, 
or up to a year earlier at State option, in accordance with section 
454(34) of the Act, under which States elect which distribution 
priority in former-assistance cases to use under their IV-D programs.
    In response to comments, proposed Sec.  303.72(h)(3)(i) is revised 
to continue the requirement that a IV-D agency, except as provided in 
paragraph (ii), must inform individuals receiving services under Sec.  
302.33 in advance that amounts offset will be applied to satisfy any 
past-due support which has been assigned to the State and submitted for 
Federal tax refund offset. States may opt to continue to distribute in 
this manner with respect to collections made as a result of Federal tax 
refund offset. However, a State may opt, under section 454(34) of the 
Act, to apply amounts offset first to satisfy any current and past-due 
support which is owed to the family. Therefore, the regulatory language 
at Sec.  303.72(h)(3)(ii), was changed to make clear that States are 
not required to send such notices if the State chooses the distribution 
option allowed under 454(34) of the Act.

PART 304--FEDERAL FINANCIAL PARTICIPATION

Section 304.20--Availability and Rate of Federal Financial 
Participation

    Section 7308 of the DRA amends section 455(a)(1)(C) of the Act by 
reducing the previously enhanced Federal matching rate for laboratory 
costs to determine paternity from 90 percent to 66 percent, effective 
October 1, 2006. Accordingly, we revised Sec.  304.20(d) to reflect the 
reduction in the matching rate for genetic testing costs for the 
determination of paternity.
Response to Comments
    We received 28 letters from States, Tribes, advocacy groups, and 
other interested individuals. Below is a summary of the comments and 
our responses.
General Comments
    1. Comment: One commenter said that the proposed rules are 
detrimental to the children and families that are being served by the 
IV-D program and that they are contradictory to the public policy of 
improving the lives of children and families.
    Response: These rules reflect the statutory requirements of the 
DRA. We believe that the mandates and authorities in the DRA will have 
positive effects for families receiving child support enforcement 
services in that the changes in the law build on the successes of the 
1996 welfare reform law, the Personal Responsibility and Work 
Opportunity Reconciliation Act (PRWORA), in strengthening families and 
promoting responsibility. The DRA provisions reflect the need for 
responsible deficit reduction while still retaining generous Federal 
funding of the child support enforcement program.
    2. Comment: One commenter requested that an updated version of 
Action Transmittal 06-01, Child Support Provision in the Deficit 
Reduction Act of 2005 (DRA), dated May 7, 2006, be provided with 
Federal guidance on all of the DRA provisions. For example, section 
7302 of the DRA which addresses assignment and distribution, has many 
aspects on which States need Federal guidance. Another commenter urged 
OCSE to provide guidance on distribution changes.
    Response: We do not believe updating AT-06-01 is appropriate. We 
have worked diligently since March of 2006 to provide guidance to 
States in an effort to assist them in implementing the mandates of the 
DRA.
    3. Comment: Two commenters asked how long States will have after 
the publication of these final rules to align IV-D computer data system 
designs to comply with the final Federal rules.
    Response: The requirements of these final rules are effective 60 
days from the date of publication.
    There is no specific mandate that these statutory provisions be 
automated. With respect to the DRA requirements, States must meet the 
statutory effective date for each provision, subject to the authorized 
delay date: If the State requires legislation to meet the requirements 
imposed by the mandates of the DRA, the effective date of the 
amendments shall be 3 months after the first day of the first calendar 
quarter beginning after the close of the first regular session of the 
State legislature that began after the date of the enactment of the DRA 
(February 8, 2006). In the case of a State that has a 2-year 
legislative session, each year of the session shall be considered to be 
a separate regular session of the State legislature. We recommend that 
should a State need to make changes to its automated system, those 
changes be made as soon as possible.
    4. Comment: One commenter asked if OCSE will impose specific 
automated systems programming requirements on States that choose to pay 
the annual $25 fee themselves.
    Response: OCSE is not imposing specific programming requirements on 
States that choose to pay the fee themselves. When these rules are 
published in final, States will already be imposing the $25 annual fee. 
Any changes to the way the State is imposing the fee that are required 
as a result of publication of the final rules should be made consistent 
with the effective date of the rules. States will not be penalized for 
systems changes for fee procedures they implement prior to issuance of 
these final rules that are reasonable and consistent with the statutory 
fee language. However, the effective date of these rules is 60 days 
from the date of publication in the Federal Register .
    5. Comment: One commenter asked if the Secretary's rulemaking 
authority permits the Secretary to convert a mandatory fee assessed on 
the custodial parent, noncustodial parent, applicant, or State to a 
mandatory fee on the State in light of the fact that the State must pay 
the Federal portion of the fee to the Federal government if it is not 
collected through other means. The commenter said that Executive Order 
12612, section three limits Federal action to instances where 
Constitutional authority for the action is clear and certain. The final 
rules should include the bases on which the Administration claims the 
Congressional intent behind the mandatory assessment of a fee 
translates to a requirement for a State to pay a program fee to the 
Federal government that was otherwise not collected.
    Response: The Federal responsibility is to ensure that 
Congressional intent is met. Requiring a State to charge the fee, but 
allowing a State to assert that collection efforts were unsuccessful 
would contravene the intent of the mandate.
    6. Comment: One commenter stated that the Federal funding cuts 
imposed by the DRA are likely to tax the State IV-D agencies to such an 
extent that services and outreach to employers will suffer.
    Response: The Federal funding of the IV-D program is generous and 
we expect that services to families and outreach to employers will not 
suffer. The Federal OCSE has an office that specifically works to 
provide outreach to employers. To access the internet site with 
information relevant to employers, please go to: http://www.acf.hhs.gov/programs/cse/newhire/employer/home.htm.

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PART 301--STATE PLAN APPROVAL AND GRANT PROCEDURES

Section 301.1--General Definitions

    1. Comment: One commenter said that in the discussion of Sec.  
301.1 of the proposed rule, the preamble says: ``this amendment will 
allow collection of past-due child support * * * on behalf of 
individuals who were owed child support as children but then aged out 
of the system without having collected the full amount of support owed 
to them'' and implies that the now emancipated child has the right to 
collect past-due support through the Federal tax refund offset program, 
not the custodial parent to whom the support was ordered to be paid.
    Response: The provision allows IV-D cases with arrearages owed to 
emancipated minors to benefit from the highly successful Federal tax 
refund offset program. It does not impact the payee under the support 
order.
    2. Comment: The wording of the definition of ``past-due support'' 
suggests the law change applies to cases where the children are minors 
as of October 1, 2007, and the authority for States to intercept 
arrearages for emancipated children only applies to children that reach 
majority after October 1, 2007. If this isn't the case, we suggest: 
``Effective October 1, 2007, past-due support accrued under a valid 
order for a qualified child can be submitted for FITRO [Federal Income 
Tax Refund Offset] until the past-dues support is paid in full.''
    Response: We have not changed the definition as suggested by the 
commenter. As drafted, the only limitation was with respect to past-due 
support submitted for offset until September 30, 2007. Subsequent to 
that date the definition of past-due support is no longer limited to 
support owed to a ``qualified child'' in a non-assistance case. A 
``qualified child'' was, through September 30, 2007, a child who is a 
minor or who, while a minor, was determined to be disabled under title 
II or XVI of the Act, and for whom a support order is in effect.
    3. Comment: One commenter asked that OCSE confirm that there is no 
requirement to distinguish between cases referred for tax refund offset 
under rules effective until September 30, 2007, and those referred for 
offset after October 1, 2007, because of the change to the definition 
of ``past-due support.'' Two commenters questioned whether the 
definition could be interpreted to mean that persons owed child support 
for non-minor children may apply for IV-D services to gain access to 
the Federal tax refund offset program without having received IV-D 
services when the child was a qualified child.
    Response: There is no requirement to distinguish between cases 
referred for tax refund offset under rules effective until September 
30, 2007, and those referred for offset after October 1, 2007, because 
of the change to the definition of ``past-due support.''
    As of October 1, 2007, States may submit past-due support for any 
case that meets submittal requirements regardless of whether the past-
due support is owed on behalf of a minor. The statute defines ``past-
due support'' as the amount of a delinquency, determined under a court 
order, or an order of administrative process established under State 
law, for support and maintenance of a child (whether or not a minor), 
or of a child (whether or not a minor) and the parent with whom the 
child is living. The statute does not limit referral for Federal tax 
refund offset to past-due support owed in pre-existing IV-D cases or to 
cases in which IV-D services were provided while the obligee was a 
minor. Past-due support in a IV-D case may be submitted for Federal tax 
refund offset if it otherwise meets existing criteria in Sec.  
303.72(a).
    4. Comment: One commenter asked if allocation, distribution, and 
disbursement could be defined in Sec.  301.1, rather than in the 
preamble to Sec.  302.32.
    Response: We have not adopted the commenter's suggestion. We do not 
believe it is appropriate to add definitions of these terms in this 
final rule without allowing the public an opportunity to first comment 
on proposed definitions. However, as discussed in the preamble to the 
NPRM, the term ``distribution'' refers to how a support collection is 
allocated between families and the State and Federal government in 
accordance with Federal requirements. The term ``disbursement'' refers 
to the act of paying, by check or electronic transfer, support 
collections to families. The term ``allocation'' was never defined in 
the preamble to the NPRM, but was used in describing distribution. In 
that context, ``allocated'' refers to the apportionment of collections 
between or among different IV-D cases, or among various obligations 
within a support order (for example, withheld income between two income 
withholding orders for the same employee, or within the same case, 
child support and medical support, or child support and spousal 
support.)
    5. Comment: One commenter stated that depending on how the Internal 
Revenue Service (IRS) will amend its rule of the definition of 
qualified child at 31 CFR 285.3, OCSE should delete the qualified child 
definition and restructure the past-due support definition to read: 
Past-due support means the amount of the support 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, that has not been paid. For 
purposes of cases referred prior to October 1, 2007, for Federal income 
tax refund offset of support due an individual who is receiving 
services under Sec.  302.33 of this chapter, past-due support means 
support owed to or on behalf of a child who is a minor or who, while a 
minor was determined to be disabled under title II or XVI of the Act, 
and for whom a support order is in effect.
    Response: We believe it is appropriate to include the definition of 
qualified child in IV-D program rules because States and families are 
familiar with that term.
    The Department of Treasury's Financial Management Service amended 
rules at 31 CFR 285.3 in accordance with section 7301(f) of the DRA by 
removing the definition of ``qualified child''. The rules were 
published in the Federal Register on October 22, 2007 (72 FR 59480), 
http://a257.g.akamaitech.net/7/257/2422/01jan20071800/edocket.access.gpo.gov/2007/pdf/07-5175.pdf.
    6. Comment: One commenter supported the definition to allow use of 
the Federal tax refund offset program to collect past-due child support 
on behalf of children who are not minors. The commenter estimates that 
in his State an additional 3,631 cases will be eligible for offset and 
projects that this will generate over $2 million in collections in the 
caseload with emancipated children. Other commenters supported the 
changes that allow a State to continue to intercept Federal tax refunds 
in cases where children are no longer minors and where there are still 
arrearages owed to the custodial parent and/or the child.
    Response: We agree that this change will garner much needed support 
for families not able to use this enforcement technique in the past and 
appreciate the support of the commenter. States have certified over 
900,000 additional cases for Federal Tax Refund Offset, providing a 
tremendous boost to support collections for families for years to come. 
We expect to receive an additional $200 million in collections during 
processing year 2008.

[[Page 74902]]

PART 302--STATE PLAN APPROVAL REQUIREMENTS

Section 302.32--Collection and Disbursement of Support Payments by the 
IV-D Agency

    1. Comment: Do States under proposed Sec.  303.72 have the option 
to continue to keep the exception that allows Federal tax refund 
offsets to be applied first to satisfy any past-due support which has 
been assigned to the State or to choose to distribute the money in 
accordance with the rules under section 457 of the Act as amended by 
the DRA, which would allow the offset to be paid to the family first?
    Response: Yes. Under current section 457(a)(2)(B)(iv) of the Act 
governing distribution of offsets in former-assistance cases, Federal 
tax refund offset collections must be distributed to arrearages only, 
and must be applied first to any arrearages assigned to the State to 
reimburse public assistance paid to the family. If a States chooses the 
new distribution sequence for former-assistance cases under revised 
section 457 of the Act, the State must distribute Federal tax refund 
offset collections to satisfy any unpaid current support and arrearages 
owed to families first before retaining offset amounts to satisfy 
arrearages assigned to the State.
    States will be required to update State Plan Pre-Print page 2.4, 
Collection and Distribution of Support Payments, to indicate which 
option for distribution in former-assistance cases the State has 
adopted. The statute provides authority to States to make choices among 
a number of options which impact the amount of collections families 
receive. State choices may well vary.

Section 302.33--Services to Individuals Not Receiving Title IV-A 
Assistance General

    1. Comment: One commenter encouraged OCSE to ensure that the final 
rule and the preamble to the final rule implementing the fee be as 
simple and flexible as possible. The commenter is concerned that if the 
rules for imposing and collecting the fee become too detailed or 
complex, it will become more difficult for State governments to collect 
the fees. OCSE should provide general guidance and leave States the 
flexibility to determine how the rule applies in specific case 
scenarios.
    Response: OCSE has a longstanding partnership with States and the 
approach to developing rules and working with the States supports 
flexibility for State choices. We have responded to questions 
concerning some specific case scenarios in this section of the 
preamble.
    2. Comment: One commenter is concerned with the fact that States 
must implement the $25 annual fee prior to issuance of the final rules. 
The cost could be significantly increased depending on the content of 
the final rules and could result in additional systems programming 
changes.
    Response: As stated in DCL-06-16, section 7310 of the DRA amends 
section 454(6) of the Act to provide that a State child support plan 
must provide for the imposition of an annual fee of $25 in each case in 
which an individual has never received assistance under a State program 
funded under title IV-A of the Act and for whom the State has collected 
at least $500 of support, effective October 1, 2006.
    In order to certify compliance with this new requirement, States 
are required to submit a State plan amendment certifying to the 
Secretary that the State has implemented the $25 annual fee requirement 
by the effective date in the particular State. States will not be 
penalized for fee procedures they implement to meet the statutory 
effective date that are reasonable and consistent with the statutory 
fee language. Additional changes for compliance with the final rule may 
be necessary and States must make any necessary changes required under 
the final rules. The effective date of the rule is 60 days from the 
date of publication.

