Rule2021-23742
Claims Collection
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
November 24, 2021
Effective
February 22, 2022
Issuing agencies
National Foundation on the Arts and the HumanitiesNational Endowment for the Humanities
Abstract
The National Endowment for the Humanities (NEH) is revising its Claims Collection regulation in accordance with the Debt Collection Improvement Act of 1996 (DCIA), as implemented by the Department of Justice (DOJ) and the Department of Treasury (Treasury) in the revised Federal Claims Collection Standards (FCCS). This final rule revises NEH's rules and procedures for administrative collection, offset, compromise, suspension, and termination of collection activity for civil claims for money, funds, or property. Additionally, this final rule revises the rules and procedures that NEH follows to refer civil claims to Treasury, Treasury-designated debt collection centers, or DOJ so that Treasury or DOJ may collect the civil claim through further administrative action or litigation, as applicable.
Full Text
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<title>Federal Register, Volume 86 Issue 224 (Wednesday, November 24, 2021)</title>
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[Federal Register Volume 86, Number 224 (Wednesday, November 24, 2021)]
[Rules and Regulations]
[Pages 66964-66975]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2021-23742]
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NATIONAL FOUNDATION ON THE ARTS AND HUMANITIES
National Endowment for the Humanities
45 CFR Part 1177
RIN 3136-AA38
Claims Collection
AGENCY: National Endowment for the Humanities; National Foundation on
the Arts and the Humanities.
ACTION: Direct final rule.
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SUMMARY: The National Endowment for the Humanities (NEH) is revising
its Claims Collection regulation in accordance with the Debt Collection
Improvement Act of 1996 (DCIA), as implemented by the Department of
Justice (DOJ) and the Department of Treasury (Treasury) in the revised
Federal Claims Collection Standards (FCCS). This final rule revises
NEH's rules and procedures for administrative collection, offset,
compromise, suspension, and termination of collection activity for
civil claims for money, funds, or property. Additionally, this final
rule revises the rules and procedures that NEH follows to refer civil
claims to Treasury, Treasury-designated debt collection centers, or DOJ
so that Treasury or DOJ may collect the civil claim through further
administrative action or litigation, as applicable.
DATES: This rule is effective February 22, 2022 without further action,
unless adverse comment is received by December 27, 2021. If adverse
comment is received, NEH will publish a timely withdrawal of the rule
in the Federal Register.
ADDRESSES: You may send comments by email to <a href="/cdn-cgi/l/email-protection#482f2d262b273d263b2d2408262d20662f273e"><span class="__cf_email__" data-cfemail="3c5b59525f5349524f59507c525954125b534a">[email protected]</span></a>.
Instructions: Include ``Claims Collection'' and RIN 3136-AA38 in
the subject line of the email.
FOR FURTHER INFORMATION CONTACT: Elizabeth Voyatzis, Deputy General
Counsel, Office of the General Counsel, National Endowment for the
Humanities, 400 7th Street SW, Room 4060, Washington, DC 20506; (202)
606-8322; <a href="/cdn-cgi/l/email-protection#4027252e232f352e33252c002e25286e272f36"><span class="__cf_email__" data-cfemail="0b6c6e6568647e65786e674b656e63256c647d">[email protected]</span></a>.
SUPPLEMENTARY INFORMATION:
1. Background
The original FCCS provided guidance for implementing the Debt
Collection Act of 1982, Public Law 97-365 on a government-wide basis.
NEH implemented the FCCS in 1986 in its Claims Collection regulation,
set forth at 45 CFR 1177 et seq. As mandated by the DCIA, in 2000, DOJ
and Treasury jointly promulgated the revised FCCS, set forth at 31 CFR
900-904, to reflect the DCIA's legislative changes to federal debt
collection procedures. The revised FCCS superseded the original FCCS.
As a result, NEH is revising its Claims Collection regulation to
conform with the DCIA and the current FCCS.
2. Basic Provisions
In accordance with the requirements of the DCIA and the revised
FCCS, this rule revises NEH's rules and procedures for the
administrative collection, offset, compromise, suspension, and
termination of collection activity for civil claims for money, funds,
or property, as defined by 31 U.S.C. 3701(b). Additionally, this rule
revises the rules and procedures that NEH will use to refer applicable
civil claims to Treasury, Treasury-designated debt collection centers,
or DOJ for collection by further administrative action or litigation.
This rule affects NEH's debtors, but it does not apply to claims
between federal agencies.
This rule incorporates the following changes to NEH's current
Claims Collection regulation (45 CFR 1177, et seq.):
A. Demand Letter
One demand letter should be sufficient. The demand letter will
include: (1) The applicable standards NEH follows for imposing any
interest, penalties, or administrative costs; (2) NEH's policies
regarding its use of collection agencies, federal salary offset, tax
refund offset, administrative offset, and litigation; (3) any rights
the debtor may have to seek review of NEH's determination of the debt
and to enter into a reasonable repayment agreement; and (4) information
regarding NEH's remedies to enforce payment of the debt.
[[Page 66965]]
B. Mutual Releases
In all appropriate instances, NEH and debtors will exchange mutual
releases of non-tax liabilities when compromising a claim.
C. Increase in Amount
The principal claim amount for which NEH is authorized to
compromise, suspend, or terminate collection activity--without
concurrence by DOJ--will increase from $20,000 to $100,000.
Additionally, the minimum claim amount that NEH may refer to DOJ for
litigation will increase from $600 to $2,500.
D. Transferring or Referring Delinquent Debt
There are new procedures for transferring or referring delinquent
debt to Treasury or a Treasury-designated debt collection center for
debt collection.
E. Centralized Administrative Offset
There are new debt collection procedures for disbursing officials
to follow when conducting mandatory centralized administrative offset.
F. Mandatory Credit Bureau Reporting
There are new debt collection procedures for mandatory credit
bureau reporting.
G. Prohibition Against Federal Financial Assistance
There are new debt collection procedures prohibiting federal
financial assistance, which includes grants, cooperative agreements,
contracts, loans, loan guarantees, and loan insurance to debtors,
unless waived by NEH's Chairperson (the ``Chairperson'') or the
Chairperson's designee.
Executive Order 12866, Regulatory Planning and Review, and Executive
Order 13563, Improving Regulation and Regulatory Review
This action is not a significant regulatory action and was
therefore not submitted to the Office of Management and Budget for
review.
Executive Order 13771, Reducing Regulations and Controlling Regulatory
Costs
This action is not expected to be an Executive Order 13771
regulatory action because this action is not significant under
Executive Order 12866.
Executive Order 13132, Federalism
This rulemaking does not have federalism implications. It will not
have substantial direct effects on the states, on the relationship
between the national government and the states, or on the distribution
of power and responsibilities among the various levels of government.
Executive Order 12988, Civil Justice Reform
This rulemaking meets the applicable standards set forth in section
3(a) and 3(b)(2) of Executive Order 12988. Specifically, this
rulemaking is written in clear language designed to help reduce
litigation.
Executive Order 13175, Indian Tribal Governments
Under the criteria in Executive Order 13175, NEH evaluated this
rulemaking and determined that it will not have any potential effects
on Federally recognized Indian Tribes.
Executive Order 12630, Takings
Under the criteria in Executive Order 12630, this rulemaking does
not have significant takings implications. Therefore, a takings
implication assessment is not required.
Administrative Procedure Act of 1946
NEH finds good cause to issue this regulation as a direct final
rule, without prior notice and comment, because the agency views it as
a noncontroversial amendment and anticipates no significant adverse
comment. This rulemaking merely conforms NEH's claims collection
regulation to the standards of agency practice and procedure previously
jointly promulgated by DOJ and Treasury according to the DCIA.
Therefore, under 5 U.S.C. 553(b)(3)(A), this rule is not subject to the
Administrative Procedure Act's requirements for a notice of proposed
rulemaking.
Regulatory Flexibility Act of 1980
This rulemaking will not have a significant adverse impact on a
substantial number of small entities, including small businesses, small
governmental jurisdictions, or certain small not-for-profit
organizations.
Paperwork Reduction Act of 1995
This rulemaking does not impose an information collection burden
under the Paperwork Reduction Act. This action contains no provisions
constituting a collection of information pursuant to the Paperwork
Reduction Act.
Unfunded Mandates Act of 1995
This rulemaking does not contain a Federal mandate that will result
in the expenditure by State, local, and Tribal governments, in the
aggregate, or by the private sector of $100 million or more in any one
year.
