Proposed Rule2025-23704
Debt Collection Authorities Under the Debt Collection Improvement Act of 1996
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
December 23, 2025
Issuing agencies
Treasury DepartmentFiscal Service
Abstract
The Department of the Treasury ("Treasury"), Bureau of the Fiscal Service ("Fiscal Service"), proposes to revise its existing regulations regarding the Treasury Offset Program ("TOP") for several reasons, including to: restore statutory flexibility that was unnecessarily restricted; implement new authorities; eliminate repetitive and unnecessary language; reword certain provisions for clarity, consistent with the requirements of the Plain Writing Act of 2010 and Executive Order 12866; and better organize the regulations for easier comprehension.
Full Text
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[Federal Register Volume 90, Number 244 (Tuesday, December 23, 2025)]
[Proposed Rules]
[Pages 60034-60053]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-23704]
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DEPARTMENT OF THE TREASURY
Office of the Secretary
31 CFR Part 5
Fiscal Service
31 CFR Parts 256 and 285
[DOCKET NO. FISCAL-2023-0004]
RIN 1530-AA17
Debt Collection Authorities Under the Debt Collection Improvement
Act of 1996
AGENCY: Bureau of the Fiscal Service, Fiscal Service, Treasury.
ACTION: Notice of proposed rulemaking with request for comment.
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SUMMARY: The Department of the Treasury (``Treasury''), Bureau of the
Fiscal Service (``Fiscal Service''), proposes to revise its existing
regulations regarding the Treasury Offset Program (``TOP'') for several
reasons, including to: restore statutory flexibility that was
unnecessarily restricted; implement new authorities; eliminate
repetitive and unnecessary language; reword certain provisions for
clarity, consistent with the requirements of the Plain Writing Act of
2010 and Executive Order 12866; and better organize the regulations for
easier comprehension.
DATES: Comments must be received by February 23, 2026.
ADDRESSES: Fiscal Service participates in the U.S. Government's
eRulemaking Initiative by publishing rulemaking information on
<a href="http://www.regulations.gov">www.regulations.gov</a>. <a href="http://Regulations.gov">Regulations.gov</a> offers the public the ability to
comment on, search, and view publicly available rulemaking materials,
including comments received on rules.
Instructions for comment submission:
Comments on this rule, identified by docket FISCAL-2023-0004, may
be submitted using the Federal eRulemaking Portal: <a href="http://www.regulations.gov">www.regulations.gov</a>.
Follow the instructions on the website for submitting comments. Should
you wish to mail a paper comment in lieu of an electronic comment, it
should be sent via regular or express mail to: Director, TOP Division,
Disbursing and Debt Management, Bureau of the Fiscal Service, Landover
Warehouse, 3201 Pennsy Drive, Landover, MD 20785.
All submissions received must include the agency name (``Bureau of
the Fiscal Service'') and docket number (``FISCAL-2023-0004'') for this
rulemaking. In general, comments will be published on <a href="http://Regulations.gov">Regulations.gov</a>
[[Page 60035]]
without change, including any business or personal information
provided. Comments received, including attachments and other supporting
materials, are part of the public record and subject to public
disclosure. Do not enclose any information in your comment or
supporting materials that you consider confidential or inappropriate
for public disclosure.
FOR FURTHER INFORMATION CONTACT: Director, TOP Division, Disbursing and
Debt Management, Bureau of the Fiscal Service at (202) 874-6810.
SUPPLEMENTARY INFORMATION:
I. Background
Legal Authorities. The Debt Collection Improvement Act of 1996
(``DCIA''), Public Law 104-134, 110 Stat. 1321-358 et seq. (April 26,
1996), among other things, authorized Federal disbursing officials to
withhold eligible Federal payments to pay the payee's delinquent nontax
debt owed to the United States. See 31 U.S.C. 3716(c). The DCIA also
provided that Federal nontax payments may be offset to collect
delinquent debts owed to States, including past-due support, and that
payments made by States may be offset to collect delinquent debts owed
to the United States. See 31 U.S.C. 3716(h). In addition, the DCIA
requires Federal agencies to identify Federal employees who owe
delinquent nontax debts to the United States. See 5 U.S.C. 5514(a)(1).