Annual $25 Fee--Section 302.33(e)(1)

    1. Comment: Four commenters asked for the definition of ``never-
assistance'' for purposes of assessing the fee. Another commenter said 
that proposed Sec.  302.33(e)(1) states that receipt of any type of 
TANF assistance exempts an individual from the $25 mandatory fee. The 
commenter goes on to say that OCSE-AT-99-10 includes types of IV-A 
benefits not included in the explanation of never-assistance in the 
proposed rule, and therefore not exempt from the fee. If a case 
receives assistance as defined in AT-99-10, but is not referred to the 
IV-D agency, the IV-D agency may not know whether the fee is required. 
One commenter opposed allowing an exemption from the fee for those 
cases which do not meet the definition of ``assistance'' at 45 CFR 
260.31.
    Response: We have determined that a definition of the term ``never-
assistance'' is not appropriate because that term has different 
connotations within the IV-D program depending on the context in which 
it is used. OCSE-AT-99-10 transmitted the definition of ``assistance'' 
found in the TANF program rules. The term ``assistance'' is 
appropriately defined in the rules governing the TANF program and 
specifies what services are included in the definition of 
``assistance'' as well as what benefits are not considered TANF 
assistance. Assistance is defined in the TANF rules at 45 CFR 260.31 
as:
    ``(a)(1) The term ``assistance'' includes cash, payments, vouchers, 
and other forms of benefits designed to meet a family's ongoing basic 
needs (i.e., for food, clothing, shelter, utilities, household goods, 
personal care items, and general incidental expenses).
    (2) It includes such benefits even when they are:
    (i) Provided in the form of payments by a TANF agency, or other 
agency on its behalf, to individual recipients; and
    (ii) Conditioned on participation in work experience or community 
service (or any other work activity under Sec. 261.30 of this chapter).
    (3) Except where excluded under paragraph (b) of this section, it 
also includes supportive services such as transportation and child care 
provided to families who are not employed.
    (b) It excludes:
    (1) Nonrecurrent, short-term benefits that:
    (i) Are designed to deal with a specific crisis situation or 
episode of need;
    (ii) Are not intended to meet recurrent or ongoing needs; and
    (iii) Will not extend beyond four months.
    (2) Work subsidies (i.e., payments to employers or third parties to 
help cover the costs of employee wages, benefits, supervision, and 
training);
    (3) Supportive services such as child care and transportation 
provided to families who are employed;
    (4) Refundable earned income tax credits;
    (5) Contributions to, and distributions from, Individual 
Development Accounts;
    (6) Services such as counseling, case management, peer support, 
child care information and referral, transitional services, job 
retention, job advancement, and other employment-related services that 
do not provide basic income support; and
    (7) Transportation benefits provided under a Job Access or Reverse 
Commute project, pursuant to section 404(k) of the Act, to an 
individual who is not otherwise receiving assistance.
    (c) The definition of the term assistance specified in paragraphs 
(a) and (b) of this section:
    (1) Does not apply to the use of the term assistance at part 263, 
subpart A, or at part 264, subpart B, of this chapter; and

[[Page 74903]]

    (2) Does not preclude a State from providing other types of 
benefits and services in support of the TANF goal at Sec. 260.20(a).''
    In response to comments, the proposed rules at Sec.  302.33(e)(1) 
have been amended to add reference to the receipt of assistance under 
the former AFDC programs as well as to include a cross-reference to the 
TANF rules definitions of assistance at 45 CFR 260.31. For consistency 
with the inclusion of the cross-reference to the definition of TANF 
assistance, we also included a cross-reference to the definition of 
Tribal TANF assistance 45 CFR 286.10.
    2. Comment: One commenter asked if the Federal rules could be 
interpreted to indicate that the fee is not assessed any time there is 
an assignment of support rights to the State as a condition of 
receiving assistance under Title IV-A of the Act. The commenter also 
asked if the final rules will allow individual States to determine the 
definition of ``never IV-A assistance cases.''
    Response: The answer to both questions is no. The Federal statute 
at section 454(6) of the Act does not limit those who are exempt from 
the fee to those who have assigned their support rights to the State 
under a State TANF program. We believe that a cross-reference to a 
definition of assistance in these rules is critical to ensure 
consistency across State IV-D programs. Any individual who is required 
to cooperate with the IV-D program as a condition of Food Stamp 
eligibility as defined at 7 CFR 273.11(o) and (p) will not be charged 
the fee (although, if all other conditions are met--an individual in 
the case receiving IV-D services has never received State AFDC, State 
or Tribal TANF assistance, and the State has collected and disbursed at 
least $500 of support to the family-- the other parent or the State may 
ultimately be responsible for paying the fee). This is discussed in 
more detail later in the preamble. In addition, the TANF rules exclude 
from the definition of ``assistance'' under the TANF program, anything 
in 45 CFR 260.31(b)(1)-(7). If the only TANF benefits received by an 
individual fall into the categories listed in 45 CFR 260.31(b)(1)-(7), 
those individuals would not be considered to be receiving or to have 
received assistance under title IV-A of the Act unless they received 
assistance under the former AFDC program. Therefore, those individuals 
are subject to the fee if all other conditions for collecting the fee 
are met.
    3. Comment: One commenter appreciated that OCSE has proposed a 
broad definition of IV-A assistance in order to allow States to exempt 
as many families as possible from the fee. However, this definition is 
broader than the definition of ``IV-A assistance paid to the family'' 
set forth in OCSE AT 99-10. Some States will only be able to identify 
families receiving assistance under this narrower definition, which 
essentially covers those who have been paid cash assistance and had 
their cases referred to the IV-D agency. We recommend that OCSE permit 
State flexibility in this area, so that States must exempt from the fee 
those cases in which IV-A assistance has been paid to the family, but 
may exempt cases receiving the broader type of IV-A benefits, as 
defined at 45 CFR 260.31(b), when a State can easily identify these 
cases.
    Response: As discussed earlier, the definition of assistance under 
the State and Tribal TANF program rules is appropriate and a cross-
reference has been added to ensure consistency among State definitions 
and similar treatment of families regardless of the State in which they 
live. Individuals in TANF cases that only receive benefits excluded 
from the TANF definition of assistance in 45 CFR 260.31 do not assign 
rights to support and should not be referred to the IV-D agency. An 
application for IV-D services would be required in such cases to be 
considered a IV-D case. See PIQ-05-06, dated December 22, 2005 [http://www.acf.hhs.gov/programs/cse/pol/PIQ/2005/piq-05-06.htm], for treatment 
of inappropriately referred cases.
    4. Comment: One commenter wanted to know whether to assess the fee 
on a case that had received IV-A assistance, as defined by AT 99-10, 
but was not referred by the IV-A agency to the IV-D agency.
    Response: Referral by the IV-A agency is irrelevant to the 
imposition of the $25 fee. If there is a IV-D case that otherwise meets 
the conditions for the imposition of the fee, the case is subject to 
the fee.
    5. Comment: Two commenters stated that tracking whether someone 
(for example, in an interstate case) is receiving Tribal IV-A 
assistance will be problematic since many State IV-D agencies do not 
electronically communicate with Tribes. The commenter asked for 
suggestions for overcoming this barrier. One commenter proposed that 
OCSE require States to establish procedures so all former or current 
Tribal TANF clients can inform the State of their TANF status, so a 
State does not inadvertently impose the fee.
    Response: Although States may not electronically communicate with 
Tribes operating Tribal TANF programs, ascertaining whether an 
individual has received Tribal IV-A assistance is not an insurmountable 
barrier. As the IV-D caseworker is soliciting information from the 
custodial parent in an application case, questions specific to receipt 
of IV-A assistance should be asked. States may want to develop specific 
questions related to IV-A assistance and benefits to determine what 
type of IV-A assistance, if any, a custodial parent or a child in the 
family receives/received. IV-D agencies will have necessary case 
records to identify current TANF cases referred to the IV-D agency and 
former TANF cases that continue to receive IV-D services. If a 
custodial parent tells the IV-D office that he or she or the child 
received Tribal IV-A assistance, the State would need to contact the 
Tribal IV-A office to confirm receipt of Tribal TANF. By the close of 
FY 2006, 52 Tribal TANF plans were approved to operate on behalf of 236 
Tribal and Alaskan Native Villages. If a State finds it necessary to 
confirm receipt of Tribal TANF, the Tribal TANF contact list may be 
accessed on the ACF Internet via: http://www.acf.dhhs.gov/programs/dts/ttanfcont_1002.htm and, as appropriate, the exemption from the fee 
noted in the IV-D case record.
    This situation may not occur in many cases. The State would only be 
required to verify whether an individual received this assistance in 
instances in which an individual had asserted that he or she had 
received or is receiving Tribal TANF. States should document in the 
case record whether an exemption is appropriate.
    6. Comment: Three commenters asked for clarification on how to 
ascertain if an applicant for IV-D services formerly received or 
currently receives TANF. Another commenter said that the NPRM does not 
clarify the level of documentation a State IV-D program needs to exempt 
a case from a fee if a custodial parent says he or she received AFDC or 
TANF in another State or Tribal program. Such verification could 
include documentation from another State agency or language in a court 
order. The commenter suggested that if the IV-D agency receives a sworn 
statement from the custodial parent stating the parent received IV-A 
assistance in another State, that would be sufficient documentation for 
the family and for the State and Federal government. This would be 
comparable to requirements for signatures for the Federally approved 
interstate form ``Affidavit in Support of Establishing Paternity'' and 
a signature of a parent on a paternity acknowledgement under 42 U.S.C. 
652(a)(7).

[[Page 74904]]

    Response: In order for a State to determine that an individual 
never received assistance under a State or Tribal IV-A plan, the State 
should ask the individual applying for services. Current State TANF 
recipients do not apply for IV-D services. The State may also confirm 
with the State or Tribal IV-A program to ensure that assistance has not 
been provided. However, States are not required to have a confirmation 
from every State that the client has never received assistance; 
contacting the State or Tribal program named by the applicant would be 
sufficient.
    Some States may determine it is in the best interest of the 
individual and for documentation purposes to develop a procedure for 
instances in which an individual claims receipt of TANF in another 
State. A State may consider a sworn statement from the custodial parent 
stating the parent received qualifying assistance under a former State 
AFDC program or the current TANF program (with the exception of 
emergency assistance as defined in 45 CFR 260.31(b)(1)-(7)) in another 
State to be adequate documentation for exemption from the fee.
    7. Comment: One commenter recommended providing instructions to 
address situations such as when the individual custodial parent who has 
never received assistance as defined under Sec.  302.33(e)(1) has a IV-
D case and moves from one State where the fee is paid by the State, and 
applies for services in another State that collects the fee from the 
noncustodial parent or retains the fee from the collection made for the 
custodial parent, during the same fiscal year. The commenter asked for 
clarification as to whether both States will be required to impose the 
fee during the same fiscal year, regardless of which collection method 
or methods are used.
    Response: In such a situation, the second State may document in the 
case record that the previous State collected the fee. The $25 annual 
fee may be imposed and paid or collected only once per year in a case 
in which the fee is assessed, regardless of where the individual lives. 
A sworn statement from a custodial parent would not be adequate in this 
instance because the State may have absorbed the fee or the 
noncustodial parent may have paid the fee without the custodial 
parent's knowledge. A IV-D agency should ask each applicant for 
services if the fee has already been collected or paid for the year. If 
an individual moves to a different State, the second State should 
confirm with the first State that the fee was collected or paid by the 
State and document that the fee was accounted for or paid to another 
State.
    8. Comment: One commenter believes that the Food Stamp Act 
prohibits the collection of the annual $25 fee on Food Stamp-only cases 
when the State has elected to require IV-D services for families who 
receive food-stamps.
    Response: The Food Stamp rule at 7 CFR 273.11(o)(1), Option to 
disqualify custodial parent for failure to cooperate provides the State 
Food Stamp agency the option to disqualify, or make ineligible for the 
Food stamp program an individual who refuses to cooperate with a State 
IV-D agency. This section further clarifies that if the State Food 
Stamp agency chooses to implement the provision to disqualify an 
individual for non-cooperation with the State child support agency, it 
must refer all appropriate individuals to the IV-D agency to establish 
paternity of the child and establish, modify, or enforce a support 
order with respect to the child and the individual in accordance with 
the cooperation provision in section 454(29) of the Act. If the 
individual is receiving TANF or Medicaid, or assistance from the State 
IV-D agency, and has already been determined to be cooperating, or has 
been determined to have good cause for not cooperating, then the State 
agency shall consider the individual to be cooperating for Food stamp 
purposes. Section 273.11(o)(4) of Title 7 says that a State agency 
electing to implement the provision to disqualify a custodial parent 
for failure to cooperate shall not require the payment of a fee or 
other costs for services provided under Part D of title IV-D of the 
Social Security Act. The Food Stamp agency issued guidance on August 
22, 2007, to States to explain the impact of the fee provision in the 
DRA on the Food Stamp program. OCSE transmitted this through IM-07-09, 
dated September 24, 2007. This may be viewed at http://www.acf.dhhs.gov/programs/cse/pol/2007-im.html.
    We are aware of five States that have opted to require cooperation 
by the custodial parent with the IV-D program in order to be eligible 
to receive Food Stamp services. Those States are Idaho, Wisconsin, 
Michigan, Mississippi, and Florida. Of those five States, Mississippi 
and Wisconsin also require cooperation by the noncustodial parent with 
the IV-D program in order to receive Food Stamp services.
    The commenter asks whether it is a correct interpretation of the 
Food Stamp Act that in a ``Food Stamp-only'' case the IV-D agency will 
not require the payment of a fee or other costs for services provided 
under title IV-D of the Act. In a IV-D case in which the custodial 
parent is required to cooperate with the IV-D agency in order to be 
eligible for Food Stamps, even when the IV-D case otherwise meets the 
criteria for the imposition of the fee, the fee may not be assessed 
against the custodial parent. However, the statute provides four 
options for payment of the fee. In this instance, the fee would be 
required to be paid either by the State, by the noncustodial parent or 
charged to the noncustodial parent and deducted from a collection after 
current support and any payment on arrearages for the month under a 
court or administrative order have been disbursed to the family.
    In instances in which the noncustodial parent in a IV-D case is 
receiving Food Stamps and is required to cooperate with the IV-D 
agency, if the custodial parent in the same case is not receiving Food 
Stamps, and the case otherwise meets the criteria for the fee 
assessment (i.e., an individual in the case receiving IV-D services has 
never received State AFDC, State or Tribal TANF assistance, and the 
State has collected and disbursed at least $500 of support to the 
family), the fee could be taken from the collection, charged to the 
custodial parent or paid by the State.
    In a IV-D case in a State in which the Food Stamp agency requires 
cooperation with the IV-D agency and both the custodial and 
noncustodial parent are recipients of Food Stamps, and the case in 
which the noncustodial parent is involved otherwise meets the 
conditions for the imposition of the fee (i.e., the individual in the 
case has never received State AFDC, State or Tribal TANF assistance, 
and the State has collected and disbursed at least $500 of support to 
the family), the State would be required to pay the fee.
    9. Comment: Seven commenters stated that the proposed rules are 
unclear on whether current or former IV-E assistance cases are exempt 
from the annual $25 fee assessment. These commenters believe that in 
some places, the proposed rules for the annual $25 fee appear not to 
exclude from the fee individuals who have received assistance under 
title IV-E while elsewhere in the rules reference to IV-E cases appears 
to exclude those cases from the fee. The commenters are seeking 
clarification on whether or not the proposed rules require the State to 
assess the annual fee in IV-E cases.
    Response: In any current or former IV-E assistance case in which 
the criteria for imposition of the fee are met, a fee is required. As 
stated earlier, a fee is assessed for any case in which the individual 
has never received assistance under a former State AFDC program, or 
State or Tribal TANF and the State has