National Environmental Policy Act of 1969
This rulemaking will not have a significant effect on the human
environment.
Small Business Regulatory Enforcement Fairness Act of 1996
This rulemaking will not be a major rule as defined in section 804
of the Small Business Regulatory Enforcement Fairness Act of 1996. This
rulemaking will not result in an annual effect on the economy of $100
million or more, a major increase in costs or prices, significant
adverse effects on competition, employment, investment, productivity,
innovation, or the ability of United States-based companies to compete
with foreign-based companies in domestic and export markets.
E-Government Act of 2002
All information about NEH required to be published in the Federal
Register may be accessed at <a href="http://www.neh.gov">www.neh.gov</a>. The website <a href="https://www.regulations.gov">https://www.regulations.gov</a> contains electronic dockets for NEH's rulemakings
under the Administrative Procedure Act of 1946.
Plain Writing Act of 2010
To ensure this rulemaking was written in plain and clear language
so that it can be used and understood by the public, NEH modeled the
language of this rulemaking on the Federal Plain Language Guidelines.
List of Subjects in 45 CFR 1177
Administrative practice and procedure, Claims, Debt, Government
employees, Privacy.
0
For the reasons set forth in the preamble, the National Endowment for
the Humanities revises 45 CFR part 1177 to read as follows:
PART 1177--CLAIMS COLLECTION
Subpart A--Scope of Standards
Sec.
1177.1 Prescription of standards.
1177.2 Definitions and construction.
1177.3 Antitrust, fraud, and tax and interagency claims excluded.
1177.4 Compromise, waiver, or disposition under other statutes not
precluded.
1177.5 Form of payment.
1177.6 Subdivision of claims not authorized.
1177.7 Required administrative proceedings.
1177.8 No private rights created.
Subpart B--Standards for the Administrative Collection of Claims
1177.9 Aggressive NEH collection activity.
1177.10 Demand for payment.
1177.11 Collection by administrative offset.
1177.12 Reporting debts.
[[Page 66966]]
1177.13 Contracting with private collection contractors and with
entities that locate and recover unclaimed assets.
1177.14 Suspension or revocation of eligibility for federal
financial assistance.
1177.15 Liquidation of collateral.
1177.16 Collection in installments.
1177.17 Interest, penalties, and administrative costs.
1177.18 Analysis of costs.
1177.19 Use and disclosure of mailing addresses.
1177.20 Exemptions.
Subpart C--Standards for the Compromise of Claims
1177.21 Scope and application.
1177.22 Bases for compromise.
1177.23 Enforcement policy.
1177.24 Joint and several liability.
1177.25 Further review of compromise offers.
1177.26 Consideration of tax consequences to the Government.
1177.27 Mutual releases of the debtor and the Government.
Subpart D--Standards for Suspending or Terminating Collection Activity
1177.28 Scope and application.
1177.29 Suspension of collection activity.
1177.30 Termination of collection activity.
1177.31 Exception to termination.
1177.32 Discharge of indebtedness; reporting requirements.
Subpart E--Referrals to the Department of Justice
1177.33 Prompt referral.
1177.34 Claims Collection Litigation Report.
1177.35 Preservation of evidence.
1177.36 Minimum amount of referrals to the Department of Justice.
Authority: 31 U.S.C. 3711, 3716-3719; Pub. L. 104-134; 31 CFR
900-904.
Subpart A--Scope of Standards
Sec. 1177.1 Prescription of standards.
(a) The National Endowment for the Humanities (NEH) is issuing the
regulation the regulations in this part pursuant to 31 CFR 900-904 and
under the authority contained in 31 U.S.C. 3711(d)(2). The regulations
in this part prescribe the standards that NEH will use in the
administrative collection, offset, compromise, suspension, and
termination of collection activity for civil claims for money, funds,
or property, as defined by 31 U.S.C. 3701(b), unless specific Federal
agency statues or regulations apply to such activities or, as provided
for by Title 11 of the United States Code, when the claims involve
bankruptcy. Federal agencies include agencies of the executive,
legislative, and judicial branches of the Government, including
Government corporations. The regulations in this part also prescribe
standards for referring debts to the Department of Justice (DOJ) for
litigation. Additional guidance is contained in the Office of
Management and Budget's circular A-129 (Revised), ``Policies for
Federal Credit Programs and Non-Tax Receivables,'' the Department of
the Treasury's (Treasury) ``Managing Federal Receivables,'' and other
publications concerning debt collection and debt management. These
publications are available from the Debt Management Services, Financial
Management Service, Department of the Treasury, 401 14th Street SW,
Room 151, Washington, DC 20227.
(b) Additional rules governing centralized administrative offset
and the transfer of delinquent debts to Treasury or Treasury-designated
debt collection centers for collection (cross-servicing) under the Debt
Collection Improvement Act of 1996, Public Law 104-134, 110 Stat. 1321,
1358 (April 26, 1996) (DCIA), are issued in separate regulations by
Treasury. Rules governing the use of certain debt collection tools
created under the DCIA, such as administrative wage garnishment, also
are issued in separate regulations by Treasury. See generally 31 CFR
285.
(c) NEH is not limited to the remedies contained in this part and
may use all authorized remedies, including alternative dispute
resolution and arbitration, to collect civil claims, to the extent that
such remedies are not inconsistent with the Federal Claims Collection
Act, as amended, Public Law 89-508, 80 Stat. 308 (July 19, 1966), the
Debt Collection Act of 1982, Public Law 97-365, 96 Stat. 1749 (October
25, 1982), the DCIA, or other relevant statutes. The regulations in
this part are not intended to impair NEH's common law rights to collect
debts.
(d) Standards and policies regarding the classification of debt for
accounting purposes (for example, write off of uncollectible debt) are
contained in the Office of Management and Budget's Circular A-129
(Revised), ``Policies for Federal Credit Programs and Non-Tax
Receivables.''
Sec. 1177.2 Definitions and construction.
(a) For the purposes of the standards in this part, the terms
``claim'' and ``debt'' are synonymous and interchangeable. They refer
to an amount of money, funds, or property that an agency official has
determined to be due the United States from any person, organization,
or entity, except another Federal agency. For the purposes of
administrative offset under 31 U.S.C. 3716, the terms ``claim'' and
``debt'' include an amount of money, funds, or property owed by a
person to a State (including past-due support being enforced by a
State), the District of Columbia, American Samoa, Guam, the United
States Virgin Islands, the Commonwealth of the Northern Mariana
Islands, or the Commonwealth of Puerto Rico.
(b) ``Chairperson'' means the Chairperson of NEH or the
Chairperson's designee.
(c) A debt is ``delinquent'' if it has not been paid by the date
specified in the initial written demand for payment or applicable
agreement or instrument (including a post-delinquency payment
agreement), unless other satisfactory payment arrangements have been
made.
(d) Words in the plural form shall include the singular and vice
versa, and words signifying the masculine gender shall include the
feminine and vice versa. The terms ``includes'' and ``including'' do
not exclude matters not listed but do include matters that are in the
same general class.
(e) ``Recoupment'' is a special method for adjusting debts arising
under the same transaction or occurrence. For example, obligations
arising under the same contract generally are subject to recoupment.
(f) Unless otherwise stated, ``Secretary'' means the Secretary of
the Treasury or the Secretary's delegate.
Sec. 1177.3 Antitrust, fraud, and tax and interagency claims
excluded.
(a) The standards in this part relating to compromise, suspension,
and termination of collection activity do not apply to any debt based
in whole or in part on conduct that violates the antitrust laws or to
any debt involving fraud, the presentation of a false claim, or
misrepresentation on the part of the debtor or any party having an
interest in the claim. Only DOJ has the authority to compromise,
suspend, or terminate collection activity on such claims. The standards
in this part relating to the administrative collection of claims do
apply, but only to the extent authorized by DOJ in a particular case.
Upon identification of a claim based in whole or in part on conduct in
violation of the antitrust laws or any claim involving fraud, the
presentation of a false claim, or misrepresentation on the part of the
debtor or any party having an interest in the claim, NEH shall promptly
refer the case to DOJ for action. At its discretion, DOJ may return the
claim to NEH for further handling, in accordance with the standards in
this part.
(b) This part does not apply to tax debts.
(c) This part does not apply to claims between Federal agencies.