[[Page 74905]]

collected and disbursed at least $500 of support to the family. The 
impact of the use of the ``disbursed to the family'' regulatory 
language is that current IV-E cases will rarely, if ever, be subject to 
the fee because the family may never receive $500 in support 
collections in a Federal fiscal year. However, in instances in which an 
individual formerly received title IV-E assistance, and all conditions 
for imposition of the fee are met, including disbursement of $500 to 
the former IV-E family, then an annual fee is required.
    10. Comment: One commenter stated that the proposed rule at Sec.  
302.33(e)(1) defines the cases charged the fee as those in which an 
individual has never received assistance under a State or Tribal title 
IV-A program, and for whom the State has disbursed to the family at 
least $500 of support in the fiscal year. Since one requirement for 
imposing the fee is that the payment is disbursed to the family and 
foster care payments are disbursed to a State agency, are IV-E foster 
care cases exempt from the fee?
    Response: See preceding response. As explained in the preamble to 
the NPRM, the $500 in support collection must have been disbursed to 
the family in a title IV-D case before imposing the $25 fee because to 
allow otherwise would result in imposition of a fee in cases in which 
support is collected but not disbursed to the family. To allow the fee 
to be collected prior to the collection being disbursed to the family 
would be inconsistent with the statute's concept that a case subject to 
the $25 fee would have benefited from receipt of the $500 in support 
during the year before an annual $25 fee is imposed.
    The impact of the use of the ``disbursed to the family'' regulatory 
language is that current IV-E cases and possibly other categories of 
cases, for example some former IV-E cases, will not be subject to the 
fee if $500 has not been disbursed to the family. We believe that this 
is reasonable since the family will not have received $500 in support 
if the support is assigned to the State and retained in whole or in 
part to reimburse the State and Federal government for the costs for 
assistance programs under the title IV-E.
    11. Comment: One commenter asked for clarification as to whether or 
not cases in which an individual never received assistance under title 
IV-A of the Act but has received services from other means-tested 
programs like Food Stamps, IV-E foster care, and Medicaid are exempt 
from the fee. The commenter also requested confirmation that 
collections that are assigned and not disbursed to the family do not 
count towards the $500 of support in a year.
    Response: As mentioned earlier in the preamble, an individual who 
has received assistance under a State AFDC program, assistance as 
defined in Sec.  260.31 under a State TANF program, or assistance as 
defined in Sec.  286.10 under a Tribal TANF program, is exempt from the 
$25 annual fee. As discussed above, in situations in which an 
individual in a IV-D case formerly received IV-E foster care services 
and $500 of support has been disbursed to the family that case would be 
subject to a fee. Similarly, Medicaid-only cases, in which child 
support collected is paid to the family and assigned cash medical 
support may be retained by the State may be subject to the fee if other 
conditions are met; i.e., the individual in the case has never received 
AFDC, State, or Tribal title IV-A assistance, is not required to 
cooperate with the IV-D agency in Food Stamp cases, and the State has 
collected and disbursed at least $500 of support to the family within 
the Federal fiscal year.
    While the statute at section 454(6) of the Act does not 
specifically mention recipients of Food Stamps, individuals who are 
cooperating with and receiving services from the IV-D program as a 
condition of Food Stamp eligibility under 7 CFR 273.11(o) and (p) may 
not be charged the $25 annual fee. As discussed earlier, in such cases 
the collection of the $25 annual fee from the individual required to 
cooperate is prohibited. However, the fee must be assessed and 
accounted for if all conditions for assessing the fee are met. These 
final rules reflect this change to the proposed rule at Sec.  
302.33(e)(3)(i)(B), (ii) and (iii) to prohibit collecting the fee from 
individuals required to cooperate with the IV-D program as a condition 
of eligibility for Food Stamps.
    12. Comment: One commenter stated that in the preamble, the terms 
``family'' and ``caretaker relative'' are used rather than the term 
``individual'' as stated in the proposed rule. The commenter asked if 
the determination of ``never received assistance'' is applied to any 
individual in the case.
    Response: Yes, the determination that an individual never received 
assistance is applied to any individual in the case. If any individual 
in a IV-D case received assistance as defined in Sec.  302.33(e), that 
case is exempt from the $25 annual fee.
    13. Comment: One commenter is seeking clarification of the fee 
provision for title XIX Medicaid-only cases which are only receiving 
medical services under 45 CFR 302.33(a)(5). The proposed medical 
support rules will result in more orders for cash medical support in 
IV-D cases. Some of those IV-D cases will be Medicaid-only cases 
receiving IV-D services under Sec.  302.33(a)(1)(ii). Some will already 
have support orders which will include a requirement for the 
noncustodial parent to pay both child support and cash medical support. 
Many will be cases in which the custodial parent has never received IV-
A assistance. In some of the Medicaid-only cases, the custodial parents 
will inform the IV-D agency they only want medical support services, 
and not child support services. Because these are IV-D cases, though, 
all support payments under the support orders may be made through the 
State Disbursement Unit (SDU). However, the IV-D agency is not 
providing child support enforcement services, but merely receiving and 
disbursing child support payments through the SDU, so the custodial 
parent is not an individual ``for whom the State has collected at least 
$500 of support.''
    Response: Because in these Medicaid-only cases IV-D child support 
services have been refused, the IV-D agency is not providing child 
support enforcement services to the family, but merely receiving and 
disbursing the child support payments through the SDU. In these cases, 
even when the custodial parent receives $500 of child support in the 
Federal fiscal year, that support is not considered to have been 
collected and disbursed to the family through IV-D program services and 
thus no fee is charged.
    14. Comment: One commenter asked whether to assess the fee for a 
custodial parent who was on Medicaid one year, and the next year 
Medicaid ended, and the custodial parent (who declined child support 
enforcement services while receiving Medicaid) requests, in response to 
the notice, all IV-D services be provided including child support and 
medical support services. When the IV-D agency disburses at least $500 
in the new year to the custodial parent, is a $25 annual fee due for 
that case that year?
    Response: In accordance with 45 CFR 302.33(a)(4), whenever a family 
is no longer eligible for assistance under the State title IV-A, IV-E 
foster care, and Medicaid programs, the IV-D agency must notify the 
family, within 5 working days of the notification of ineligibility, 
that IV-D services will be continued unless the IV-D agency is notified 
by the family to the contrary. The notice must inform the family of the 
consequences of continuing to receive IV-D services, including the 
available services and the State's fees, cost recovery, and 
distribution policies.
    If the scenario described by the commenter occurs, the fee would be

[[Page 74906]]

imposed in the case if all of the other conditions for imposing the fee 
are met; i.e., the individual in the case has never received AFDC, 
State, or Tribal title IV-A assistance, and the State has collected and 
disbursed at least $500 of support to the family within the Federal 
fiscal year. If the custodial parent or non-custodial parent is 
required to cooperate with the IV-D program as a condition of 
eligibility for Food Stamps, the fee could not be collected from such 
individual but could be collection from the other parent or be paid by 
the State.
    15. Comment: One commenter requested that OCSE redefine public 
assistance in the rules to include recipients of means-tested programs 
outside of TANF such as Medicaid, SCHIP, and Food Stamps as exempt from 
the fee. Another commenter said that the proposed rules do not exempt 
Medicaid-only/former Medicaid-only cases from the fee and believes it 
is contrary to sound public policy because Medicaid-only recipients who 
are referred to IV-D for services do not have a choice whether or not 
to participate. They have limited income; Medicaid-only recipients are 
allowed to opt out of child support services.
    Response: The Federal statute at section 454(6) of the Act does not 
provide for any additional categories of exempt individuals such as 
those who may be receiving, or who may have received in the past, other 
types of Federal, State or Tribal assistance. However, as discussed 
earlier, the impact of the use of the ``disbursed to the family'' 
regulatory language is that current IV-E cases and possibly other 
categories of cases, for example some former IV-E cases, will not be 
subject to the fee if $500 has not been disbursed to the family. We 
believe that this is reasonable since the family will not have received 
$500 in support if the support is assigned to the State and retained in 
whole or in part to reimburse the State and Federal government for the 
costs for assistance programs under the title IV-E. In addition, under 
specific circumstances, the fee would not be collected from individuals 
receiving Food Stamps based on language in the Food Stamp Act. See 
Comment and Response 8 in this section of the preamble.
    16. Comment: One commenter supports the exemption of individuals 
who have received Tribal IV-A assistance from the fee, but expressed 
concern that referring to Tribal IV-A programs in the State rules could 
lead to changes in the Tribal IV-D program. The commenter supports the 
protection of all Tribal individuals and programs from the demands the 
new rules would imply.
    Response: The statute at section 454(6) of the Act and these rules 
do not apply to the Tribal IV-D program cases.
    17. Comment: One commenter agrees with OCSE's decision to exempt 
current and former Tribal title IV-A assistance cases along with 
current and former State title IV-A cases from the fee.
    Response: We appreciate the support of the commenter. As stated in 
the preamble to the NPRM, we believe that it is authorized and 
consistent with the purpose and the scope of the statutory exemption to 
exempt individuals who are receiving or have received Tribal title IV-A 
assistance as a subset of the category of those who are exempt from the 
fee.
    18. Comment: One commenter asked if a case in which the only 
collection made is a Federal tax refund offset that is applied to 
satisfy an assigned arrearage, or a non-Federal tax refund offset that 
is applied to a case in which the only dollar amount owed is assigned 
to the Medicaid agency, is exempt from the $25 collection fee since a 
disbursement was not sent to the family.
    Response: Yes, in the instance described, no annual fee would be 
due because the State had not disbursed at least $500 of support 
collected to the family.
    19. Comment: One commenter asked for clarification of whether a 
case is eligible for the $25 annual fee if an individual in a current 
IV-D case had received IV-A assistance in a prior IV-D case. For 
example, if the noncustodial parent is currently in a case that does 
not qualify for the fee but formerly received AFDC as part of an 
entirely different family, is the current case eligible for the new $25 
fee?
    Response: If a noncustodial parent in a case who does not currently 
receive IV-A assistance formerly received assistance as part of an 
entirely different family, the current case is subject to the $25 
annual fee if all conditions are met. The rules at Sec.  302.33(e)(1) 
mandates the fee ``if there is an individual in the case to whom IV-D 
services are provided and for whom the State has collected and 
disbursed at least $500 of support in that year; who has never received 
assistance under a former State AFDC program, assistance as defined in 
Sec.  260.31 under a State TANF program, or assistance as defined in 
Sec.  286.10 under a Tribal TANF program * * *'' The collections must 
be disbursed to the individual receiving IV-D services. In the case of 
a noncustodial parent, the collections are not being disbursed to the 
noncustodial parent; a fee must be imposed if all of the other 
conditions are met (i.e., the individual in the case has never received 
AFDC, State or Tribal TANF assistance, or in certain Food Stamp cases, 
and the State has collected and disbursed at least $500 of support to 
the family within the Federal fiscal year).
    20. Comment: One commenter asked whether the fee should be imposed 
in a IV-D case in the following situations:
     The child is the only individual in the household that has 
received or currently receives IV-A assistance. The custodial parent 
has never received assistance.
     The custodial parent received IV-A assistance as a child.
     The noncustodial parent received IV-A assistance as a 
custodial parent or as a child.
     The IV-A agency provides assistance or benefits to a 
custodial parent but there is no assignment of support rights or 
referral to IV-D agency.
    Response: The fee requirements for the above scenarios, in the 
order listed are as follows:
     If the child is the only individual in the household that 
has received or currently receives IV-A assistance, the fee may not be 
imposed.
     If the custodial parent received public assistance as a 
child but has never received State or Tribal title IV-A assistance as 
an adult, the case is subject to the fee if all other conditions for 
imposing the fee are met (i.e., the State has collected and disbursed 
at least $500 of support to the family in the Federal fiscal year).
     The noncustodial parent is not an individual for whom $500 
of support has been collected in the year in question. Therefore, 
neither the case nor the noncustodial parent is exempt from the fee 
even if he or she previously received IV-A assistance as a custodial 
parent or as a child, and the fee must be imposed if all other 
conditions are met.
     If the IV-A agency provides assistance to a custodial 
parent, a fee would not be required. If the custodial parent applies 
for IV-D services, qualifies for the fee and the IV-D agency collects 
and disburses $500 to the family in the Federal fiscal year, a fee 
would be imposed in this case, as the custodial parent is receiving 
title IV-A benefits excluded from the definition of TANF assistance at 
45 CFR 260.31(b).
    21. Comment: Four commenters supported the use of the calendar year 
for imposing and collecting the annual fee. These commenters indicated 
that charging a fee according to a calendar year is easier for the 
general public to understand. One commenter said that if

[[Page 74907]]

the fee was charged in accordance with the Federal fiscal year, the 
average child support order in a State is $250 per month, and the fee 
is collected from the noncustodial parent, then a noncustodial parent 
who pays current support in the first two months of the fiscal year 
would be assessed the fee in early December. This could impact holiday 
celebrations and take money from families just before Christmas. By 
shifting the year to calendar year, it is less likely to impact 
families at the December holidays. Six commenters supported the use of 
the Federal fiscal year and one commenter said that using a Federal 
fiscal year will assist States in computer re-programming because it 
will be consistent with current reporting of collections, 
disbursements, and undistributed collections on the Form OCSE-34A, 
Quarterly Report of Collections; with program income and expenditures 
reporting on the Form OCSE-396A, Child Support Enforcement Program 
Financial Report; and with reporting caseload size, court order 
percentage, and other performance measures data on the Form OCSE-157, 
Child Support Enforcement Annual Data Report. One commenter indicated 
that the definition of ``annual'' should be universal and not vary from 
State to State. One commenter indicated that the Federal fiscal year 
will best serve the State in the future, however, for the initial year 
the State will incur extraordinary expenses because of advance payment 
of the fee and the cost of technological improvement.
    Response: The NPRM proposed that the annual fee be imposed and 
reported for the Federal fiscal year. OCSE specifically solicited 
comments on and a rationale for, an alternative 12-month period in 
order to provide more State flexibility.
    While we support State flexibility, we agree that the Federal 
fiscal year will be more consistent with current reporting of 
collections, disbursements, and undistributed collections on the Form 
OCSE-34A, Quarterly Report of Collections; with program income and 
expenditures reporting on the Form OCSE-396A, Child Support Enforcement 
Program Financial Report; and with reporting caseload size, court-order 
percentage, and other performance measures data on the Form OCSE-157, 
Child Support Enforcement Annual Data Report. We agree with the 
commenter that a universal definition of ``annual'' is needed; 
therefore, the final rule retains the Federal fiscal year as the 12-
month period in which the $25 annual fee must be imposed and reported.
    22. Comment: Two commenters asked for States that require 
legislation to implement the fee, if in the first year of 
implementation the fee applies to all cases in which the individuals 
involved in the case never received title IV-A assistance and for which 
$500 has been disbursed to the family or if it only applies to cases in 
which $500 was disbursed to the family after the effective date of the 
State law. The commenters believe that a requirement to look at any 
period prior to the State's implementation date would be unreasonable 
and inconsistent with Congressional recognition that some States need 
time to obtain statutory authority for the new fee. Another commenter 
asked if a State is responsible for fees and program income for the 
entire year if the implementation date is later than the beginning of 
the fiscal year.
    Response: The statutory effective date for the annual fee mandated 
in section 7310 of the DRA is October 1, 2006. If a State requires 
legislation in order to implement this provision, the effective date of 
the mandatory annual fee provision is three months after the first day 
of the first calendar quarter beginning after the close of the first 
regular session of the State legislature that began after February 8, 
2006. In the case of a State that has a two-year legislative session, 
each year of the session shall be considered to be a separate regular 
session of the State legislature. The mandate for the collection of the 
fee does not apply to any period prior to the effective date of the 
State law in each State. For example, if in State A a law is needed and 
the legislative session for State A begins January 1, 2007 (after the 
February 8, 2006 enactment date of the DRA), and the close of the 
regular session is April 30, 2007, the fee provision must be 
implemented by October 1, 2007. If in State B a law is needed and the 
legislative session for State B begins January 1, 2007 (after the 
February 8, 2006 enactment date of the DRA), and the close of the 
regular session is December 30, 2007, the effective date for fee 
provision would be April 1, 2008. The State is not responsible for 
program income for fees for the entire fiscal year if the State's need 
for legislation requires that the implementation month for the $25 fee 
is other than the beginning of the Federal fiscal year.
    23. Comment: One commenter said that its State legislators asked if 
the State could charge the annual fee to a former recipient of TANF 
when it has been a year since the former recipient of TANF received 
assistance. The commenter went on to ask if a State is limited to 
charging the $25 annual fee only for cases in which the individual 
involved never received assistance as defined under Sec.  302.33(e) or 
if the State could choose to expand those cases subject to the fee.
    Response: A State may not charge a former recipient of TANF the 
annual fee after the individual has been off TANF assistance for a 
year. The statute is clear that the fee is assessed in the case of an 
individual who has never received title IV-A assistance. An individual 
who has been off TANF assistance for a year is not an individual who 
has never received assistance under title IV-A of the Act. The State 
may not expand those cases which are subject to the $25 annual fee.
    24. Comment: Seven commenters asked for clarification of whether or 
not to impose the fee in a case in which the individual never received 
State or Tribal title IV-A assistance prior to the disbursement of the 
$500 of support to the family for whom the support is owed, but begins 
to receive State or Tribal title IV-A assistance during the year after 
the disbursement of the $500 to the family for whom the support is 
owed. The commenters went on to ask for clarification in instances in 
which the individual becomes IV-A-eligible during a year after the fee 
has been collected and whether the State would be required to return 
the fee.
    Response: If a fee has already been assessed and collected, there 
is no authority to reimburse the fee, because at the time the fee was 
assessed, the conditions for imposing the fee were met.