NEH will attempt to resolve interagency claims by negotiation in
accordance with
[[Page 66967]]
Executive Order 12146 (3 CFR, 1979 Comp., pp. 409-412).
Sec. 1177.4 Compromise, waiver, or disposition under other statutes
not precluded.
Nothing in this part precludes NEH's disposition of any claim under
statutes and implementing regulations other than 31 U.S.C. 37,
subchapter II (Claims of the United States Government). See e.g., the
Federal Medical Care Recovery Act, Public Law 87-693, 76 Stat. 593
(September 25, 1962) (codified at 42 U.S.C. 2651 et seq.), and
applicable regulations, 28 CFR 43. In such cases, the laws and
regulations that are specifically applicable to NEH's claims collection
activities generally take precedence over this part.
Sec. 1177.5 Form of payment.
Debtors may pay claims in the form of money or, when a contractual
basis exists, the Government may demand the return of specific property
or the performance of specific services.
Sec. 1177.6 Subdivision of claims not authorized.
NEH will not subdivide debts in order to avoid the monetary ceiling
established by 31 U.S.C. 3711(a)(2). NEH will consider a debtor's
liability arising from a particular transaction or contract as a single
debt in determining whether the debt is one of less than $100,000
(excluding interest, penalties, and administrative costs) or such
higher amount as the Attorney General shall from time to time prescribe
for purposes of compromising, suspending, or terminating collection
activity.
Sec. 1177.7 Required administrative proceedings.
NEH is not required to omit, foreclose, or duplicate administrative
proceedings required by contract or other laws or regulations.
Sec. 1177.8 No private rights created.
The standards in this part do not create any right or benefit,
substantive or procedural, enforceable at law or in equity by a party
against the United States, its agencies, its officers, or any other
person, nor shall NEH's failure to comply with any of the provisions of
this part be available to any debtor as a defense.
Subpart B--Standards for the Administrative Collection of Claims
Sec. 1177.9 Aggressive NEH collection activity.
(a) NEH will aggressively collect all debts that arise out of its
activities, or that are referred or transferred for collection services
to NEH. NEH will promptly undertake collection activities and take
follow-up action as necessary. Nothing in 31 CFR 900 through 904
requires DOJ, Treasury, or other Treasury-designated debt collection
centers to duplicate collection activities previously undertaken by NEH
or to perform collection activities that NEH should have undertaken.
(b) Debts that NEH refers or transfers to Treasury or Treasury-
designated debt collection centers under the authority of 31 U.S.C.
3711(g) will be serviced, collected, or compromised, or the collection
action will be suspended or terminated, in accordance with the
statutory requirements and authorities applicable to the collection of
such debts.
(c) NEH will cooperate with other agencies in debt collection
activities.
(d) NEH will consider referring debts that are less than 180 days
delinquent to Treasury or to Treasury-designated debt collection
centers to accomplish efficient, cost effective debt collection.
Treasury is a debt collection center, is authorized to designate other
Federal agencies as debt collection centers based on their performance
in collecting delinquent debts, and may withdraw such designations.
Referrals to debt collection centers are at the discretion of, and for
a time period acceptable to, the Secretary. Referrals may be for
servicing, collection, compromise, suspension, or termination of
collection action.
(e) NEH will transfer to the Secretary any debt that has been
delinquent for a period of 180 days or more so that the Secretary may
take appropriate action to collect the debt or terminate collection
action. See 31 CFR 285.12 (Transfer of Debts to Treasury for
Collection). This requirement does not apply to any debt that:
(1) Is in litigation or foreclosure;
(2) Will be disposed of under an approved asset sale program;
(3) Has been referred to a private collection contractor for a
period of time acceptable to the Secretary;
(4) Is at a debt collection center for a period of time acceptable
to the Secretary (see paragraph (d) of this section);
(5) Will be collected under internal offset procedures within three
years after the debt first became delinquent; or
(6) Is exempt from this requirement based on a determination by the
Secretary that exemption for a certain class of debt is in the best
interests of the United States. NEH may request that the Secretary
exempt specific classes of debts.
(e) Agencies operating Treasury-designated debt collection centers
are authorized to charge a fee for services rendered regarding referred
or transferred debts. NEH may pay the fee out of amounts it collects
and may add the fee to the debt as an administrative cost (see Sec.
1177.18).
Sec. 1177.10 Demand for payment.
(a) NEH will promptly make a written demand, as described in
paragraph (b) of this section, upon a debtor of the United States in
terms that inform the debtor of the consequences of failing to
cooperate with NEH to resolve the debt. The specific content, timing,
and number of demand letters will depend upon the type and amount of
the debt and the debtor's response, if any, to NEH's letters or
telephone calls. Generally, one demand letter should suffice. In
determining the timing of the demand letter(s), NEH will give due
regard to the need to refer debts promptly to DOJ for litigation, in
accordance with Sec. 1177.33 or otherwise. When necessary to protect
the Government's interest (for example, to prevent a statute of
limitations from running), NEH may precede written demand by other
appropriate actions under this part, including immediate referral for
litigation.
(b) Demand letters will inform the debtor of:
(1) The basis for the indebtedness and the rights, if any, the
debtor may have to seek review within NEH;
(2) The applicable standards for imposing any interest, penalties,
or administrative costs;
(3) The date by which the debtor should make payment in order to
avoid late charges (i.e., interest, penalties, and administrative
costs) and enforced collection, which generally should not be more than
thirty (30) days from the date that NEH mails or hand-delivers the
demand letter; and
(4) The name, address, and phone number of a contact person or
office within NEH.
(c) NEH will exercise care to ensure that demand letters are mailed
or hand-delivered on the same day that they are dated. There is no
prescribed format for demand letters. NEH will utilize demand letters
and procedures that will lead to the earliest practicable determination
of whether the agency can resolve the debt administratively or must
refer it for litigation.
(d) NEH will include in demand letters such items as the agency's
willingness to discuss alternative methods of payment; its policies
with respect to the use of credit bureaus, debt collection centers, and
collection agencies; its remedies to enforce payment of the debt
(including
[[Page 66968]]
assessment of interest, administrative costs and penalties,
administrative garnishment, the use of collection agencies, Federal
salary offset, tax refund offset, administrative offset, and
litigation); the requirement that any debt delinquent for more than 180
days be transferred to Treasury for collection; and, depending on
applicable statutory authority, the debtor's entitlement to
consideration of a waiver.
(e) NEH will respond promptly to communications from debtors,
within thirty (30) days whenever feasible, and will advise debtors who
dispute debts to furnish available evidence to support their
contentions.
(f) Prior to initiating the demand process, or at any time during
or after completing the demand process, if NEH determines to pursue, or
is required to pursue, offset, it will follow the offset procedures in
Sec. 1177.11. The availability of funds or money for debt satisfaction
by offset, and NEH's determination to pursue collection by offset, will
release NEH from further compliance with paragraphs (a), (b), (c), and
(d) of this section.
(g) Prior to referring a debt for litigation, NEH will advise each
person it determines to be liable for the debt that, unless the agency
can collect the debt administratively, it may initiate litigation. This
notification will comply with Executive Order 12988 (3 CFR, 1996 Comp.,
pp. 157-163) and may be given as part of a demand letter under
paragraph (b) of this section or in a separate document. NEH will
notify DOJ that it has given this notice.
(h) When NEH learns that a bankruptcy petition has been filed with
respect to a debtor, before proceeding with further collection action,
the agency will immediately seek legal advice from its Office of the
General Counsel concerning the impact of the Bankruptcy Code on any
pending or contemplated collection activities. Unless NEH determines
that the automatic stay imposed at the time of filing pursuant to 11
U.S.C. 362 has been lifted or is no longer in effect, in most cases NEH
will immediately stop collection activity against the debtor.
(1) After seeking legal advice, in most cases NEH will file a proof
of claim with the bankruptcy court or the Trustee. NEH will refer to
the provisions of 11 U.S.C. 106 relating to the consequences on
sovereign immunity of filing a proof of claim.
(2) If NEH is a secured creditor, it may seek relief from the
automatic stay regarding its security, subject to the provisions and
requirements of 11 U.S.C. 362.
(3) In most cases, offset is stayed by the automatic stay. However,
NEH will seek legal advice from its Office of the General Counsel to
determine whether it may freeze its payments to the debtor, and other
agencies' payments that are available for offset, until it can obtain
from the bankruptcy court relief from the automatic stay. NEH will also
seek legal advice from its Office of the General Counsel to determine
whether recoupment is available.
Sec. 1177.11 Collection by administrative offset.
(a) Scope. (1) The term ``administrative offset'' has the meaning
provided in 31 U.S.C. 3701(a)(1).
(2) This section does not apply to:
(i) Debts arising under the Social Security Act, except as provided
in 42 U.S.C. 404;
(ii) Payments made under the Social Security Act, except as
provided for in 31 U.S.C. 3716(c) (see 31 CFR 285.4, Federal Benefit
Offset);
(iii) Debts arising under, or payments made under, the Internal
Revenue Code (see 31 CFR 285.2, Tax Refund Offset) or the tariff laws
of the United States;
(iv) Offsets against Federal salaries to the extent these standards
are inconsistent with regulations published to implement such offsets
under 5 U.S.C. 5514 and 31 U.S.C. 3716 (see 5 CFR part 550, subpart K,
and 31 CFR 285.7, Federal Salary Offset);
(v) Offsets under 31 U.S.C. 3728 against a judgment that a debtor
obtained against the United States;
(vi) Offsets or recoupments under common law, State law, or Federal
statutes specifically prohibiting offsets or recoupments of particular
types of debts; or
(vii) Offsets in the course of judicial proceedings, including
bankruptcy.
(3) Unless otherwise provided for by contract or law, NEH may
collect debts or payments that are not subject to administrative offset
under 31 U.S.C. 3716 by administrative offset under the common law or
other applicable statutory authority.
(4) Unless otherwise provided by law, NEH will not collect a debt
by administrative offset under the authority of 31 U.S.C. 3716 more
than ten (10) years after the Government's right to collect the debt
first accrued, unless facts material to the Government's right to
collect the debt were not known and could not reasonably have been
known by the Government official or officials who were charged with the
responsibility to discover and collect such debts. This limitation does
not apply to debts reduced to a judgment.
(5) In bankruptcy cases, NEH will seek legal advice from its Office
of the General Counsel concerning the impact of the Bankruptcy Code,
particularly 11 U.S.C. 106, 362, and 553, on pending or contemplated
collections by offset.
(b) Mandatory centralized administrative offset. (1) NEH is
required to refer past due, legally enforceable nontax debts which are
over 180 days delinquent to the Secretary for collection by centralized
administrative offset. NEH may also refer debts which are less than 180
days delinquent to the Secretary for this purpose. See paragraph (b)(5)
of this section for debt certification requirements.
(2) The names and taxpayer identifying numbers (TINs) of debtors
who owe debts which NEH referred to the Secretary as described in
paragraph (b)(1) of this section will be compared to the names and TINs
on payments to be made by Federal disbursing officials. Federal
disbursing officials include disbursing officials of Treasury, the
Department of Defense, the United States Postal Service, other
Government corporations, and United States disbursing officials
designated by the Secretary. When a debtor's name and TIN match a
payee's name and TIN and all other requirements for offset have been
met, the payment will be offset to satisfy the debt.
(3) Federal disbursing officials will notify the debtor/payee in
writing that an offset has occurred to satisfy, in part or in full, a
past due, legally enforceable delinquent debt. The notice will include
a description of the type and amount of the payment from which the
offset was taken, the amount of offset that was taken, the identity of
the creditor agency requesting the offset, and a contact point within
the creditor agency who will respond to questions regarding the offset.
(4) NEH will initiate offsets only after:
(i) Sending the debtor written notice of the type and amount of the
debt, NEH's intention to use administrative offset to collect the debt,
and an explanation of the debtor's rights under 31 U.S.C. 3716; and
(ii) Giving the debtor the opportunity:
(A) To inspect and copy NEH records related to the debt;
(B) For a review within NEH of its determination of indebtedness;
and
(C) To make a written agreement to repay the debt.
(5) NEH may omit the procedures set forth in paragraph (b)(4) of
this section when:
(i) The offset is in the nature of a recoupment;
(ii) The debt arises under a contract as set forth in Cecile
Industries, Inc. v. Cheney, 995 F.2d 1052 (Fed. Cir. 1993) (notice and
other procedural protections
[[Page 66969]]
set forth in 31 U.S.C. 3716(a) do not supplant or restrict established
procedures for contractual offsets accommodated by the Contracts
Disputes Act); or
(iii) In the case of non-centralized administrative offsets
conducted under paragraph (c) of this section, NEH first learns of the
amount owed by the debtor when there is insufficient time before
payment would be made to the debtor/payee to allow for prior notice and
an opportunity for review. When NEH omits prior notice and an
opportunity for review, it will give the debtor such notice and an
opportunity for review as soon as practicable, and it will promptly
refund any money which it ultimately finds the debtor did not owe to
the Government.
(6) When an agency has previously given a debtor any of the
required notice and review opportunities with respect to a particular
debt (see e.g., Sec. 1177.10), NEH need not duplicate such notice and
review opportunities before initiating administrative offset.
(7) When referring delinquent debts to the Secretary, NEH will
certify, in a form acceptable to the Secretary, that:
(i) The debt(s) is (are) past due and legally enforceable; and
(ii) NEH has complied with all due process requirements under 31
U.S.C. 3716(a) and paragraphs (b)(4), (b)(5), and (b)(6) of this
section.
(8) Payments that are prohibited by law from being offset are
exempt from centralized administrative offset. The Secretary will
exempt payments under means-tested programs from centralized
administrative offset when the head of the payment certifying or
authorizing agency requests in writing that the Secretary do so. Also,
the Secretary may exempt other classes of payments from centralized
offset upon the head of the payment certifying or authorizing agency's
written request.
(9) NEH may offset benefit payments made under the Social Security
Act (42 U.S.C. 301, et seq.), part B of the Black Lung Benefits Act (30
U.S.C. 921, et seq.), and any law administered by the Railroad
Retirement Board (other than tier two (2) benefits), only in accordance
with Treasury regulations, issued in consultation with the Social
Security Administration, the Railroad Retirement Board, and the Office
of Management and Budget. See 31 CFR 285.4.
(10) In accordance with 31 U.S.C. 3716(f), the Secretary may waive
the Computer Matching and Privacy Protection Act of 1988's provisions
concerning matching agreements and post-match notification and
verification (5 U.S.C. 552a(o) and (p)) for centralized administrative
offset upon receipt of a certification from NEH, as the creditor
agency, that it has met the due process requirements enumerated in 31
U.S.C. 3716(a). NEH's certification in accordance with paragraph (b)(7)
of this section will satisfy this requirement. If the Secretary grants
such a waiver, only Treasury's Data Integrity Board is required to
oversee any matching activities, in accordance with 31 U.S.C. 3716(g).
This waiver authority does not apply to offsets conducted under
paragraphs (c) and (d) of this section.
(c) Non-centralized administrative offset. (1) Generally, NEH will
conduct non-centralized administrative offsets at its discretion on an
ad hoc case-by-case basis, internally or in cooperation with the agency
certifying or authorizing payments to the debtor. Unless otherwise
prohibited by law, when centralized administrative offset is not
available or appropriate, NEH may collect past due, legally enforceable
non-tax delinquent debts through non-centralized administrative offset.
In these cases, a creditor agency may make a request directly to a
payment authorizing agency to offset a payment due a debtor in order to
collect a delinquent debt. For example, it may be appropriate for a
creditor agency to request that the Office of Personnel Management
(OPM) offset a Federal employee's lump sum payment upon leaving
Government service in order to satisfy an unpaid advance.
(2) Before requesting that a payment authorizing agency conduct a
non-centralized administrative offset, NEH will provide:
(i) The debtor with due process as set forth in paragraphs (b)(4)
through (6) of this section; and
(ii) The payment authorizing agency with written certification that
the debtor owes past due, legally enforceable delinquent debt in the
amount stated, and that NEH has fully complied with its regulations
concerning administrative offset.
(3) Payment authorizing agencies will comply with offset requests
by creditor agencies to collect debts owed to the United States, unless
the offset would not be in the best interests of the United States with
respect to the authorizing agency's program, or would otherwise be
contrary to law. NEH will make appropriate use of other agencies'
cooperative efforts in effecting collection by administrative offset.
(4) When collecting multiple debts by non-centralized
administrative offset, NEH will apply the recovered amounts to those
debts in accordance with the best interests of the United States, as
determined by the facts and circumstances of the specific case,
particularly the applicable statute of limitations.