When the $500 of Support Threshold Is Reached--Section 302.33(e)(1)(i)

    1. Comment: Several commenters wanted to know how the $500 support 
threshold will be calculated: When the money is collected or when it is 
disbursed to the family. The commenters are in support of calculating 
the threshold when the $500 is disbursed to the family. Allowing 
otherwise may result in imposition of the $25 fee in cases in which 
support is collected but not disbursed to the family, e.g. Federal tax 
intercepts held pending appeal which may overturn their collection. If 
this happens, and the State had already calculated that the $500 
threshold is met from those intercepts, and collected the $25 fee 
amounts over the $500, the reversal of those two processes would be 
administratively challenging at best. In addition, the commenters 
believe this would be inconsistent with the concept that a family has 
benefited from

[[Page 74908]]

receiving $500 in support prior to the State receiving the annual $25 
fee.
    Response: We agree that the family must benefit from the receipt of 
the $500 collection of support made by the State before the fee is 
collected. It is clear in Sec.  302.33(e)(1) that at least $500 of 
support must be collected and disbursed to the family prior to the 
imposition of the fee.
    2. Comment: One commenter noted that the proposed rules say: ``In 
the case of an individual who has never received assistance under a 
State or Tribal title IV-A program, and for whom the State has 
disbursed to the family at least $500 of support * * *'' The statute 
says: ``* * * in the case of an individual who has never received 
assistance under a State program funded under Part A and for whom the 
State has collected at least $500 * * *''
    The commenter said that the proposed rule is more prescriptive than 
Federal law. The final rule should use the word ``collected'' to mirror 
the Federal law or be changed to provide a State option to impose the 
annual fee either at the point of distribution or the point of 
disbursement.
    Response: We disagree that these rules should be changed. We 
believe it is imperative that the family receive the $500 of support 
collected prior to the imposition and collection of the $25 annual fee. 
Collecting the annual fee prior to disbursing the child support 
collection means the family has not yet benefited from the collection.
    3. Comment: Two commenters asked that OCSE define ``disbursed.'' 
The commenters asked if a payment received in one Federal fiscal year 
and held in escrow due to a pending legal matter and disbursed in the 
subsequent Federal fiscal year counts toward the $500 threshold in the 
Federal fiscal year in which the collection was made or the Federal 
fiscal year in which the disbursement was made. If a disbursement is 
held pending location of the custodial parent in one Federal fiscal 
year and the collection is not sent to the family until a subsequent 
Federal fiscal year, once the custodial parent is located, does the 
disbursement count toward the $500 threshold in the Federal fiscal year 
in which the support was collected or in the Federal fiscal year in 
which the custodial parent was located and the collection was 
disbursed? If a disbursement is returned as undeliverable in one 
Federal fiscal year or is lost in the mail, and the payment is received 
by the family due the payment in the subsequent Federal fiscal year, 
can a State deduct the $25 fee paid in the original Federal fiscal year 
from the total fee paid in the subsequent year? The commenter indicated 
that he thinks that the fees taken from the collections should be 
treated like disbursements and count toward the calculation of the $500 
threshold.
    Response: As stated earlier in the preamble, we did not define 
``disbursement'' in Sec.  301.1 of these rules. As noted, disbursement 
refers to the act of paying, by check or electronic transfer, support 
collections to a family. The rule language makes clear that the 
collection of the fee in a case in which the individual has never 
received assistance must occur after the $500 collection is disbursed 
to the family.
    If a payment received in one Federal fiscal year is held in escrow 
due to a pending legal matter and released in a subsequent Federal 
fiscal year so that the disbursement of this payment also happens in 
the subsequent Federal fiscal year, the disbursement counts toward the 
$500 threshold in the Federal fiscal year in which the payment was 
disbursed.
    If more than $500 is collected and disbursed and the $25 fee 
withheld in one Federal fiscal year but the disbursement to the family 
is returned as undeliverable in the Federal fiscal year subsequent to 
the year in which it was disbursed, a State may consider the $25 annual 
fee paid in the original Federal fiscal year as the fee paid in the 
subsequent year because the collection was disbursed to the family in 
the subsequent year and the conditions in which the $25 fee were 
imposed were met during the subsequent year.
    We do not agree that fees taken from the collections should be 
treated as disbursement and count towards the calculation of the $500 
because the $500 has to have been disbursed to the family. Fees taken 
from the $500 in collections reduce the amount disbursed to the family.
    4. Comment: Several commenters requested clarification of the 
following statement: ``If $500 in support is collected in one year but 
not disbursed until the next year, the fee would be imposed in the year 
in which the collection was actually disbursed to the family.'' It is 
clear from this statement that if a single (and the only) $500 
collection is received in one year but not disbursed until the 
following year; the fee would apply in the following year, because $500 
is disbursed in that year. However, the statement could be read to 
require imposition of a fee in the following year when $500 total 
support is collected in one year, but only $450 is disbursed in that 
year, and $50 disbursed in the following year. It is clear to us that a 
fee should not be imposed in these circumstances, but the language of 
the referenced statement could imply to someone that a fee should be 
imposed in such a case.
    Response: We agree that if only $500 is collected in one year, but 
the entire $500 is not disbursed to the family in the same year, there 
will be no fee imposed in that case for the year the $500 was 
collected. As stated earlier, the family must benefit from the entire 
$500 collection prior to the imposition and collection of the fee.
    5. Comment: One commenter stated that the difference in the amount 
of fee collections would be negligible whether assessing the fee at the 
point of distribution or the point of disbursement and that for some 
States, levying the fee at the point of disbursement will be 
considerably more costly than imposing at the point of distribution.
    Response: We believe that it is paramount that families benefit 
from the $500 collection prior to the imposition of the fee. Therefore, 
the fee must not be assessed and collected until after the disbursement 
of the $500 in collections to the family.

Collection of the Annual Fee: State Options To Retain, Charge, Recover 
or Pay the Annual Fee--Section 302.33(e)(3)

    1. Comment: One commenter stated that if a State opts to impose the 
fee on the noncustodial parent, the conforming amendment made by 
section 7310(b) of the DRA to 42 U.S.C. 657(a)(3) allows a State to 
collect that fee by withholding it from collections and subsequently 
collecting an additional $25 in support from the noncustodial parent. 
The commenter stated that OCSE has a long-standing policy since 1989 
precluding such withholding. The commenter believes that it is 
appropriate to withhold the fee from collections based on the following 
rationale: The DRA did amend the Federal statute on how money collected 
as support is distributed. The DRA amendment to section 457(a)(3) of 
the Act (which becomes section 457(a)(4) effective October 1, 2009, or 
up to a year earlier at State option) \1\ allows States to take the fee 
from support collected before paying the rest to the family that never 
received assistance as defined under Sec.  302.33(e). This applies 
regardless of whether the State chooses to have the custodial parent or 
noncustodial parent pay the fee. The 1989 policy is superseded by the 
new language which allows States to deduct the $25 fee

[[Page 74909]]

charged to the noncustodial parent before paying the remaining amount 
collected to the family. Therefore, Congress has specifically provided 
authority for taking the new fee from support collections and Congress 
did not limit that authority to instances in which only the custodial 
parent pays the fee.
---------------------------------------------------------------------------

    \1\ Throughout the preamble, this provision will be referenced 
as 457(a)(4) for ease of understanding.
---------------------------------------------------------------------------

    Response: We believe that section 457(a)(3) of the Act (to become 
paragraph (a)(4) as explained above) can be read to allow the fee to be 
charged to the noncustodial parent and retained from a collection under 
certain circumstances. If a State opts to charge the fee to a 
noncustodial parent, the fee may be taken from a child support 
collection provided that $500 has been disbursed to the family in the 
Federal fiscal year, current support for the month in which the 
collection is received has been satisfied, and any specified arrearage 
payment for that month pursuant to an administrative or court order has 
been satisfied. In this way the family receives its current monthly 
support payment and an obligor who has been ordered to pay an 
additional amount each month to satisfy an outstanding arrearage will 
not fail to meet a court or administratively ordered payment. States 
are reminded that if they elect to collect the fee in this manner, the 
due process rights of the noncustodial parent must be protected.
    Section 302.33(e)(3)(i) has been revised to read: ``Retained by the 
State from support collected in cases subject to the fee in accordance 
with the distribution requirements in Sec.  302.51(a)(5) of this part, 
except that no cost will be assessed for such services against: (A) A 
foreign obligee in an international case receiving IV-D services 
pursuant to section 454(32)(C) of the Act; and (B) an individual who is 
required to cooperate with the IV-D program as a condition of Food 
Stamp eligibility as defined at Sec.  273.11(o) and (p) of title 7.
    Section 302.51(a)(5) has been revised to allow the fee to be 
collected prior to the support collection being distributed to a family 
that has never received assistance as defined under Sec.  302.33(e) and 
now reads: ``(i) Except as provided in paragraph (a)(5)(ii), a State 
must pay to the family that has never received assistance under a 
program funded or approved under title IV-A and to an individual who is 
not required to cooperate with the IV-D program as a condition of Food 
Stamp eligibility as defined at Sec.  273.11(o) and (p) of title 7 the 
portion of the amount collected that remains after withholding any 
annual $25 fee that the State imposes under Sec.  302.33(e) of this 
part. (ii) If a State charges the noncustodial parent the annual $25 
fee under Sec.  302.33(e) of this part, the State may retain the $25 
fee from the support collected after current support and any payment on 
arrearages for the month under a court or administrative order have 
been disbursed to the family provided the non-custodial parent is not 
required to cooperate with the IV-D agency as a condition of 
eligibility for Food Stamps.''
    2. Comment: One commenter noted that the preamble to the NPRM 
states that the fee will reduce IV-D administrative costs. The 
commenter does not agree and says this is only true for the Federal 
government. The requirement that the State must pay the fee to the 
Federal government even if the State has not collected the fee is 
essentially a ``bill for services'' to the States from the Federal 
government.
    Response: The State is not required to absorb the fee by paying it 
out of State funds. The statute provides for four options for 
collecting or accounting for the fee. The fee may be retained by the 
State from support collected on behalf of the custodial parent, paid by 
the custodial parent applying for services, recovered from the 
noncustodial parent or collected by the State out of its own funds. 
Regardless of which method the State chooses, the fee is reported as 
program income and is used to offset both the State and Federal shares 
of the IV-D program expenses.
    3. Comment: One commenter stated that the rules allow four options 
to collect the fee and wants to know why a State must identify the 
exact method of collecting the fee when there are four options. The 
commenter suggests limiting the State plan preprint to indicate the 
State will impose and collect the fee and not identify the method to be 
used.
    Response: State plan preprint pages indicate options chosen when 
States have authority to choose among various options. We often get 
requests for information on State choices with respect to the various 
State plan options including fee and cost recovery policy. Having this 
information available to us will allow us to track the information 
without asking the States directly. A State is free to indicate it will 
use more than one method to account for fees assessed.
    4. Comment: One commenter noted the preamble to the NPRM indicates 
that: ``If a State * * * collects less than $25 in excess of the first 
$500 * * *, the State must collect the fee using one of the other 
methods, and, if all else fails, pay the fee itself * * *'' The 
commenter questions whether a State must make other attempts to collect 
before paying the fee itself. The commenter also asked if a State would 
have to develop and administer a secondary billing system to collect 
small (under $25) unpaid amounts from custodial parents and 
noncustodial parents. The commenter recommended that States have the 
option to use other methods to collect unpaid amounts, or to pay the 
fee itself.
    Response: A State does not have to make other attempts to collect 
the fee before paying the fee itself. The statute allows for four 
options for collecting the fee. Nor is a State required to develop and 
administer a secondary billing system, but should a State determine 
that it is a viable option for collecting and tracking the fee, it may 
do so.
    5. Comment: A number of commenters proposed that the rule eliminate 
the four payment options and require that the fee only be deducted from 
collections and noted that the preamble states that ``* * * retaining 
the annual fee from support collected * * * may be the least 
administratively burdensome method * * *'' Payment of the fee can only 
be guaranteed if it is deducted from collections or if it is paid by 
the State.
    Response: The statute allows four options for collecting the annual 
fee. While retaining the annual fee from the support collected may be 
the least administratively burdensome method for collection of the fee, 
we have no discretion to eliminate any of the options authorized by the 
statute.
    6. Comment: One commenter stated that by allowing four payment 
methods, there will not be uniformity among the States which will 
result in less fees being collected. For example, if one State law 
requires the fee to be collected from the noncustodial parent and it is 
an interstate case, then the fee could not be collected by that State. 
Further, if the noncustodial parent resides in a State that is only 
permitted to deduct the fee from collections, then the noncustodial 
parent is not paying the fee at all.
    Response: The statute allows State discretion and we agree it will 
result in different policies in different States. As discussed later in 
the preamble, in an interstate case, the application fee is charged by 
the State in which the individual applies for services. Only the 
initiating State has all the information necessary to know whether the 
$25 annual fee should be imposed in a particular case. Therefore, it is 
appropriate for the initiating State to impose the annual $25 fee in 
eligible cases after the $500 threshold is met, and to report the 
amount of the fees imposed as required.

[[Page 74910]]

    As discussed earlier in the preamble, if a State opts to charge the 
fee to a noncustodial parent, the fee may be taken from a child support 
collection provided that $500 has been disbursed to the family in the 
Federal fiscal year, current support for the month in which the 
collection is received has been satisfied and any specified arrearage 
payment for the month pursuant to an administrative or court order has 
been satisfied. Allowing collection of the fee in this manner will help 
ensure the appropriate amount of fees are collected and reported.
    7. Comment: One commenter asked that OCSE provide guidance 
concerning potential conflicts of law between the initiating and 
responding State. If the responding State's law requires the custodial 
parent to pay the fee, but the initiating State's laws require the 
noncustodial parent to pay, whose law governs? If the initiating 
State's law governs, the responding State, by its law, cannot collect 
the fee, because the noncustodial parent is not liable in that State.
    Response: As stated in the preamble to the NPRM, we believe it is 
appropriate for the initiating State to impose the annual $25 fee in 
eligible cases after the $500 threshold is met, and to report the 
amount of the fees imposed as required. The initiating State will 
collect and impose the fee; therefore it is the initiating State law 
which governs.
    8. Comment: One commenter said that the preamble to the NPRM states 
that the noncustodial parent must designate a portion of a subsequent 
payment as the $25 annual fee before the State retains a portion of the 
support collection as payment for the fee. The commenter asked for 
clarification of whether a State may retain the fee from the 
noncustodial parent's support payment.
    Response: We believe that section 457(a)(4) of the Act can be read 
to allow the fee to be charged to the noncustodial parent under certain 
circumstances, as discussed earlier in the preamble. Therefore, with 
respect to the $25 annual fee, the noncustodial parent does not have to 
designate a portion of the payment as the $25 annual fee.
    9. Comment: One commenter stated that should a State select one of 
the first three options outlined in the statute, the language in the 
U.S. Code does not appear to authorize the mandatory payment 
interpretation of the State paying the fee in the rules. Several 
commenters stated that section 7310 of the DRA does not require States 
to pay the fee for services. It specifically allows States to collect 
the fee from either the custodial or noncustodial parent. The recovery 
of the fee is never certain and they believe Congress contemplated that 
some fees would not be collected or paid. The preamble and rules make 
States the guarantors for payment of the fee. There is no authority for 
OCSE to use its regulatory powers to contravene the statutory 
provisions. Congress allowed States to pay the fee or collect it from 
the parents. The commenters asked that OCSE reconsider this issue and 
amend the rules accordingly. Many commenters stated that billing the 
custodial parent or the noncustodial parent for the fee will be 
administratively impractical. If they do not pay, the State will have 
to resort to retaining the fee from collected support or paying it from 
its own funds.
    Response: Section 454(6)(B)(ii) of the Act conveys a clear 
expectation that the $25 fee will actually be imposed and retained, 
collected, or paid in all eligible cases in which at least $500 of 
support was collected in a year. Therefore, each State is responsible 
for imposing, retaining, collecting or paying the fee, and reporting 
the total amount of annual $25 fees imposed in all cases in which the 
fee is required to be imposed during the Federal fiscal year.
    10. Comment: Several commenters requested clarification if a IV-D 
agency chooses to collect the annual fee from a custodial parent. If 
the IV-D agency does not collect enough (only collects $510 in a fiscal 
year) to cover the fee, the rules require the State to make up the 
difference. In such cases, can the State seek to recoup that fee? May 
the fee be deducted from subsequent payments that occur in the next 
year, without specific authorization from the custodial parent? Another 
commenter asked, if the custodial parent is assessed the fee and the 
collections made on the case amounts to only $510 in the year the fee 
is assessed, does the State have to wait until it collects in excess of 
$525 in the next year before collecting the remaining $15 of the fee? 
The commenters are seeking clarity on the status of the debt to the 
State.
    Response: If the State pays the fee for a qualifying case in the 
preceding year, it may recoup the fee from the custodial parent 
responsible for the fee under State procedures in the subsequent year 
without the custodial parent's specific authorization. However, in 
accordance with Sec.  303.2(a)(2), the State IV-D agency must notify 
the applicant that the cost recovery will be made. The State does not 
have to wait until it collects in excess of $525 in the next year to 
recoup the $15 fee it paid in the previous year.
    11. Comment: Many commenters asked for clarification of the 
following situation: The $500 threshold is met and the collection is 
disbursed at the end of Year A and the $25 fee to be deducted from the 
next collection has not been collected. The State pays the $25 fee in 
Year A. How is the $25 fee retained by the State in the subsequent year 
(Year B) to reimburse the State for paying the fee the year before 
(Year A) counted for the purposes of the threshold in Year B? Does the 
State need to collect $525 in Year B before the next $25 is collected?
    Response: Yes. If the State pays the fee for a qualifying case in 
the preceding year, it may recoup the fee from the custodial parent 
responsible for the fee under State procedures in the subsequent year. 
The fee that is recouped by the State in the next year would not be 
counted towards the $500 threshold because that fee is kept by the 
State and not disbursed to the family. Collections must be disbursed to 
the family in order for them to count towards the $500 threshold.
    12. Comment: One commenter stated that the proposed rule authorizes 
that the fee may be ``retained'' by the State and believes the use of 
the term ``retained'' is incorrect. The correct terminology should be 
``distributed'' as defined in the preamble, specifically in Sec.  
302.32 where the term ``distribution'' is defined as how a support 
collection is allocated between families and the State and the Federal 
government in accordance with requirements. Once collections are 
received on behalf of the individual receiving services, the money must 
be ``distributed,'' ``disbursed,'' or accounted for as 
``undistributed.'' Saying in Sec.  302.51(a)(5) that ``the State must 
pay to a family that has never received assistance * * * after 
withholding any $25 fee that the State imposes * * *'' understates the 
``distribution'' impact of this option.
    Response: The regulatory language in Sec.  302.51(a)(5) is 
consistent with the statutory language at section 457(a)(4) of the Act, 
which says: ``In the case of any other family, the State shall 
distribute to the family the portion of the amount so collected that 
remains after withholding any fee pursuant to section 454(6)(B)(ii).'' 
Distribution in cases in which the family has never received assistance 
as defined under Sec.  302.33(e) is not complex because, other than the 
authority to withhold the $25 annual fee, all collections go to the 
family.
    13. Comment: One commenter requested clarification on how IV-D 
agencies can ``recover'' the $25 annual fee from a noncustodial parent, 
if the noncustodial parent is to be responsible for the fee. The 
commenter specifically asked if the State can employ typical IV-D 
collection tools such as income