(d) Requests to OPM to offset a debtor's anticipated or future
benefit payments under the Civil Service Retirement and Disability
Fund. Upon providing OPM written certification that a debtor has been
afforded the procedures provided in paragraphs (b)(4) through (6) of
this section, NEH may request that OPM offset a debtor's anticipated or
future benefit payments under the Civil Service Retirement and
Disability Fund (Fund) in accordance with regulations codified at 5 CFR
831.1801-831.1808. Upon receipt of such a request, OPM will identify
and ``flag'' a debtor's account in anticipation of the time when the
debtor requests, or becomes eligible to receive, payments from the
Fund. This will satisfy any requirement that NEH initiate offset prior
to the expiration of the time limitations referenced in paragraph
(a)(4) of this section.
(e) Review Requirements. (1) For purposes of this section, whenever
NEH is required to afford a debtor a review, it will provide the debtor
with a reasonable opportunity for an oral hearing when the debtor
requests reconsideration of the debt and NEH determines that the
question of indebtedness cannot be resolved by reviewing the
documentary evidence; for example, when the validity of the debt turns
on an issue of credibility or veracity.
(2) Unless otherwise required by law, an oral hearing under this
section is not required to be a formal evidentiary hearing, although
NEH will carefully document all significant matters discussed at the
hearing.
(3) This section does not require an oral hearing with respect to
debt collection systems in which a determination of indebtedness rarely
involves issues of credibility or veracity and NEH has determined that
the review of the written record is ordinarily an adequate means to
correct prior mistakes.
(4) In those cases when an oral hearing is not required by this
section, NEH will accord the debtor a ``paper hearing;'' that is, a
determination of the request for reconsideration based upon a review of
the written record.
Sec. 1177.12 Reporting debts.
(a) NEH procedures for reporting delinquent debts to credit bureaus
and other automated databases will comply with the Bankruptcy Code and
the Privacy Act of 1974, 5 U.S.C. 552a, as amended. The provisions of
the Privacy Act do not apply to credit bureaus.
[[Page 66970]]
(b) NEH procedures for reporting delinquent consumer debts to
credit bureaus will be consistent with the due process and other
requirements contained in 31 U.S.C. 3711(e). When an agency has given a
debtor any of the required notice and review opportunities with respect
to a particular debt, NEH need not duplicate such notice and review
opportunities before reporting that delinquent consumer debt to credit
bureaus.
(c) NEH will report delinquent debts to the Department of Housing
and Urban Development's Credit Alert Interactive Voice Response System
(CAIVRS). NEH will contact the Director of Information Resources
Management Policy and Management Division, Office of Information
Technology, Department of Housing and Urban Development, 451 7th Street
SW, Washington, DC 20410 for information about the CAIVRS program.
Sec. 1177.13 Contracting with private collection contractors and with
entities that locate and recover unclaimed assets.
(a) Subject to the provisions of paragraph (b) of this section, NEH
may contract with private collection contractors, as defined in 31
U.S.C. 3701(f), to recover delinquent debts, provided that:
(1) NEH retains the authority to resolve disputes, compromise
debts, suspend or terminate collection activity, and refer debts for
litigation;
(2) The private collection contractor is not allowed to offer the
debtor, as an incentive for payment, the opportunity to pay the debt
less the private collection contractor's fee unless NEH has granted
such authority prior to the offer;
(3) The contract provides that the private collection contractor is
subject to the Privacy Act of 1974, to the extent specified in 5 U.S.C.
552a(m), and to applicable Federal and state laws and regulations
pertaining to debt collection practices, including but not limited to
the Fair Debt Collection Practices Act, 15 U.S.C. 1692; and
(4) The private collection contractor is required to account for
all amounts collected.
(b) NEH will use government-wide debt collection contracts to
obtain debt collection services provided by private contractors.
However, NEH may refer debts to private collection contractors pursuant
to a contract with the private collection contractor only if such debts
are not subject to the requirement to transfer debts to Treasury for
collection. See 31 U.S.C. 3711(g); 31 CFR 285.12(e).
(c) NEH may fund private collection contractor contracts in
accordance with 31 U.S.C. 3718(d), or as otherwise permitted by law.
(d) NEH may enter into contracts for locating and recovering United
States assets, such as unclaimed assets. NEH will establish procedures
that are acceptable to the Secretary before entering into contracts to
recover United States assets held by a state government or a financial
institution.
(e) NEH may enter into contracts for debtor asset and income search
reports. In accordance with 31 U.S.C. 3718(d), such contracts may
provide that the fee a contractor charges NEH for such services may be
payable from the amounts recovered, unless otherwise prohibited by
statute.
Sec. 1177.14 Suspension or revocation of eligibility for federal
financial assistance.
(a) Unless waived by the Chairperson (or the Chairperson's
designee), NEH will not extend financial assistance, which includes
grants, cooperative agreements, contracts, loans, loan guarantees, or
loan insurance to any person delinquent on a nontax debt owed to a
Federal agency. NEH may extend credit after the delinquency has been
resolved. The Secretary may exempt classes of debts from this
prohibition and has prescribed standards defining when a
``delinquency'' is ``resolved'' for purposes of this prohibition. See
31 CFR 285.13 (Barring Delinquent Debtors from Obtaining Federal Loans
or Loan Insurance or Guarantees).
(b) In non-bankruptcy cases, when NEH is seeking the collection of
statutory penalties, forfeitures, or other types of claims, it will
consider suspending or revoking a debtor's licenses, permits, grants,
cooperative agreements, contracts, or other privileges for inexcusable
or willful failure to pay such a debt in accordance with NEH's
regulations or governing procedures. In its written demand for payment,
NEH will advise the debtor of the agency's ability to suspend or revoke
licenses, permits, grants, cooperative agreements, contracts, or other
privileges. In instances where NEH is making, guaranteeing, insuring,
acquiring, or participating in grants, cooperative agreements,
contracts, or loans, it will consider suspending or disqualifying any
lender, contractor, grantee, partner, counterparty, broker, or
participant from doing further business with NEH or engaging in
programs, agreements, or activities that are sponsored, co-sponsored or
otherwise supported by NEH if such lender, contractor, grantee,
partner, counterparty, broker, or participant fails to pay its debts to
the Government within a reasonable time or if such lender, contractor,
grantee, partner, counterparty, broker, or participant has been
suspended, debarred, or disqualified from participation in a program,
agreement, or activity by another Federal agency. NEH will report to
Treasury the failure of any surety to honor its obligations in
accordance with 31 U.S.C. 9305. The Treasury will forward to all
interested agencies a notification that a surety's certificate of
authority to do business with the Government has been revoked by
Treasury.
(c) NEH will also extend the suspension or revocation of licenses,
permits, grants, cooperative agreements, contracts, or other privileges
to Federal programs, agreements, or activities that are administered by
the states or other third parties on behalf of the Federal Government,
to the extent that they affect the Federal Government's ability to
collect money or funds owed by debtors. Therefore, states or other
third parties that manage Federal programs, agreements, or activities,
pursuant to NEH approval, should ensure that appropriate steps are
taken to safeguard against issuing licenses, permits, grants,
cooperative agreements, contracts, or other privileges to debtors who
fail to pay their debts to the Federal Government.
(d) In bankruptcy cases, before advising the debtor of its
intention to suspend or revoke licenses, permits, grants, cooperative
agreements, contracts, or other privileges, NEH will seek legal advice
from its Office of the General Counsel concerning the impact of the
Bankruptcy Code, particularly 11 U.S.C. 362 and 525, which may restrict
such action.
Sec. 1177.15 Liquidation of collateral.
(a) NEH will liquidate security or collateral through the exercise
of a power of sale in the security instrument or a nonjudicial
foreclosure, and apply the proceeds to the applicable debt(s), if the
debtor fails to pay the debt(s) within a reasonable time after demand
and if such action is in the best interest of the United States.
Collection from other sources, including liquidation of security or
collateral, is not a prerequisite to requiring payment by a surety,
insurer, or guarantor unless such action is expressly required by
statute or contract.
(b) When NEH learns that a bankruptcy petition has been filed with
respect to a debtor, the agency will seek legal advice from its Office
of the General Counsel concerning the impact of the Bankruptcy Code,
including but not limited to 11 U.S.C. 362, to
[[Page 66971]]
determine the applicability of the automatic stay and the procedures
for obtaining relief from such stay prior to proceeding under paragraph
(a) of this section.
Sec. 1177.16 Collection in installments.
(a) Whenever feasible, NEH will collect the total amount of a debt
in one lump sum. If a debtor is financially unable to pay a debt in one
lump sum, NEH may accept payment in regular installments. NEH will
obtain financial statements from debtors who represent that they are
unable to pay in one lump sum and independently verify such
representations whenever possible (see Sec. 1177.22(g) of this part).
If NEH agrees to accept payments in regular installments, it will
obtain a legally enforceable written agreement from the debtor that
specifies all of the terms of the arrangement and that contains a
provision accelerating the debt in the event of default.
(b) The size and frequency of installment payments will bear a
reasonable relation to the size of the debt and the debtor's ability to
pay. If possible, the installment payments should be sufficient in size
and frequency to liquidate the debt in three years or less.
(c) NEH will obtain security for deferred payments, in appropriate
cases. NEH may accept installment payments notwithstanding the debtor's
refusal to execute a written agreement or to give security, at the
agency's option.
Sec. 1177.17 Interest, penalties, and administrative costs.
(a) Except as provided in paragraphs (g), (h), and (i) of this
section, NEH will charge interest, penalties, and administrative costs
on debts owed to the United States pursuant to 31 U.S.C. 3717. NEH will
mail or hand-deliver a written notice to the debtor, at the debtor's
most recent address available to NEH, explaining the agency's
requirements concerning these charges, except where these requirements
are included in a contractual or repayment agreement. These charges
shall continue to accrue until the debt is paid in full or otherwise
resolved through compromise, termination, or waiver of the charges.
(b) NEH will charge interest on debts owed the United States as
follows:
(1) Interest will accrue from the date of delinquency, or as
otherwise provided by law.
(2) Unless otherwise established in a grant, cooperate agreement,
contract, repayment agreement, or by statute, the rate of interest that
NEH charges will be the rate that the Secretary establishes annually in
accordance with 31 U.S.C. 3717. Pursuant to 31 U.S.C. 3717, NEH may
charge a higher rate of interest if it reasonably determines that a
higher rate is necessary to protect the rights of the United States.
NEH will document the reason(s) for its determination that the higher
rate is necessary.
(3) The rate of interest that NEH initially charges will remain
fixed for the duration of the indebtedness. When a debtor defaults on a
repayment agreement and seeks to enter into a new agreement, NEH may
require payment of interest at a new rate that reflects the Treasury's
value of funds at the time the new agreement is executed. NEH will not
compound interest; that is, it will not charge interest on interest,
penalties, or administrative costs required by this section. If,
however, a debtor defaults on a previous repayment agreement, NEH will
add to the principal under the new repayment agreement any charges that
accrued but which NEH did not collect under the defaulted agreement.
(c) NEH will assess administrative costs it incurred for processing
and handling delinquent debts. NEH will base its calculation of
administrative costs on the actual costs it incurred or upon its
estimated costs.
(d) Unless otherwise established in a contract, repayment
agreement, or by statute, NEH will charge a penalty, pursuant to 31
U.S.C. 3717(e)(2), not to exceed six (6) percent a year on the amount
due on a debt that is delinquent for more than ninety (90) days. This
charge shall accrue from the date of delinquency.
(e) NEH may increase an ``administrative debt'' by the cost-of-
living adjustment in lieu of charging interest and penalties under this
section. ``Administrative debt'' includes but is not limited to a debt
based on fines, penalties, and overpayments, but does not include a
debt based on the extension of Government credit, such as those arising
from loans and loan guaranties. The cost-of-living adjustment is the
percentage by which the Consumer Price Index for the month of June of
the calendar year preceding the adjustment exceeds the Consumer Price
Index for the month of June of the calendar year in which the debt was
determined or last adjusted. NEH will annually compute increases to
administrative debts. NEH will use this alternative only when there is
a legitimate reason to do so, such as when calculating interest and
penalties on a debt would be extremely difficult because of the debt's
age.
(f) When a debtor pays a debt in partial or installment payments,
the Government will first apply the amount it receives to any
contingency fees added to the debt, second to outstanding penalties,
third to administrative costs other than contingency fees, fourth to
interest, and last to principal. For purposes of this paragraph (f),
``contingency fees'' are administrative costs resulting from fees paid
by a Federal agency to other Federal agencies or private collection
contractors for collection services rendered when the fees are paid
from the amounts collected from a debtor.
(g) NEH will waive the collection of interest and administrative
costs imposed pursuant to this section on the portion of the debt that
the debtor pays within thirty (30) days after the date on which
interest began to accrue. NEH may extend this thirty-day period on a
case-by-case basis. In addition, NEH may waive interest, penalties, and
administrative costs charged under this section, in whole or in part,
without regard to the amount of the debt, either under the criteria set
forth in these standards for the compromise of debts, or if NEH
determines that collection of these charges is against equity and good
conscience or is not in the best interest of the United States.
(h) NEH will not suspend the assessment of interest, penalties, and
administrative costs during the administrative review of a debt, except
for periods during which it has suspended collection activity under
Sec. 1177.29 of this part.
(i) NEH is authorized to impose interest and related charges on
debts not subject to 31 U.S.C. 3717, in accordance with the common law.
Sec. 1177.18 Analysis of costs.
NEH will periodically compare costs incurred and amounts collected.
NEH will use data on costs and corresponding recovery rates for debts
of different types and in various dollar ranges to compare the cost
effectiveness of alternative collection techniques, establish
guidelines with respect to points at which costs of further collection
efforts are likely to exceed recoveries, assist in evaluating
compromise offers, and establish minimum debt amounts below which
collection efforts need not be taken.
Sec. 1177.19 Use and disclosure of mailing addresses.
(a) When attempting to locate a debtor in order to collect or
compromise a debt under this part or other authority, NEH may send a
request to the Secretary to obtain a debtor's mailing address from the
Internal Revenue Service's records.
(b) NEH is authorized to use mailing addresses it obtained under
paragraph
[[Page 66972]]
(a) of this section to enforce collection of a delinquent debt and may
disclose such mailing addresses to other agencies and to collection
agencies for collection purposes.
Sec. 1177.20 Exemptions.
(a) The preceding sections of this part, to the extent that they
reflect remedies or procedures prescribed by the Debt Collection Act of
1982 and the DCIA, such as administrative offset, use of credit
bureaus, contracting for collection agencies, and interest and related
charges, do not apply to debts arising under, or payments made under,
the Internal Revenue Code of 1986, as amended (26 U.S.C. 1, et seq.);
the Social Security Act (42 U.S.C. 301, et seq.), except to the extent
provided under 42 U.S.C. 404 and 31 U.S.C. 3716(copyright); or the
tariff laws of the United States. These remedies and procedures,
however, may be authorized with respect to debts that are exempt from
the Debt Collection Act of 1982 and the DCIA, to the extent that they
are authorized under some other statute or the common law.
(b) NEH does not construe this section as prohibiting its use of
these authorities or requirements when collecting debts owed by persons
employed by agencies administering the laws cited in paragraph (a) of
this section, unless the debt arose under those laws.
Subpart C--Standards for the Compromise of Claims
Sec. 1177.21 Scope and application.
(a) The standards set forth in this subpart apply to the compromise
of debts pursuant to 31 U.S.C. 3711. NEH may exercise such compromise
authority for debts that arise out of its activities, or that are
referred or transferred to it for collection services, when the amount
of the debt then due, exclusive of interest, penalties, and
administrative costs, does not exceed $100,000 or any higher amount
authorized by the Attorney General. The Chairperson may designate
officials within NEH to exercise the authorities in this section.
(b) Unless otherwise provided by law, when the principal balance of
a debt, exclusive of interest, penalties, and administrative costs,
exceeds $100,000 or any higher amount authorized by the Attorney
General, the authority to accept the compromise rests with DOJ. NEH
will evaluate the compromise offer, using the factors set forth in this
subpart. If NEH finds that an offer to compromise a debt in excess of
$100,000 is acceptable, it will refer the debt to the Civil Division or
other appropriate litigating division in DOJ using a Claims Collection
Litigation Report (CCLR). NEH may obtain the CCLR from DOJ's National
Central Intake Facility. The referral will include appropriate
financial information and a recommendation for the acceptance of the
compromise offer. DOJ approval is not required if NEH rejects a
compromise offer.
Sec. 1177.22 Bases for compromise.