[[Page 74911]]

withholding, Financial Institution Data Match and Federal tax offset to 
recover the fee from the noncustodial parent. If so, will the annual 
fee be at the bottom of the distribution hierarchy after current 
support and arrearages? In States that charge interest, this could 
create a situation where interest could potentially accrue on the fee 
in addition to the child support arrearages.
    Response: Since section 457(a)(4) of the Act can be read to allow 
the State to charge the noncustodial parent the fee and take the fee 
from the child support collection, we have revised Sec.  
302.33(e)(3)(i) to recognize that the fee may be retained by the State 
from a collection in accordance with the distribution requirements in 
Sec.  302.51(a)(5) which require that current support and any payment 
on arrearages for the month under a court or administrative order have 
been disbursed to the family before the fee is retained. Whether 
assessing the fee against the noncustodial parent or the custodial 
parent, the fee may be retained from the collection provided that the 
requirements for assessing the fee are met, i.e., the individual has 
never received assistance as defined in Sec.  302.33(e) and the State 
has collected and disbursed $500 in the Federal fiscal year to the 
family. However, States may also use IV-D enforcement techniques, 
including income withholding, to collect the fee.
    14. Comment: One commenter asked if, in instances in which a State 
must use IV-D enforcement efforts to collect the $25 annual fee from 
the noncustodial parent, the resources used to collect the fee are 
eligible for IV-D Federal financial participation.
    Response: Yes, the resources used to collect the annual fee are 
allowable costs attributable to the program and eligible for IV-D 
Federal financial participation.
    15. Comment: One commenter asked if when using the standard Federal 
income withholding form to collect the annual fee an employer must 
follow the $25 annual fee rules of the State issuing the income 
withholding order, or whether the employer must follow the $25 annual 
fee rules of the State of the principal place of employment of the 
noncustodial parent.
    Response: Employers must continue to comply with the terms of 
income withholding orders. If the order indicates that the employer 
must retain a $25 fee from the employee's wages, in addition to the 
amount of the collection, the employer must follow those instructions.
    16. Comment: Several commenters stated that the preamble to the 
NPRM indicates that a State's option to account for a fee, if not 
collected through one of the other allowable methods, at the end of the 
Federal fiscal year in which the threshold was met is limited to paying 
the fee out of State funds. States would not be able to exercise 
options to collect the fee by retaining the fee from collections in 
situations in which they are unable to collect the fee by the end of 
the Federal fiscal year. The State should not be held accountable for a 
fee that it cannot collect using an allowable option under the DRA.
    Response: The preamble indicates that if the $500 threshold is 
reached toward the end of a Federal fiscal year, the methods available 
to the State to collect the fee may be limited to retaining the fee 
from a subsequent collection, if there is one made and disbursed before 
the end of the year or paying the fee out of State funds. As indicated 
earlier, if there is not a $25 collection in excess of the $500 and the 
State pays the fee, the State can recoup that payment from the 
individual responsible for making the payment in the following year.
    17. Comment: One commenter asked if, in an instance in which the 
State elects to recover the fee from one of the parties, the fee is not 
collected from that party in the year in which it was due, and the 
State has to pay the fee, cost recovery, as described under Sec.  
302.33(d), could be used.
    Response: Section 302.33(d) allows States to recover costs in 
excess of any fees collected to cover administrative costs. If a State 
elects to recover the annual $25 fee from one of the parties, and the 
threshold for imposing the fee is met during the year, but the fee is 
not paid by the party in that same year, the State is required to pay 
the fee. The State may then recover the fee from a subsequent 
collection to reimburse itself. As discussed earlier in this preamble, 
we agree that the language in the DRA provides the State the ability to 
retain the fee in accordance with Sec.  302.33(e)(3), from the 
collection to the family that has never received assistance as defined 
under Sec.  302.33(e) and section 457(a)(4) of the Act. If the State 
opts to charge the fee to the noncustodial parent and retains the first 
$25 of the collection in excess of $500 and in accordance with Sec.  
302.51(a)(5), the amount of support paid to the family will be reduced.
    18. Comment: One commenter asked if the Federal tax refund 
intercept is the only collection a State gets in excess of $500 in the 
Federal fiscal year, will both the $25 intercept fee and the $25 annual 
fee be assessed on that case. In other words, would the State be 
required to charge the custodial parent the $25 annual fee and then the 
custodial parent would receive the IRS intercept amount minus $50?
    Response: These rules at Sec.  303.72(i)(1) provide that the 
Secretary of the Treasury may impose a fee with respect to non-IV-A tax 
offset submittals which shall not exceed $25 per submittal. The rules 
at Sec.  303.72(i)(2) allow the State IV-D agency to charge an 
individual who is receiving services a fee not to exceed $25 for 
submitting past-due support for Federal tax refund offset. These fees 
are distinct from the $25 annual fee required in Sec.  302.33(e). It is 
conceivable that a custodial parent who receives a Federal tax refund 
offset could be charged three different fees of $25 each, totaling $75 
for one case: A $25 fee each from the Secretary of Treasury and the 
State IV-D agency, both for the tax refund offset, and the $25 annual 
fee because the case meets the criteria for charging the fee.

One $25 Fee for Each Qualifying Case--Section 302.33(e)(1)

    1. Comment: One commenter said that at Sec.  302.33(e)(1) the 
proposed rules state ``* * * in the case of an individual who has never 
received assistance * * *'' and asked how the concept of tying the 
applicability of the fee to an individual reconciled with the concept 
of tying the applicability of the fee to a case.
    Response: The statute says ``* * * in the case of an individual who 
has never received assistance under a State program funded under part A 
and for whom the State has collected at least $500 of support, the 
State shall impose an annual fee of $25 for each case in which services 
are furnished, which shall be retained by the State from support 
collected on behalf of the individual (but not from the first $500 so 
collected), paid by the individual applying for the services, recovered 
from the absent parent, or paid by the State out of its own funds (the 
payment of which from State funds shall not be considered as an 
administrative cost of the State for the operation of the plan, and the 
fees shall be considered income to the program).'' It is our 
interpretation that the determination of whether a fee should be 
assessed in a IV-D case is dependent on whether any individual in that 
IV-D case receives or has received AFDC, State, or Tribal TANF 
assistance under title IV-A of the Act. The statutory language refers 
to both an individual receiving IV-D services and a case in which IV-D 
services are furnished.
    2. Comment: One commenter opposes charging a $25 annual fee because 
if the $25 annual fee is charged to the

[[Page 74912]]

custodial parent, the annual fee, and other fees required by a State 
could deter a custodial parent from requesting needed services. The $25 
annual fee, coupled with administrative fees charged to the 
noncustodial parent in some States, will cause further financial 
burdens to parents already struggling to meet child support 
obligations. Whether the fee is charged to the custodial parent or 
noncustodial parent, it is a burden.
    Response: As discussed earlier, the imposition of the $25 annual 
fee is limited to circumstances in which an individual has never 
received assistance under a State AFDC program; State or Tribal TANF 
program; and the State has successfully collected and disbursed $500 to 
the family in a Federal fiscal year. Section 454(6) of the Act requires 
some fees and authorizes States to charge other fees and recover costs. 
This requirement implements the $25 annual fee required by the statute. 
We believe that the language in the statute and rules appropriately 
exempts categories of individuals who are low-income or who have not 
benefited adequately from receipt of child support and offers 
alternative methods of collection to allow States to determine who 
should pay the fee.
    3. Comment: One commenter stated that a $25 fee may be assessed on 
cases submitted for Federal tax refund offset and that it would be 
beneficial to allow States to refrain from assessing the fee on those 
cases. At State option, the State may charge an individual who is 
receiving IV-D services a fee not to exceed $25 for submitting past-due 
support for Federal tax refund offset. The Department of Treasury 
Federal tax refund offset program is already allowed to deduct a $25 
fee from collections made on behalf of non-public assistance custodial 
parents. The commenter does not feel it benefits families to add the 
additional $25 annual fee. However, the commenter supports allowing 
Federal tax refund offset dollars to be used in calculating the $500 
threshold.
    Response: We believe that the fees charged are reasonable and 
commensurate with the receipt of successful child support services.
    4. Comment: One commenter noted that the proposed rules at 45 CFR 
Sec.  302.33(e) require that States impose the fee in international 
cases, but that States are not able to retain the fee from collections. 
The commenter does not believe a State should be responsible for 
imposing a fee which it is not able to collect by using one of the 
allowable fee collection options allowed under the section 7310 of the 
DRA which amends section 454(6)(B) of the Act and that international 
cases should be exempt from the fee.
    Response: Under section 454(32) of the Act, any request for 
services by a foreign reciprocating country or a foreign country with 
which a State has an arrangement is treated like a request from a State 
and foreign obligees may not be charged fees. However, as discussed 
earlier in the preamble, we believe that the language in section 7310 
of the DRA which amends section 457(a)(4) of the Act can be read to 
allow the fee to be charged to the noncustodial parent and retained 
from a collection under certain circumstances. Therefore, the fee 
assessed in qualifying international cases may be retained from a 
collection before the distribution of the collection to the family, 
provided that $500 has been disbursed to the family in the Federal 
fiscal year, current support for the month in which the collection is 
received has been satisfied, and any specified arrearage payment 
pursuant to an administrative or court order for that month has been 
satisfied. A State also has the option to charge the noncustodial 
parent or pay the fee itself in incoming international cases. Because 
the statute and rules provide these alternative methods to collect and 
account for the fee, imposition of the fee in appropriate cases is 
fitting.

Who Imposes the Fee in Interstate, International and Intergovernmental 
Tribal Title IV-D Cases?--Section 302.33(e)(2)

    1. Comment: Three commenters agreed with the selection of the 
initiating State as the one to impose and report the annual fee in 
interstate IV-D cases, as proposed in Sec.  303.7(e). A commenter went 
on to say that there must be a consistent Federal standard, and the 
initiating State is in the best position to determine when it is 
appropriate to impose the fee.
    Response: We appreciate the comments. As stated in the preamble to 
the proposed rule, only the initiating State has all the information 
necessary to know whether the annual $25 fee should be imposed in a 
particular case.
    2. Comment: One commenter noted that the NPRM preamble language 
says: ``A State may not impose a fee in a Tribal IV-D case that is 
referred to the State IV-D program for assistance in securing support 
from a Tribal IV-D program.'' The commenter questions why a Tribal IV-D 
program would refer a case to the State to secure child support from 
another Tribal IV-D program and asked if this was a typographical 
error.
    Response: There is a typographical error in the sentence. The 
phrase ``from a Tribal IV-D program'' at the end of the phrase should 
not have been included. The sentence should have read: ``A State may 
not impose a fee in a Tribal IV-D case that is referred to the State 
IV-D program for assistance in securing support.''
    3. Comment: One commenter said that the preamble to the proposed 
rule states that if the $25 annual fee is not addressed in a 
cooperative agreement between a Tribal IV-D program and a State IV-D 
program, the State IV-D program would be responsible for collecting the 
fee in any case where the State is the jurisdiction receiving the 
application or receiving a referral from a State TANF, Foster care, or 
Medicaid program. However, there is an exemption from the fee for 
current or former State TANF cases.
    Response: The preamble language was misleading. We agree that there 
is an exemption from the fee for individuals who are receiving or have 
ever received AFDC or State or Tribal TANF, as defined in Sec.  
302.33(3)(1). If a State were to receive a referral from a TANF agency, 
the individual in the TANF case would clearly be receiving title IV-A 
services and would not be assessed a fee.
    4. Comment: One commenter said that if a State imposes the annual 
fee and a Tribe is required to collect the fee, the fee becomes an 
administrative burden for the Tribe, and may actually result in an 
increase in program expenditures. Tribes do not have automated systems, 
and imposing and tracking the fee will be labor intensive.
    Response: Section 454(6)(B)(ii) of the Act is a State plan 
requirement and as such is not applicable to Tribal IV-D programs. A 
Tribe would only be required to impose and collect the annual fee if 
the Tribe is not operating a Tribal IV-D program but has entered into a 
cooperative agreement with a State IV-D agency under section 454(33) of 
the Act and Sec.  302.34 to assist the State in delivering title IV-D 
services. The fee is not applicable to the Tribal IV-D program.
    5. Comment: One commenter opposes the requirement that forces a 
Tribe to charge the fee when working cooperatively with a State to 
provide IV-D services. The commenter noted that this may cause Tribal 
IV-D programs not to work cooperatively with States.
    Response: A Tribe that is under a cooperative agreement with the 
State under section 454(33) of the Act is providing IV-D services under 
a State program that is subject to State IV-D requirements and receives 
reimbursement from the State IV-D