(a) NEH may compromise a debt if the Government cannot collect the
full amount because:
(1) The debtor is unable to pay the full amount in a reasonable
time, as verified through credit reports or other financial
information;
(2) The Government is unable to collect the debt in full by
enforced collection proceedings within a reasonable time;
(3) The cost of collecting the debt does not justify the enforced
collection of the full amount; or
(4) There is significant doubt concerning the Government's ability
to prove its case in court.
(b) NEH will consider the following relevant factors when
determining the debtor's inability to pay:
(1) The debtor's age and health;
(2) The debtor's present and potential income;
(3) The debtor's inheritance prospects;
(4) The possibility that the debtor has concealed or improperly
transferred assets; and
(5) The availability of assets or income that may be realized by
enforced collection proceedings.
(c) NEH will verify the debtor's claim of inability to pay by using
a credit report and other financial information as provided in
paragraph (g) of this section. NEH will consider the applicable
exemptions available to the debtor under state and Federal law in
determining the Government's ability to enforce collection. NEH also
may consider uncertainty as to the price that collateral or other
property will bring at a forced sale in determining the Government's
ability to enforce collection. A compromise that NEH effects under this
section will be for an amount that bears a reasonable relation to the
amount that can be recovered by enforced collection procedures, with
regard to the exemptions available to the debtor and the time that
collection will take.
(d) If there is significant doubt concerning the Government's
ability to prove its case in court for the full amount claimed, either
because of the legal issues involved or because of a bona fide dispute
as to the facts, then the amount that NEH accepts in compromise of such
cases should fairly reflect the probabilities of successful prosecution
to judgment, with due regard given to the availability of witnesses and
other evidentiary support for the Government's claim. In determining
the litigative risks involved, NEH will consider the probable amount of
court costs and attorney fees pursuant to the Equal Access to Justice
Act, 28 U.S.C. 2412, that may be imposed against the Government if it
is unsuccessful in litigation.
(e) NEH may compromise a debt if the cost of collecting the debt
does not justify the enforced collection of the full amount. The amount
NEH accepts in compromise in such cases may reflect an appropriate
discount for the administrative and litigative costs of collection,
with consideration given to the time it will take to effect collection.
Collection costs may be a substantial factor in the settlement of small
debts. In determining whether the cost of collecting justifies enforced
collection of the full amount, NEH will consider whether continued
collection of the debt, regardless of cost, is necessary to further an
enforcement principle, such as the Government's willingness to pursue
aggressively defaulting and uncooperative debtors.
(f) NEH generally will not accept compromises payable in
installments. This is not an advantageous form of compromise in terms
of time and administrative expense. If, however, payment of a
compromise in installments is necessary, NEH will obtain a legally
enforceable written agreement providing that, in the event of default,
the debtor's full original principal balance prior to compromise, less
sums paid thereon, will be reinstated. Whenever possible, NEH also will
obtain security for repayment in the manner set forth in subpart B of
this part.
(g) To assess the merits of a compromise offer based in whole or in
part on the debtor's inability to pay the full amount of a debt within
a reasonable time, NEH will obtain a current financial statement from
the debtor, executed under penalty of perjury, showing the debtor's
assets, liabilities, income, and expenses. NEH also may obtain credit
reports or other financial information to assess compromise offers. NEH
may use its own financial information form or may request suitable
forms from DOJ or the local United States Attorney's Office.
[[Page 66973]]
Sec. 1177.23 Enforcement policy.
Pursuant to this subpart, NEH may compromise statutory penalties,
forfeitures, or claims that it established as an aid to enforcement and
to compel compliance, if NEH's enforcement policy in terms of
deterrence and securing compliance, present and future, will be
adequately served by the agency's acceptance of the compromise offer.
Sec. 1177.24 Joint and several liability.
a. When two or more debtors are jointly and severally liable, NEH
will pursue collection activity against all debtors, as appropriate.
NEH will not attempt to allocate the burden of payment between the
debtors but will proceed to liquidate the indebtedness as quickly as
possible.
b. NEH will ensure that a compromise agreement with one debtor does
not release the agency's claim against the remaining debtors. The
amount of a compromise with one debtor will not be considered a
precedent or binding in determining the amount that will be required
from other debtors jointly and severally liable on the claim.
Sec. 1177.25 Further review of compromise offers.
If NEH is uncertain whether to accept a firm, written, substantive
compromise offer on a debt that is within the agency's delegated
compromise authority, it may refer the offer to the Civil Division or
other appropriate litigating division in DOJ, using a CCLR accompanied
by supporting data and particulars concerning the debt. DOJ may act
upon such an offer or return it to NEH with instructions or advice.
Sec. 1177.26 Consideration of tax consequences to the Government.
In negotiating a compromise, NEH will consider the tax consequences
to the Government. In particular, NEH will consider requiring a waiver
of the debtor's tax-loss-carry-forward and tax-loss-carry-back rights.
For information on discharge of indebtedness reporting requirements,
see Sec. 1177.32.
Sec. 1177.27 Mutual releases of the debtor and the Government.
In all appropriate instances, NEH will implement acceptable
compromises by means of a mutual release, in which the debtor is
released from further non-tax liability on the compromised debt in
consideration of payment in full of the compromise amount and the
Government and its officials, past and present, are released and
discharged from any and all of the debtor's claims and causes of action
arising from the same transaction. In the event NEH does not execute a
mutual release when it compromises a debt, unless prohibited by law,
the debtor is still deemed to have waived any and all claims and causes
of action against the Government and its officials related to the
transaction that gave rise to the compromised debt.
Subpart D--Standards for Suspending or Terminating Collection
Activity
Sec. 1177.28 Scope and application.
(a) The standards set forth in this subpart apply to the suspension
or termination of collection activity, pursuant to 31 U.S.C. 3711, on
debts that do not exceed $100,000, or such other amount as the Attorney
General may direct, exclusive of interest, penalties, and
administrative costs, after deducting the amount of partial payments or
collections, if any. Prior to referring a debt to DOJ for litigation,
NEH may suspend or terminate collection under this subpart with respect
to debts that arise out of its activities, or that are referred or
transferred to it for collection services.
(b) If, after deducting the amount of any partial payments or
collections, the principal amount of a debt exceeds $100,000, or such
other amount as the Attorney General may direct, exclusive of interest,
penalties, and administrative costs, the authority to suspend or
terminate rests solely with DOJ. If NEH believes that suspension or
termination of any debt in excess of $100,000 may be appropriate, it
will refer the debt to the Civil Division or other appropriate
litigating division in DOJ, using the CCLR. The referral will specify
the reasons for NEH's recommendation. If, prior to referral to the DOJ,
NEH determines that a debt is plainly erroneous or clearly without
legal merit, NEH may terminate collection activity without obtaining
DOJ concurrence, regardless of the amount involved.
Sec. 1177.29 Suspension of collection activity.
(a) NEH may suspend collection activity on a debt when:
(1) NEH cannot locate the debtor;
(2) NEH expects the debtor's financial condition to improve; or
(3) The debtor has requested a waiver or review of the debt.
(b) NEH may suspend collection activity on a debt when, based on
the debtor's current financial condition, the debtor's future prospects
justify retention of the debt for periodic review and collection
activity and:
(1) The applicable statute of limitations has not expired; or
(2) Future collection can be effected by administrative offset,
notwithstanding the expiration of the applicable statute of limitations
for litigation of claims, with due regard to the ten-year limitation
for administrative offset prescribed by 31 U.S.C. 3716(e)(1); or
(3) The debtor agrees to pay interest on the amount of the debt on
which collection will be suspended, and such suspension is likely to
enhance the debtor's ability to pay the full amount of the debt with
interest at a later date.
(c)(1) NEH will suspend collection activity during the time
required to consider the debtor's request for waiver or administrative
review of the debt, if the statute under which the debtor makes the
request prohibits NEH from collecting the debt during that time.
(2) If the statute under which the debtor makes the request does
not prohibit collection activity pending consideration of the debtor's
request, NEH may use discretion, on a case-by-case basis, to suspend
collection. Further, NEH ordinarily will suspend collection action upon
a request for waiver or review if a statute or regulation prohibits NEH
from issuing a refund of amounts it collected prior to considering the
debtor's request. However, NEH should not suspend collection when it
determines that the request for waiver or review is frivolous or was
made primarily to delay collection.
(d) If NEH learns that a bankruptcy petition has been filed with
respect to a debtor, in most cases it must suspend the collection
activity on that debtor's debt, pursuant to the provisions of 11 U.S.C.
362, 1201, and 1301, unless NEH can clearly establish that the
automatic stay has been lifted or is no longer in effect. NEH will
immediately seek legal advice from its Office of the General Counsel
and, if legally permitted, take the necessary legal steps to ensure
that the agency does not pay any funds or money to the debtor until it
obtains relief from the automatic stay.
Sec. 1177.30 Termination of collection activity.
(a) NEH may terminate collection activity when:
(1) NEH is unable to collect any substantial amount through its own
efforts or through the efforts of others;
(2) NEH is unable to locate the debtor;
(3) NEH anticipates that the costs of collection will exceed the
amount recoverable;
(4) The debt is legally without merit or enforcement of the debt is
barred by any applicable statute of limitations;
(5) NEH cannot substantiate the debt; or
[[Page 66974]]
(6) The debt against the debtor has been discharged in bankruptcy.
(b) Before terminating collection activity, NEH will have pursued
all appropriate means of collection and determined, based upon the
results of the collection activity, that the debt is uncollectible.
Terminating collection activity ceases active collection of the debt
but does not preclude NEH from retaining a record of the account for
purposes of:
(1) Selling the debt, if the Secretary determines that such sale is
in the best interests of the United States;
(2) Pursuing collection at a subsequent date in the event there is
a change in the debtor's status or a new collection tool becomes
available;
(3) Offsetting against future income or assets not available at the
time the agency terminated collection activity; or
(4) Screening future applicants for prior indebtedness.
(c) Generally, NEH will terminate collection activity on a debt
that has been discharged in bankruptcy, regardless of the amount. NEH
may continue collection activity, however, subject to the provisions of
the Bankruptcy Code, for any payments provided under a plan of
reorganization. Offset and recoupment rights may survive the discharge
of the debtor in bankruptcy and, under some circumstances, claims also
may survive the discharge. For example, if NEH is a known creditor of
the debtor, its claims may survive a discharge if it did not receive
formal notice of the proceedings. NEH will seek legal advice from its
Office of the General Counsel if it believes it has claims or offsets
that may survive the discharge of a debtor.
Sec. 1177.31 Exception to termination.
When a significant enforcement policy is involved, or recovery of a
judgment is a prerequisite to the imposition of administrative
sanctions, NEH may refer debts for litigation even though termination
of collection activity may otherwise be appropriate.
Sec. 1177.32 Discharge of indebtedness; reporting requirements.
(a) Before discharging a delinquent debt (also referred to as a
close out of the debt), NEH will take all appropriate steps to collect
the debt in accordance with 31 U.S.C. 3711(g), including, as
applicable, administrative offset; tax refund offset; Federal salary
offset; referral to Treasury, Treasury-designated debt collection
centers, or private collection contractors; credit bureau reporting;
wage garnishment; litigation; and foreclosure. Discharge of
indebtedness is distinct from termination or suspension of collection
activity under this subpart and is governed by the Internal Revenue
Code. When NEH suspends or terminates collection action on a debt, the
debt remains delinquent and NEH may pursue further collection action at
a later date, in accordance with the standards set forth in this part.
When NEH discharges a debt in full or in part, further collection
action is prohibited. Therefore, NEH will make the determination that
collection action is no longer warranted before discharging a debt. NEH
must also terminate debt collection action before discharging a debt.
(b) Section 3711(i), title 31, United States Code, requires NEH to
sell a delinquent nontax debt upon termination of collection action if
the Secretary determines such a sale is in the best interests of the
United States. Since the discharge of a debt precludes any further
collection action (including the sale of a delinquent debt), NEH may
not discharge a debt until it meets the requirements of 31 U.S.C.
3711(i).
(c) Upon discharge of an indebtedness, NEH must report the
discharge to the IRS in accordance with the requirements of 26 U.S.C.
6050P and 26 CFR 1.6050P-1. NEH may request Treasury or Treasury-
designated debt collection centers to file such a discharge report to
the IRS on NEH's behalf.
(d) When discharging a debt, NEH must request that litigation
counsel release any liens of record securing the debt.
Subpart E--Referrals to the Department of Justice
Sec. 1177.33 Prompt referral.
(a) NEH will promptly refer to DOJ for litigation any debts on
which it has taken aggressive collection activity in accordance with
subpart B of this part and that it cannot compromise, or on which it
cannot suspend or terminate collection activity, in accordance with
subparts C and D of this part. NEH may refer those debts arising out of
its activities, or that were referred or transferred to it for
collection services. NEH will refer debts for which the principal
amount is over $1,000,000, or such other amount as the Attorney General
my direct, exclusive of interest and penalties, to the Civil Division
or other division responsible for litigating such debts at DOJ,
Washington, DC. NEH will refer debts for which the principal amount is
$1,000,000 or less, or such other amount as the Attorney General may
direct, exclusive of interest or penalties, to DOJ's Nationwide Central
Intake Facility as required by the CCLR instructions. NEH will refer
debts as early as possible, consistent with aggressive agency
collection activity and the standards contained in this part, and, in
any event, well within the period for initiating timely lawsuits
against the debtors. NEH will make every effort to refer delinquent
debts to DOJ for litigation within one year of the date that such debts
last became delinquent.
(b) DOJ has exclusive jurisdiction over the debts NEH refers to it,
pursuant to this section. As the referring agency, NEH will immediately
terminate its administrative debt collection activities at the time it
refers the debt to the DOJ. NEH will advise DOJ of the collection
activities it has utilized to date, and their result. NEH will refrain
from having any contact with the debtor and shall direct all debtor
inquiries concerning the debt to DOJ. NEH will immediately notify DOJ
of any payments it credited to the debtor's account after it referred a
debt under this section. DOJ will notify NEH, in a timely manner, of
any payments it receives from the debtor.
Sec. 1177.34 Claims Collection Litigation Report.
(a) Unless excepted by DOJ, NEH will complete the CCLR (see Sec.
1177.21(b)), accompanied by a signed Certificate of Indebtedness, to
refer all administratively uncollectible claims to DOJ for litigation.
As a referring agency, NEH will complete all sections of the CCLR that
are appropriate to each claim, as required by the CCLR instructions,
and furnish such other information as may be required in specific
cases.
(b) NEH will indicate clearly on the CCLR the actions it wishes DOJ
to take with respect to the referred claim. The CCLR permits NEH to
indicate specifically any of a number of litigative activities which
DOJ may pursue, including enforced collection, judgment lien only,
renew judgment lien only, renew judgment lien and enforce collection,
program enforcement, foreclosure only, and foreclosure and efficiency
judgment.
(c) NEH also will use the CCLR to refer claims to DOJ to obtain
approval of any proposals to compromise the claims or to suspend or
terminate NEH collection activity.
Sec. 1177.35 Preservation of evidence.
When NEH refers claims to DOJ, it will take care to preserve all
files and records that DOJ may need to prove its claims in court. NEH
ordinarily will include certified copies of the documents that form the
basis for its
[[Page 66975]]
claims in the packages it creates to refer its claims to DOJ for
litigation. NEH will provide originals of such documents immediately
upon DOJ's request.
Sec. 1177.36 Minimum amount of referrals to the Department of
Justice.
(a) NEH will not refer to DOJ for litigation any claims of less
than $2,500, exclusive of interest, penalties, and administrative
costs, or such other amount as the Attorney General shall from time to
time prescribe. DOJ will promptly notify NEH if the Attorney General
changes this minimum amount.
(b) NEH will not refer claims of less than the minimum amount
unless:
(1) Litigation to collect such smaller claims is important to
ensure compliance with NEH's policies or programs;
(2) NEH is referring the claim solely for the purpose of securing a
judgment against the debtor, which will be filed as a lien against the
debtor's property pursuant to 28 U.S.C. 3201 and returned to NEH for
enforcement; or
(3) The debtor has the clear ability to pay the claim and the
Government can effectively enforce payment, with due regard for the
exemptions available to the debtor under state and Federal law and the
judicial remedies available to the Government.
(c) NEH will consult with the Executive Office for United States
Attorneys' Financial Litigation Staff at the DOJ prior to referring
claims valued at less than the minimum amount.
Dated: October 27, 2021.
Samuel Roth,
Attorney-Advisor, National Endowment for the Humanities.
[FR Doc. 2021-23742 Filed 11-23-21; 8:45 am]
BILLING CODE 7536-01-P
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</html>Indexed from Federal Register on November 24, 2021.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.