[[Page 74913]]

agency for providing services specified in the cooperative agreement. 
The statute requires the annual fee where appropriate in State IV-D 
cases. We have no discretion to allow an exception to the fee 
requirement for State IV-D programs working with Tribes to provide IV-D 
services under a cooperative agreement in accordance with section 
454(33) of the Act because services provided by the Tribe are provided 
in a State IV-D program and the $25 annual fee requirement is a State 
plan requirement at section 454(6)(B)(ii) of the Act. The fee is not 
applicable to Tribal IV-D programs operating under section 455(f) of 
the Act.
    6. Comment: One commenter noted that the preamble indicates that a 
State may not impose the fee on an individual residing in a foreign 
country in an international case and asked why the noncustodial parent 
in a foreign country is exempt from the fee.
    Response: The noncustodial parent in a foreign country is not 
exempt from the fee. Section 454(32)(C) of the Act only prohibits 
States from charging application fees or assessing costs against the 
foreign reciprocating country or foreign obligee.
    7. Comment: Two commenters noted that the proposed method of 
handling the $25 annual fee for international cases causes an 
additional burden to implement, track, report, and pay the fee, due to 
further system programming to define and separate international cases 
because fees in international cases would have to be paid differently, 
that is, the State would either pay out of general funds or would have 
to charge the noncustodial parent. This would be an additional burden 
both for reporting and paying.
    Response: There are three methods of accounting for fees in 
appropriate international cases: Retaining the fee from the support 
collection, paying the fee out of State funds, or charging the fee to 
the noncustodial parent.
    8. Comment: One commenter stated that the rules are unclear with 
respect to ``responding'' international cases. The preamble says the 
proposed rules at Sec.  302.33(e) would require the State that receives 
the request from the Foreign Reciprocating Country to impose the fee. 
Earlier, the preamble states that the State cannot impose the fee due 
to section 454(32)(C) of the Act. Does this mean that the State must 
pay the fee or require the noncustodial parent to pay the fee?
    Response: Yes. However, as stated earlier in the preamble, we 
believe that section 457(a)(4) of the Act can be read to allow the fee 
to be charged to the noncustodial parent and retained from a collection 
under certain circumstances. If the State opts to retain the fee in 
accordance with Sec.  302.33(e)(3) and Sec.  302.51(a)(5) before 
sending remaining amounts collected to the family, the noncustodial 
parent does not have to designate a portion of the support payment as 
the fee. Therefore, the issue of collecting a fee on an incoming 
international case should be resolved by allowing the fee charged to 
the noncustodial parent to be retained from the collections provided 
that $500 has been disbursed to the family in the Federal fiscal year, 
current support for the month in which the collection is received has 
been satisfied, and any specified arrearage payment for that month 
pursuant to an administrative or court order has been satisfied.
    9. Comment: Several commenters said that international cases should 
be excluded from the fee or the party in the other country should pay 
the fee. The annual fee is a user fee to be paid after services are 
received and custodial parents residing in foreign countries and 
receiving child support services should also be subject to the fee. 
There is disparity if a custodial parent cannot be charged the fee when 
living in a foreign country.
    Response: As stated in the preamble to the NPRM, section 454(32)(C) 
of the Act provides that ``no applications will be required from, and 
no costs will be assessed for such services against, the foreign 
reciprocating country or foreign obligee (but costs may at State option 
be assessed against the obligor).'' We have no discretion to allow 
States to charge the custodial parent living in a foreign reciprocating 
country the annual fee. However, as noted in the previous response, 
allowing States to take the $25 fee from the collection may alleviate 
problems in collecting the fee from the noncustodial parent. In 
addition, the restriction under section 454(32)(C) of the Act does not 
apply to applicants for services who live in foreign countries but 
apply directly to a State for IV-D services, rather than through the 
country in which they live. Custodial parents in these direct 
application cases would be subject to the fee if all other conditions 
for imposing the fee are met.
    10. Comment: One commenter stated that if the State imposes a fee 
in international cases, but cannot collect the fee from the custodial 
parent because the custodial parent is living in a foreign country, the 
States automated system would not ``know'' which custodial parents are 
residing abroad and which are residing in the States.
    Response: As stated earlier in the preamble, we have no discretion 
to allow States to impose the fee on obligees exempt from the fee 
pursuant to section 454(32)(C) of the Act. And, because of the 
expanding IV-D program role in international cases, States are required 
to distinguish international cases on the Form OCSE-157, Child Support 
Enforcement Annual Data Report beginning October 1, 2009. Therefore, 
States should be able to identify incoming and outgoing international 
cases by 2009.
    11. Comment: One commenter asked if the State could assess and 
collect the fee from an individual living in Canada who applies for 
services directly with a State.
    Response: Yes. As stated earlier, in any instance in which the 
applicant for services living in another country applies for IV-D 
services directly with a State IV-D agency, if all conditions for 
imposing the fee are met, the case is subject to the annual fee and the 
State may assess and collect the fee from the applicant.

Reporting the $25 Annual Fee--Section 302.33(e)(4)

    1. Comment: Several commenters stated that under Executive Order 
13132, the annual fee appears to impose substantial direct compliance 
costs on State and local governments and has federalism impacts as 
defined in the Executive Order. The requirement that the State pay the 
$25 mandatory fee in the absence of collecting it can be looked at as 
nothing other than direct compliance costs on the State government. 
OCSE should revise the preamble to acknowledge the burden these rules 
are putting on the States and take other steps to comply with Executive 
Order 13132.
    Response: We disagree. Section 454(6)(B)(ii) of the Act provides 
the State with four options to collect this mandatory fee. The fee may 
be withheld from the amount collected, paid by the custodial parent, 
paid by the noncustodial parent or paid by the State. We anticipate 
that most States will select the first option. Nevertheless, even where 
a State chooses to pay the fee itself, a portion of the fee will be 
retained by the State as its share (currently 34 percent) of program 
income. In addition, the State retains the option of reimbursing itself 
by withholding the amount from a future collection.
    Over the next 5 years, the Federal Government will provide $20 
billion in Federal funds for child support program costs, including 
more than $2 billion in Federal incentive payments to States. The 
Federal Government continues to pay 66 percent of State costs to 
operate

[[Page 74914]]

child support enforcement programs. This is a generous matching rate, 
exceeding the administrative matching rate of other programs such as 
Medicaid and Food Stamps. Therefore, we do not believe that the annual 
fee amounts to direct compliance costs on States and local governments, 
nor does it have a federalism impact.
    2. Comment: Two commenters stated that the proposed rules require 
that the total amount of the annual fees imposed be reported, whereas 
other fees are reported at the Federal Financial Participation rate of 
66 percent. The commenters asked why these fees are being reported 
differently.
    Response: All fees are reported as program income in an identical 
manner. OCSE has always required that any mandatory or optional fees 
collected by States or other program income in the operation of this 
program be used to offset program expenses on a dollar-for-dollar 
basis. Program expenditures are reduced by program income before 
calculating the Federal and State share of expenditures. This new 
annual fee is treated no differently and is reported on the quarterly 
expenditure report both as the total amount collected ($25 in the case 
of the new annual fee) and as the Federal share of the amount collected 
(or $16.50 for every $25 fee reported, at the current 66-percent 
Federal financial participation rate). The statutory language at 
section 454(6)(B)(ii) of the Act is also clear that the payment of the 
annual fee by a State shall not be considered as an administrative cost 
of the State for the operation of the plan, and that the fee shall be 
considered solely as program income.
    3. Comment: Several commenters asked where the fee should be 
recorded on the Form OCSE-34A, Quarterly Report of Collections, if the 
custodial parent is assessed the fee; if the noncustodial parent is 
assessed the fee; if the applicant is assessed the fee; or if the State 
pays the fee. Others indicated that OCSE should provide directions or 
instructions in the final rules about the appropriate way to fill out 
the Form OCSE-34A, Quarterly Report of Collections, to record support 
collections from the noncustodial parent that are not actually support 
payments to the custodial parent. Another commenter stated that the 
amount collected/receipted by the State Disbursement Unit must be 
recorded in the top portion of the form (Form OCSE-34A, Quarterly 
Report of Collections) and the noncustodial parent must get credit for 
paying the support when the State is charging the custodial parent the 
fee. All collections on the top portion (collection) of the 34A must be 
accounted for in the lower portions (distributions) of the 34A, but 
there is no place to record ``fees'' distribution.
    Response: On November 27, 2007, OCSE issued Action Transmittal 07-
08, Implementation of Revised Financial Reporting Forms: Form OCSE-396A 
and Form OCSE-34A. This AT may be viewed electronically at: http://www.acf.hhs.gov/programs/cse/pol/AT/2007/at-07-08.htm. To accommodate 
these comments concerning the reporting of fees, we revised Form OCSE-
34A, the Quarterly Report of Collections, to enable States to report 
those fees withheld from child support collections in the 
``distributions'' section of the report. This new data entry line, Line 
7e, assures that each State accurately reports the amount of the 
collection distributed in accordance with the requirements of section 
457 of the Act and separately reports the portion withheld to comply 
with the new fee requirements. However, this new data collection line 
will only be for a fee retained from a child support collection; fees 
collected separately from either parent or paid by the State will not 
be reported on Form OCSE-34A, Quarterly Report of Collections. All 
fees, including these, regardless of the method of collection, are 
treated as program income and are reported on Line 2a of the quarterly 
expenditure report, Form OCSE-396A, Child Support Enforcement Program 
Financial Report.
    4. Comment: One commenter noted that it would be most beneficial to 
all parties if States reported the $525 as collected and disbursed on 
the Form OCSE-34A, Quarterly Report of Collections, as if the State 
were sending $525 to the custodial parent and the custodial parent was 
remitting the $25 fee to State. This way the noncustodial parent will 
receive credit for total payment of $525 and the State will get credit 
for $525 towards the collection base. In addition the $25 fee would be 
reported as required on the Form OCSE-396A, Child Support Enforcement 
Program Financial Report.
    Response: See the response to Comment 3. Although we 
received comments suggesting different ways to report these fees, we 
decided to include a separate reporting line for any fee withheld from 
a collection. In this way, the State will be able to accurately report 
the portion of the collection distributed and disbursed to the 
custodial parent and the portion retained from the collection as the 
fee paid by the custodial parent. Both the amount distributed to the 
custodial parent and the $25 fee retained by the State will be 
considered as ``distributed collections'' when computing the State's 
collection base for purposes of calculating its annual incentive 
payment; the noncustodial parent receives full credit for the amount 
paid. In the example cited by the commenter, the State would report 
$500 as distributed to the family and $25 as retained by the State as 
the custodial parent's fee; the State also would report the $25 fee as 
program income. The State would be credited with $525 in distributed 
collections and the noncustodial parent would be credited with a $525 
child support payment.
    Alternately, if the State opts to charge the fee to the 
noncustodial parent and collect it by retaining the $25 annual fee from 
a collection before sending the remaining amount to the custodial 
parent, the noncustodial parent would not get credit for the total 
amount paid. For example, a State makes a collection of over $500, in 
this instance it is $550, and $25 is retained from the collection as 
the fee charged to the noncustodial parent. The State then sends the 
remaining $525 to the custodial parent and the noncustodial parent is 
credited as making a support payment of $525.
    5. Comment: One commenter stated that the preamble discusses the 
reporting of the fees as the total amount of $25 fees imposed during 
the Federal fiscal year on line 2a of the Form OCSE-396A, Child Support 
Enforcement Program Financial Report. That reporting requirement will 
commingle the $25 fee amount with other amounts reported for other 
fees, costs recovered, and interest and asks how that will be audited. 
If States collect the fee from either party, how will the reporting of 
the fee be reconciled with State reporting of collections on the Form 
OCSE-34A, Quarterly Report of Collections? The commenter stated that 
Federal guidance is necessary on how the fee should be accounted for 
and reconciled with all relevant Federal reporting forms.
    Response: The quarterly financial reports States are required to 
submit are cumulative reports of the State's financial activities 
related to this program during the fiscal quarter. Each State always is 
expected to maintain full and complete accounting records and 
documentation in accordance with Generally Accepted Accounting 
Principles (GAAP) available for review. Such documentation would 
include a record of each annual fee reported on the quarterly 
collection report, the quarterly expenditure report, or both. 
Specifically, if a State elects to collect the fee from either parent 
or pay the fee itself, it is reported as program income

[[Page 74915]]

on the Form OCSE-396A, Child Support Enforcement Program Financial 
Report. If a State elects to withhold the fee from a collection, it is 
reported as a retained fee on the reporting line being added for that 
purpose on Form OCSE-34A, Quarterly Report of Collections, and also 
reported as program income on the Form OCSE-396A, Child Support 
Enforcement Program Financial Report.
    6. Comment: One commenter asked, if the State elects to recover the 
fee from the custodial parent through retaining support collections, 
will the fee be reported as distributed collections on Form OCSE-34A, 
Quarterly Report of Collections, and the Form OCSE-157, Child Support 
Enforcement Annual Data Report, and reported as program income on the 
Form OCSE-396A, Child Support Enforcement Program Financial Report?
    Response: Yes, if the State elects to recover the fee from the 
custodial parent through retaining support collections, the fee will be 
reported on Form OCSE-34A, Quarterly Report of Collections, and Form 
OCSE-157, Child Support Enforcement Annual Data Report, and reported as 
program income on the Form OCSE-396A, Child Support Enforcement Program 
Financial Report.
    7. Comment: One commenter said that to the extent that OCSE 
determines that changes are needed to either Form OCSE-396A, Child 
Support Enforcement Program Financial Report or Form OCSE-34A, 
Quarterly Report of Collections, to accommodate the reporting of fee 
collections, OCSE should refer such issues to an appropriate workgroup 
with OCSE and State representatives, rather than addressing such form 
issues in the final rules. The commenter also recommended against 
requiring States to report on Form OCSE-34A, Quarterly Report of 
Collections, when the State is paying the fee itself. Because both the 
DRA and the rules provide States with flexibility about how to collect 
the fee, OCSE should provide States with the flexibility to use the 
reporting method that best supports the collection method that the 
State selects. One commenter said if States must report program income 
when assessed for this fee only, then a new field should be developed 
on the Form OCSE-396A, Child Support Enforcement Program Financial 
Report.
    Response: OCSE revised both the Form OCSE-396A: Child Support 
Enforcement Program Financial Report and OCSE-34A: Quarterly Report of 
Collections. On December 4, 2006, the Proposed Information Collection 
Activity with Comment Request was published in the Federal Register (71 
FR 70407). The notice indicated that the DRA contains a number of 
provisions that will impact the States' completion and submission of 
the quarterly financial reports and opened a formal 60-day comment 
period for the public. OCSE assembled a workgroup of Federal and State 
staff to recommend any changes to improve and update these forms, 
including revisions necessary to accommodate the DRA.
    In response to the commenter's second suggestion, fees paid by the 
State itself are not reported on Form OCSE-34A, Quarterly Report of 
Collections, but will be reported as program income on Form OCSE-396A, 
Child Support Enforcement Program Financial Report.
    8. Comment: Two commenters asked for clarification of reporting for 
interstate cases. In an interstate case, the responding State collects 
all support from the noncustodial parent and sends it to the initiating 
State. If the initiating State chooses to assess the fee against the 
noncustodial parent, the initiating State cannot count that collection 
as a support payment on the Form OCSE-34A, Quarterly Report of 
Collections. The commenter asked how the responding State would know 
that the collection went to the fee, and not to the support. If the 
responding State does not change the collection from a support payment 
to a fee collection, the responding State gets credit for the support 
payment in the incentives collection base amount, whereas the 
initiating State is penalized for having a fee in the collections base 
amount.
    Response: From the responding State's perspective, the entire 
amount is a child support collection and the responding State properly 
receives credit for the full amount collected and forwarded to the 
initiating State. The responding State reports the full amount 
collected and sent to the initiating State on the appropriate lines of 
Form OCSE-34A, Quarterly Report of Collections (Lines 2 and 5, 
respectively) in the quarter in which each transaction occurs. The 
initiating State subsequently reports the full amount of the collection 
received on Line 2f of Form OCSE-34A, Quarterly Report of Collections. 
The amount disbursed to the custodial parent is reported by the 
initiating State on Line 7d of its Form OCSE-34A, Quarterly Report of 
Collections. The fee is reported as program income by the initiating 
State on Line 2a of Form OCSE-396A, Child Support Enforcement Program 
Financial Report, and, if the fee is withheld from the collection, also 
reported on (proposed) Line 7e of Form OCSE-34A, Quarterly Report of 
Collections.
    9. Comment: One commenter asked if States can rely on the 
definition of ``never-assistance'' for Federal reporting purposes to 
determine whether a case is exempt from the fee.
    Response: No. A State must identify cases subject to the fee in 
accordance with Sec.  302.33(e). All conditions for charging the fee 
under Sec.  302.33(e) must be met before imposing the $25 annual fee.
    10. Comment: Two commenters said that it seems that with the new 
annual fee, States will be required to commingle two different 
accounting styles: Accrual-based and cash-based accounting. Another 
commenter said that it is inappropriate to hold a State responsible for 
the fee by requiring the State to report the fee as program income 
before it is actually collected unless the State has elected to pay the 
fee from State funds. The fee is not program income as defined in 45 
CFR 92.25 unless and until the fee is collected.
    Response: OCSE uses a cash-basis for accounting for financial 
transactions. Transactions are reported in the quarter in which they 
occur, i.e., when cash changes hands (when the check is dated or the 
electronic transfer occurs). Fees are no different and are reported in 
the quarter collected, not assessed. In most cases, fees will likely be 
assessed and collected in the same quarter. Fees are reported as 
collected when either paid by the custodial parent, paid by the 
noncustodial parent, paid by the State (transferred from one State 
account to another) or retained by the State from the collection.
    11. Comment: One commenter asked if the Tribal IV-D agency or the 
State IV-D agency was responsible for reporting and paying the annual 
fee if there are both Tribal and State IV-D agencies in a State.
    Response: Section 454(6)(B)(ii) of the Act is a State plan 
requirement and as such is not applicable to Tribal IV-D programs. The 
State IV-D agency is responsible for collecting the fee on State cases 
that meet the criteria for collection of the fee.
    12. Comment: One commenter asked if the intent is that States will 
be reporting, as program income, the total amount of the fees imposed 
for each Federal fiscal year on the 4th quarter expenditure report, 
rather than reporting quarterly.
    Response: Fees are reported on Line 2a of Form OCSE-34A, Quarterly 
Report of Collections, in the quarter in which they are received, not 
assessed. As stated earlier, the child support enforcement program is a 
cash-based system: Expenditures are reported as paid when the check is 
written or funds transferred to pay the invoice, not when

[[Page 74916]]

the service is provided. Some States that are electing to pay the fee 
from State funds have requested that they be permitted to claim as 
program income all mandatory fees for all cases on a ``lump sum'' basis 
once a year. That is an acceptable reporting methodology in those 
circumstances; States that elect to collect the fee from either parent 
or withhold the fee from a collection must report the fees as collected 
on a quarter-by-quarter basis.
    13. Comment: One commenter said that the preamble specifies that 
all fees imposed under the DRA need to be reported as program income 
and treated in accordance with 45 CFR 302.15. The commenter asked if 
that means that if the State decides to collect the fee from a 
noncustodial parent and is not successful, it still needs to report the 
full amount as program income, give the Federal government its share 
and use the State share to offset administrative expenses. The 
commenter went on to say that if that is the case, it means that if the 
State is not able to collect the fee, it not only has to use its own 
funds to provide program income to the Federal government, it also has 
to use State funds to offset administrative expenses before seeking 
reimbursement.
    Response: This is a mandatory fee. If the State elects to collect 
the fee directly from either parent and is unsuccessful, it is required 
to pay the fee itself and report the full amount as program income.

Section 302.51--Distribution of Support Collections

    The comments received concerning distribution of past-due support 
collected via the Federal tax refund offset program are addressed in 
the Response to Comments at Sec.  303.72, Federal tax refund offset.
    1. Comment: One commenter requested confirmation that if the State 
elects to increase its pass-through and disregard from $50 to $100 that 
the Federal share of the entire $100 does not have to be paid.
    Response: This is confirmation that if a State elects to increase 
its pass-through and disregard from $50 to $100 that the Federal share 
of the entire $100 does not have to be paid.

PART 303--STANDARDS FOR PROGRAM OPERATIONS

Section 303.7--Provision of Services in Interstate Title IV-D Cases

    1. Comment: One commenter stated that the proposed rule would 
require that it is the initiating State's responsibility to impose the 
fee in an interstate case. The commenter stated that the initiating 
State is not always aware of collections in a timely manner and should 
only be held responsible for imposition of fees when aware of 
qualifying collections in a timely manner.
    Response: Under 45 CFR 303.7(c)(7)(iv), in an interstate case, the 
responding State is responsible for collecting and monitoring any 
support payments from the noncustodial parent and forwarding payments 
to the location specified by the IV-D agency in the initiating State. 
Under section 457 of the Act, effective October 1, 1998 (or October 1, 
1999, in States in which courts were processing child support 
collections on August 21, 1996), the responding SDU must, within 2 days 
of receipt in the SDU, send the amount collected in an interstate IV-D 
case to the SDU in the initiating State.

Section 303.8--Review and Adjustment of Child Support Orders

    1. Comment: Five commenters asked for clarification on how to 
identify the beginning of the three-year period for review and 
adjustment of child support orders as required by revised section 
466(a)(10) of the Act. Two commenters indicated support for the three-
year review period to begin with the date of the last review or 
modified order, and asked that OCSE clarify the beginning of time 
period for the review of an order.
    Response: When this provision requiring review and adjustment of 
child support orders was first mandated by the Family Support Act of 
1988, it required that the State implement a process whereby orders 
enforced under title IV-D were reviewed within 36 months after 
establishment of the order or the most recent review of the order and 
adjusted in accordance with the State's guidelines for support award 
amounts. The requirement for three-year reviews in TANF cases was 
removed with the passage of PRWORA.
    The statutory change in the DRA to section 466(a)(10) of the Act on 
review and adjustment of child support orders does not explicitly tie 
the three-year timeframe to any starting point, as the 1988 legislation 
did. However, the intent of the change was to revert back to the 
previous policy. Therefore, the timeframe for the review and adjustment 
of an order, if appropriate, would begin within 36 months after 
establishment of the order or the most recent review of the order.
    In response to comments, we have amended the rules at Sec.  
303.8(b)(1) to read: ``(1) The State must have procedures under which, 
within 36 months after establishment of the order or the most recent 
review of the order (or such shorter cycle as the State may determine), 
if there is an assignment under part A, or upon the request of either 
parent, the State shall, with respect to a support order being enforced 
under title IV-D of the Act, taking into account the best interests of 
the child involved:
    (i) Review and, if appropriate, adjust the order in accordance with 
the State's guidelines established pursuant to section 467(a) of the 
Act if the amount of the child support award under the order differs 
from the amount that would be awarded in accordance with the 
guidelines.''
    2. Comments: One commenter said that the NPRM suggests that the 
requirement to review orders in TANF cases every 3 years will cost the 
states $10 million in FY 2008, but save them $40 million over the next 
4 years. The commenter is in a State with a two-year time limit on TANF 
benefits and is interested in learning more about the methodology OCSE 
used in arriving at the cost savings due to increased orders among TANF 
recipients.
    Response: These costs reflect the upfront increased administrative 
costs in reviewing these cases and, as appropriate, updating the orders 
every 3 years and the savings that will result over time in the way of 
increased revenues (Federal and State shares of the larger collection 
amounts in TANF cases). This provision is also beneficial to families 
in terms of ensuring that support orders remain fair and equitable over 
time and reflect the noncustodial parent's current ability to pay.

Section 303.72--Requests for Collection of Past-Due Support by Federal 
Tax Refund Offset

    1. Comment: Several commenters said that the proposed rules require 
the State to inform individuals in advance if the State chooses to 
continue to apply offset collections to State-assigned arrearages and 
asked if the intent of the requirement is to now proactively notify the 
individuals of this option. A number of other commenters indicated 
that, under current rules, States are required to advise persons 
receiving services of the order of distribution of funds collected 
through the Federal tax refund offset program. The proposed change to 
require a notice that the State has opted to continue this distribution 
priority is unnecessary.
    Response: The current rules at Sec.  303.72(h)(3) require that the 
IV-D agency must inform individuals receiving services under Sec.  
302.33 in advance that amounts offset will be applied to satisfy any 
past-due support which has been assigned to the State

[[Page 74917]]

and submitted for Federal tax refund offset. States that elect to 
continue to apply section 457(a)(2)(B) of the Act as in effect until 
October 1, 2009, for distribution of collections in former-assistance 
cases in the future must continue to inform individuals that the State 
chooses to apply amounts offset to satisfy any past-due support which 
has been assigned to the State. The intent of the rule is not to 
proactively notify individuals, but to continue to notify them, as 
currently required, if the State does not choose to use Federal tax 
refund offset first to satisfy current support due and past-due support 
owed to a family in former-assistance cases effective October 1, 2009, 
or up to a year earlier at State option.
    We changed the regulatory language at Sec.  303.72(h)(3) for 
clarity. It now reads:
    ``(3)(i) Except as provided in paragraph (ii), the IV-D agency must 
inform individuals receiving services under Sec.  302.33 of this 
chapter in advance that amounts offset will be applied to satisfy any 
past-due support which has been assigned to the State and submitted for 
Federal tax refund offset.
    (ii) Effective October 1, 2009, or up to a year earlier at State 
option, the IV-D agency need no longer meet the requirement for notice 
under paragraph (i) if the State has opted, under section 454(34) of 
the Act, to apply amounts submitted for Federal tax refund offset first 
to satisfy any current support due and past-due support owed to the 
family.''
    2. Comment: Two commenters asked for verification regarding the 
application of IRS tax intercepts towards current support if the State 
chooses to change the distribution hierarchy in former-assistances 
cases. The commenter asked if the intent of the distribution 
requirements in Sec.  302.51 is to pay current support on collections 
that have been intercepted because of their delinquency.
    Response: The manner in which child support payments collected 
through Federal tax refund intercepts are distributed depends on the 
distribution options that a State chooses with respect to former-
assistance cases. Section 454(34) of the Act as amended by the DRA 
allows States to determine whether to follow PRWORA distribution rules 
or DRA distribution rules in former-assistance cases.
    If a State elects to follow PRWORA distribution rules, then IRS tax 
intercepts must be distributed in accordance with former section 
457(a)(2)(B)(iv) of the Act. Under former section 457(a)(2)(B)(iv) of 
the Act, Federal tax refund offset collections must be distributed to 
arrearages only, and must be applied first to any arrearages owed to 
the State to reimburse assistance paid to the former-assistance family.
    Effective October 1, 2009, or up to a year earlier at State option, 
if States choose the new distribution rules for former-assistance cases 
under section 457(a)(2)(B) of the Act as amended by the DRA, States 
must treat Federal tax refund offset collections the same as any other 
collections for purposes of distribution in all IV-D cases. States 
choosing to follow the DRA distribution rules will distribute Federal 
tax refund offset collections first to current support, then to 
arrearages owed to the family.
    Please see Action Transmittal-07-05, Instructions for the 
Assignment and Distribution of Child Support Under Sections 408(a)(3) 
and 457 of the Social Security Act (the Act) dated July 11, 2007: 
http://www.acf.dhhs.gov/programs/cse/pol/AT/2007/at-07-05.htm.

PART 304--FEDERAL FINANCIAL PARTICIPATION

Section 304.20--Availability and Rate of Federal Financial 
Participation

    1. Comment: One commenter opposes reducing the Federal financial 
participation in IV-D program expenditures for paternity establishment 
for States from 90 percent to 66 percent. The commenter states that 
this further burdens the State budgets which could eventually trickle 
down to the families and thereby reduce the Paternity Establishment 
Performance for States. The commenter encouraged the repeal of the 
proposed rules pursuant to section 654 of the Treasury and General 
Government Appropriations Act of 1999 that requires Federal agencies to 
determine whether a proposed policy or rule may negatively affect the 
well-being of families.
    Response: This is a statutory mandate. Section 7303 of the DRA 
amended section 455 of the Act to reduce the previously enhanced 
Federal matching rate for laboratory costs to determine paternity. The 
enhanced matching rate was originally implemented in 1988 because of 
the high costs of genetic testing for the determination of paternity. 
However, the cost of genetic testing has significantly declined since 
1988 and enhanced funding is no longer necessary.

III. Impact Analysis

Paperwork Reduction Act of 1995

    This rule references information collection requirements that have 
been submitted to the Office of Management and Budget (OMB) under the 
Paperwork Reduction Act of 1995 (PRA). Under this Act, no persons are 
required to respond to a collection of information unless it displays a 
valid OMB control Number.
    There is a reporting requirement for a State's IV-D plan in section 
454(34) of the Act, with respect to distribution options, to allow a 
State to choose either to apply amounts collected, including amounts 
offset from Federal tax refunds, to satisfy any support owed to the 
family first or to continue to distribute Federal tax offsets amounts, 
to satisfy any past-due support assigned to the State first. A new 
State plan preprint page was developed for States to indicate their 
distribution choice under section 454(34) of the Act. This information 
collection was set to expire on November 11, 2007. The notice to amend 
the form was published on August 21, 2007. OMB approved this collection 
tool on July 3, 2008 under OMB  0970-0017.
    States must submit a State IV-D preprint plan page to indicate that 
a State will impose a $25 annual fee in accordance with 454(6)(B)(ii) 
and how the fee will be collected. Because of the October 1, 2006 
effective date for the mandate that States implement and collect a $25 
annual fee in specified cases, the second notice for the State plan 
preprint page was published prior to the final rule. The notice was 
published in the Federal Register on November 6, 2007. OMB approved 
this collection tool on February 1, 2008 under OMB  0970-0017.
    States also are required to keep track of the total amount of $25 
fees that must be included as program income reported on Form OCSE-
396A, Child Support Enforcement Program Financial Report. In addition, 
States are required to report the collection of the total amount of $25 
fees that are retained for a child support collection on Form 34A, 
Quarterly Report of Collections. The requirement to track fees is not a 
new requirement; the $25 annual fee is tracked and reported the same 
way other fees associated with the Child Support Enforcement Program 
are tracked and reported. These two forms were approved as a package by 
OMB under  0970-0181 on November 16, 2007.
    If a State elects to recover a fee from the custodial parent 
through retaining child support collections, it must be reported on the 
OCSE-157. This form was approved by OMB under  0970-0177 on 
September 8, 2008.
    The burden associated with these collection tools has not changed 
as a result of this regulation. The DRA made

[[Page 74918]]

changes to various sections of the Social Security Act and mandated 
implementation of those various sections prior to promulgation of final 
regulations. As a result, the respondents were required to comply with 
the paperwork burden before the publication of this regulation. The 
appropriate notice and comment period was provided and OMB approved 
these collection tools. The burden described in the final rule for 
these collections is the same as the currently approved ICR.
    The respondents are State IV-D agencies.
    The total estimated burden for the entire State Plan and Financial 
Report Forms are:

----------------------------------------------------------------------------------------------------------------
                                                                                  Average burden
                   Requirement                       Number of        Yearly         hour per      Total burden
                                                    respondents     submittals       response          hours
----------------------------------------------------------------------------------------------------------------
State Plan (OCSE-100)...........................              54               1             .25            13.5
State Plan Transmittal (OCSE-21-U4).............              54               1             .25            13.5
Financial Form 396A (tracking the $25 fee)......              54               4               1           * 216
OCSE form 34A...................................              54               4               1           * 216
OCSE Form 157...................................              54               1               7           * 378
                                                 ---------------------------------------------------------------
    Total.......................................              54              11            9.50             837
----------------------------------------------------------------------------------------------------------------
* These hours represent the total burden associated with the reporting form. Incremental increases applicable to
  the provisions of this regulation were not calculated but are estimated to be less than 1% of the total burden
  shown.

Regulatory Flexibility Analysis

    The Secretary certifies that, under 5 U.S.C. 605(b), as enacted by 
the Regulatory Flexibility Act (Pub. L. 96-354), 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

    Executive Order 12866 requires that rules be reviewed to ensure 
that they are consistent with the priorities and principles set forth 
in the Executive Order. The Department has determined that these rules 
are consistent with these priorities and principles and is an 
economically significant rule as defined by the Executive Order because 
it will have an estimated $500 million impact on the economy over a 5-
year period and, potentially, a $100 million impact on the economy in 
any given year. The impacts discussed for provisions below have been 
carried in the program's base since enactment of the DRA and are most 
currently reflected in the FY 2009 President's Mid-Session Review 
Budget baseline estimates.
    Specifically, when the DRA was enacted we estimated that the 
requirement for review and adjustment of child support orders in TANF 
cases every 3 years will cost the Federal government approximately $15 
million in FY 2008 but result in approximately $40 million in savings 
over 4 years. Similarly, this provision was estimated to cost State 
governments approximately $10 million in FY 2008 but save States almost 
$40 million over 4 years with a net government impact of approximately 
$25 million in costs in FY 2008 and approximately $80 million in 
savings by FY 2011. These costs reflect the upfront increased 
administrative costs involved in reviewing these cases and, as 
appropriate, updating the orders every 3 years, and the savings that 
will result over time in the way of increased revenues (Federal and 
State shares of the larger collections amounts). This provision is also 
beneficial to families in terms of ensuring that support orders remain 
fair and equitable over time and reflect the noncustodial parent's 
current ability to pay support.
    The provision on imposition of a $25 annual collection fee for 
never-IV-A cases with at least $500 in collections was estimated to 
save the Federal government, when DRA was enacted, a little less than 
$50 million in FY 2007 and result in approximately $270 million in 
Federal savings over 5 years. The provision was estimated to save State 
governments approximately $25 million in FY 2007 and approximately $140 
million over 5 years. These fees will partially offset the government's 
costs of providing services and are representative of Federal and State 
cost sharing in the program (66 and 34 percent, respectively). The 
clarification included in this regulation which exempts additional 
Tribal Title IV-A populations from this provision has negligible 
impacts on these estimates.
    Finally, the provision eliminating enhanced Federal funding for the 
cost of paternity testing was estimated to save the Federal government 
almost $8 million in FY 2007 and approximately $40 million over 5 
years, and will result in a dollar-for-dollar increase in State costs. 
In other words, each dollar saved by the Federal government because of 
the decrease in Federal financial participation will result in a dollar 
in State costs. Enhanced Federal funding for paternity testing is no 
longer necessary because the cost of these tests has decreased 
significantly over time.
    All together these provisions were estimated to save the Federal 
and State governments approximately $66 million in FY 2007 and 
approximately $495 million over 5 years. As each of these provisions 
was mandated under the Deficit Reduction Act of 2005, alternatives to 
this rulemaking are limited. We could have chosen not to update program 
rules to reflect these statutory changes, but that would be confusing 
to the public and would ultimately have no budgetary impact since these 
provisions are effective without regard to the issuance of rules.
    In the end, the rule remains consistent with the statute and the 
underlying budget implications.

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 $120 million or more in any one 
year.
    If a covered agency must prepare a budgetary impact statement, 
section 205 further requires that it select the most cost-effective and 
least burdensome alternative that achieves the objectives of the rule 
and is consistent with the statutory requirements. In addition, section 
203 requires a plan for informing and advising any small governments 
that may be significantly or uniquely impacted by the rule.
    The Department has determined that this rule, in implementing the 
new statutory requirements of the Deficit Reduction Act, would not 
impose a

[[Page 74919]]

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. Rather, we estimate that combined the 
provisions will result in savings to States. Over 5 years, the Federal 
government is estimated to save approximately $315 million as a result 
of the review and adjustment and collection fee provisions of the rules 
and States to save almost $180 million. States are estimated to receive 
approximately $40 million less in Federal reimbursement for laboratory 
costs associated with paternity establishment over 5 years. Thus, the 
estimated net impact of the rules on States is a savings of almost $140 
million over 5 years.

Congressional Review

    The final rule being issued here is a major rule subject to the 
Congressional Review Act provisions of the Small Business Regulatory 
Enforcement Fairness Act of 1996 (5 U.S.C. 801 et seq.) and will be 
transmitted to the Congress and the Comptroller General for review.

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 negatively 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. The 
required review of the rules and policies to determine their effect on 
family well-being has been completed, and these rules will have a 
positive impact on family well-being as defined in the legislation 
because expanded access to the Federal tax refund offset, mandatory 
three-year reviews of support orders in TANF cases, and State options 
to pay more collections to families will ensure more child support is 
paid to families.

Executive Order 13132

    Executive Order 13132 prohibits an agency from publishing any rule 
that has federalism implications if the rule either imposes substantial 
direct compliance costs on State and local governments or is not 
required by statute, or the rule preempts State law, unless the agency 
meets the consultation and funding requirements of section 6 of the 
Executive Order. These rules do not have federalism implications for 
State or local governments as defined in the Executive Order.

List of Subjects

45 CFR Part 301

    Child support, Grants programs/social programs.

45 CFR Part 302

    Child support, Grants programs/social programs.

45 CFR Part 303

    Child support, Grant programs/social programs.

45 CFR Part 304

    Child support, Grants programs/social programs.

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

    Dated: April 1, 2008.
Daniel C. Schneider,
Acting Assistant Secretary for Children and Families.
    Approved: August 13, 2008.
Michael O. Leavitt,
Secretary of Health and Human Services.

0
For the reasons discussed above, title 45 chapter III of the Code of 
Federal Regulations is amended as follows:

PART 301--STATE PLAN APPROVAL AND GRANT PROCEDURES

0
1. The authority citation for part 301 continues to read as follows:

    Authority: 42 U.S.C. 651 through 658, 660, 664, 666, 667, 1301, 
and 1302.


0
2. In Sec.  301.1, revise the definitions of ``Past-due support'' and 
``Qualified child'' to read as follows:


Sec.  301.l   General Definitions.

* * * * *
    Past-due support means the amount of support 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, which has not been paid. Through 
September 30, 2007, for purposes of referral for Federal tax refund 
offset of support due an individual who is receiving services under 
Sec.  302.33 of this chapter, past-due support means support owed to or 
on behalf of a qualified child, or a qualified child and the parent 
with whom the child is living if the same support order includes 
support for the child and the parent.
* * * * *
    Qualified child, through September 30, 2007, means a child who is a 
minor or who, while a minor, was determined to be disabled under title 
II or XVI of the Act, and for whom a support order is in effect.
* * * * *

PART 302--STATE PLAN APPROVAL REQUIREMENTS

0
1. The authority citation for part 302 continues to read as follows:

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


0
2. In Sec.  302.32, revise paragraphs (b) introductory text, 
(b)(2)(iv), and (b)(3)(ii) to read as follows:


Sec.  302.32  Collection and disbursement of support payments by the 
title IV-D Agency.

* * * * *
    (b) Timeframes for disbursement of support payments by the State 
disbursement unit (SDU) under section 454B of the Act.
* * * * *
    (2) * * *
    (iv) Collections as a result of Federal tax refund offset paid to 
the family or distributed in title IV-E foster care cases under Sec.  
302.52(b)(4) of this part, must be sent to the title IV-A family or 
title IV-E agency, as appropriate, within 30 calendar days of the date 
of initial receipt by the title IV-D agency, unless State law requires 
a post-offset appeal process and an appeal is filed timely, in which 
case the SDU must send any payment to the title IV-A family or title 
IV-E agency within 15 calendar days of the date the appeal is resolved.
    (3) * * *
    (ii) Collections due the family as a result of Federal tax refund 
offset must be sent to the family within 30 calendar days of the date 
of initial receipt in the title IV-D agency, except:
    (A) If State law requires a post-offset appeal process and an 
appeal is timely filed, in which case the SDU must send any payment to 
the family within 15 calendar days of the date the appeal is resolved; 
or
    (B) As provided in Sec.  303.72(h)(5) of this chapter.

0
3. In Sec.  302.33, revise the section heading and add new paragraph 
(e) to read as follows:


Sec.  302.33  Services to individuals not receiving title IV-A 
assistance.

* * * * *
    (e) Annual $25 fee.
    (1) A State must impose in, and report for, a Federal fiscal year 
an annual fee of $25 for each case if there is an individual in the 
case to whom IV-D services are provided and:

[[Page 74920]]

    (i) for whom the State has collected and disbursed to the family at 
least $500 of support in that year; and
    (ii) no individual in the case has received assistance under a 
former State AFDC program, assistance as defined in Sec.  260.31 under 
a State TANF program, or assistance as defined in Sec.  286.10 under a 
Tribal TANF program.
    (2) The State must impose the annual $25 fee in international cases 
under section 454(32) of the Act in which the criteria for imposition 
of the annual $25 fee under paragraph (1) of this section are met.
    (3) For each Federal fiscal year, after the first $500 of support 
is collected and disbursed to the family, the fee must be collected by 
one or more of the following methods:
    (i) Retained by the State from support collected in cases subject 
to the fee in accordance with distribution requirements in Sec.  
302.51(a)(5) of this part, except that no cost will be assessed for 
such services against:
    (A) a foreign obligee in an international case receiving IV-D 
services pursuant to section 454(32)(C) of the Act; and
    (B) an individual who is required to cooperate with the IV-D 
program as a condition of Food Stamp eligibility as defined at Sec.  
273.11(o) and (p) of title 7;
    (ii) Paid by the individual applying for services under section 
454(4)(A)(ii) of the Act and implementing regulations in this section, 
provided that the individual is not required to cooperate with the IV-D 
program as a condition of Food Stamp eligibility as defined at Sec.  
273.11(o) and (p) of title 7;
    (iii) Recovered from the noncustodial parent, provided that the 
noncustodial parent is not an individual required to cooperate with the 
IV-D program as a condition of Food Stamp eligibility as defined at 
Sec.  273.11(o) and (p) of title 7; or
    (iv) Paid by the State out of its own funds.
    (4) The State must report, in accordance with Sec.  302.15 of this 
part and instructions issued by the Secretary, the total amount of 
annual $25 fees imposed under this section for each Federal fiscal year 
as program income, regardless of which method or methods are used under 
paragraph (3) of this section.
    (5) State funds used to pay the annual $25 fee shall not be 
considered administrative costs of the State for the operation of the 
title IV-D plan, and all annual $25 fees imposed during a Federal 
fiscal year must be considered income to the program, in accordance 
with Sec.  304.50 of this chapter.

0
4. In Sec.  302.51, revise paragraphs (a)(1) and (a)(3) and add 
paragraph (a)(5) to read as follows:


Sec.  302.51  Distribution of support collections.

* * * * *
    (a)(1) For purposes of distribution in a IV-D case, amounts 
collected, except as provided under paragraphs (a)(3) and (5) of this 
section, shall be treated first as payment on the required support 
obligation for the month in which the support was collected and if any 
amounts are collected which are in excess of such amount, these excess 
amounts shall be treated as amounts which represent payment on the 
required support obligation for previous months.
* * * * *
    (3)(i) Except as provided in paragraph (a)(3)(ii), amounts 
collected through Federal tax refund offset must be distributed as 
arrearages in accordance with Sec.  303.72 of this chapter, and section 
457 of the Act;
    (ii) Effective October 1, 2009, or up to a year earlier at State 
option, amounts collected through Federal tax refund offset shall be 
distributed in accordance with Sec.  303.72 of this chapter and the 
option selected under section 454(34) of the Act.
* * * * *
    (5)(i) Except as provided in paragraph (a)(5)(ii), a State must pay 
to a family that has never received assistance under a program funded 
or approved under title IV-A or foster care under title IV-E of the Act 
and to an individual who is not required to cooperate with the IV-D 
program as a condition of Food Stamp eligibility as defined at Sec.  
273.11(o) and (p) of title 7 the portion of the amount collected that 
remains after withholding any annual $25 fee that the State imposes 
under Sec.  302.33(e) of this part.
    (ii) If a State charges the noncustodial parent the annual $25 fee 
under Sec.  302.33(e) of this part, the State may retain the $25 fee 
from the support collected after current support and any payment on 
arrearages for the month under a court or administrative order have 
been disbursed to the family provided the noncustodial parent is not 
required to cooperate with the IV-D program as a condition of Food 
Stamp eligibility as defined at Sec.  273.11(o) and (p) of title 7.
* * * * *

0
5. In Sec.  302.70, revise paragraph (a)(10) in its entirety to read as 
follows:


Sec.  302.70  Required State laws.

    (a) * * *
    (10) Procedures for the review and adjustment of child support 
orders in accordance with Sec.  303.8(b) of this chapter.
* * * * *

PART 303--STANDARDS FOR PROGRAM OPERATIONS

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

    Authority: 42 U.S.C. 651 through 658, 659, 659A, 660, 663, 664, 
666, 667, 1302, 1396a(a)(25), 1396b(d)(2), 1396b(o), 1396b(p), and 
1396k.


0
2. In Sec.  303.7, add new paragraph (e) to read as follows:


Sec.  303.7  Provision of services in interstate cases.

* * * * *
    (e) Imposition and reporting of annual $25 fee in interstate cases. 
The title IV-D agency in the initiating State must impose and report 
the annual $25 fee in accordance with Sec.  302.33(e) of this chapter.
* * * * *

0
3. In Sec.  303.8, revise paragraphs (b) introductory text, (b)(1) 
introductory text, and (b)(1)(i) to read as follows:


Sec.  303.8  Review and adjustment of child support orders.

* * * * *
    (b) Required procedures. Pursuant to section 466(a)(10) of the Act, 
when providing services under this chapter:
    (1) The State must have procedures under which, within 36 months 
after establishment of the order or the most recent review of the order 
(or such shorter cycle as the State may determine), if there is an 
assignment under part A, or upon the request of either parent, the 
State shall, with respect to a support order being enforced under title 
IV-D of the Act, taking into account the best interests of the child 
involved:
    (i) Review and, if appropriate, adjust the order in accordance with 
the State's guidelines established pursuant to section 467(a) of the 
Act if the amount of the child support award under the order differs 
from the amount that would be awarded in accordance with the 
guidelines;
* * * * *

0
4. In Sec.  303.72 revise paragraphs (a)(3) introductory text, 
(a)(3)(i), and (h)(1) and (h)(3) to read as follows:


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

    (a) * * *
    (3) For support owed in cases where the title IV-D agency is 
providing title IV-D services under Sec.  302.33 of this chapter:

[[Page 74921]]

    (i) The support is owed to or on behalf of a child, or a child and 
the parent with whom the child is living if the same support order 
includes support for the child and the parent.
* * * * *
    (h) * * *
    (1) Collections received by the IV-D agency as a result of Federal 
tax refund offset to satisfy title IV-A or non-IV-A past-due support 
shall be distributed as required in accordance with section 457 and, 
effective October 1, 2009, or up to a year earlier at State option, in 
accordance with the option selected under section 454(34) of the Act.
* * * * *
    (3)(i) Except as provided in paragraph (h)(3)(ii), the IV-D agency 
must inform individuals receiving services under Sec.  302.33 of this 
chapter in advance that amounts offset will be applied to satisfy any 
past-due support which has been assigned to the State and submitted for 
Federal tax refund offset.
    (ii) Effective October 1, 2009, or up to a year earlier at State 
option, the IV-D agency need no longer meet the requirement for notice 
under paragraph (h)(3)(i) if the State has opted, under section 454(34) 
of the Act, to apply amounts submitted to Federal tax refund offset 
first to satisfy any current support due and past-due support owed to 
the family.
* * * * *

PART 304--FEDERAL FINANCIAL PARTICIPATION

0
1. The authority citation for part 304 continues to read as follows:

    Authority: 42 U.S.C. 651 through 655, 657, 1302, 1396a(a)(25), 
1396b(d)(2), 1396b(o), 1396b(p), and 1396k.


Sec.  304.20  [Amended]


0
2. In Sec.  304.20, revise paragraph (d) to read as follows:


Sec.  304.20  Availability and rate of Federal financial participation.

* * * * *
    (d) Federal financial participation at the 90 percent rate is 
available for laboratory costs incurred in determining paternity on or 
after October 1, 1988, and until September 30, 2006, including the 
costs of obtaining and transporting blood and other samples of genetic 
material, repeated testing when necessary, analysis of test results, 
and the costs for expert witnesses in a paternity determination 
proceeding, but only if the expert witness costs are included as part 
of the genetic testing contract.

 [FR Doc. E8-28660 Filed 12-8-08; 8:45 am]
BILLING CODE 4184-01-P