Further, Federal tax refund payments may be offset to collect nontax
debt owed to the United States and debts owed to States, including
past-due support. See 26 U.S.C. 6402, 31 U.S.C. 3720A, and 42 U.S.C.
664. The Supporting America's Children and Families Act, Public Law
118-258 (Jan. 4, 2025), also permits the offset of tax refund payments
to collect past-due support owed to certain Federally recognized
Tribes. See 26 U.S.C. 6402(c) and 42 U.S.C. 664.
Treasury Offset Program. Fiscal Service administers a centralized
offset program, known as the Treasury Offset Program, or TOP, through
which it exercises these legal authorities. In general, TOP works as
follows:
(1) Creditor agencies submit information about delinquent debts to
Fiscal Service, which maintains the information in its delinquent
debtor database. The information submitted includes the name and
taxpayer identifying number (``TIN'') of the debtor. (2) Payment
agencies prepare and certify payments to Fiscal Service and disbursing
officials at other Federal agencies. Each payment record contains
information about the payment, including the name and TIN of the person
entitled to payment. The disbursing official examines the payment
records to determine if they meet the requirements for disbursement. If
so, the disbursing official then disburses the payments in accordance
with the payment agencies' instructions, subject to any eligible offset
or levy. (3) Before an eligible Federal payment is disbursed, Fiscal
Service compares information about persons who are entitled to Federal
payments against a database of persons who owe delinquent debts. When a
match occurs and all the prerequisites for offset have been met, the
payment is offset to satisfy the debt, to the extent legally allowed.
Fiscal Service also has agreements with certain States, whereby it
collects nontax debts owed to the United States through the offset of
certain payments disbursed by those States. (4) Fiscal Service
transmits amounts collected through offset to the appropriate creditor
agencies after deducting fees, which Fiscal Service charges the
creditor agencies to cover the cost of operating the offset program.
Re-write of Existing Regulations. Fiscal Service promulgated 31 CFR
part 285, subpart A (the ``existing TOP regulations'') to implement the
administrative offset of payments pursuant to the authorities listed
above. The several sections within the existing TOP regulations were
promulgated (and revised) at different times. Fiscal Service proposes
to revise the existing TOP regulations for several reasons, including
to: (1) restore statutory flexibility that was unnecessarily
restricted; (2) implement new authorities; (3) eliminate repetitive and
unnecessary language; (4) reword certain provisions for clarity,
consistent with the requirements of the Plain Writing Act of 2010 and
Executive Order 12866 (Sept. 1993); and (5) better organize the
regulations for easier comprehension.
II. Section Analysis
This section describes, section-by-section, the reasoning for the
proposed revision (the ``proposed rule'') of the existing TOP
regulations. To the extent a proposed provision is substantively
consistent with the existing TOP regulations, this section does not
repeat the reasoning for the provision as such explanations are
described in Federal Register entries for prior rulemakings. To the
extent a proposed provision is substantively consistent with the
existing TOP regulations, we have described them as being
``consistent'' with the existing TOP regulations, even if wording
changes were required due to the reorganization of subpart A or if
changes were made for clarity or consistency.
Redesignation of Subpart B and Its Included Sections
To accommodate the reorganization of subpart A, the sections of
subpart B require redesignation. Sections 285.11 through 285.13 are
proposed to be redesignated as Sec. Sec. 285.111 through 285.113,
respectively. No changes to the content of subpart B are proposed.
Section 285.1--Definitions
The existing TOP regulations contain separate definition sections
for each type of offset; certain terms are defined in more than one
definition section, at times using slightly different definitions. The
definitions in the new definitions section would apply to all types of
offset. This will ensure consistency and clarity and avoid unnecessary
repetition. The definitions used in this section would apply to 31 CFR
part 285, subpart A only. For example, whether a debt is ``legally
enforceable'' for purposes of centralized offset has no bearing on
whether the debt is legally enforceable for purposes of placing a lien
on the debtor's property or for some other debt collection purpose.
Address. This term is used but not defined in the existing TOP
regulations. The proposed definition clarifies that due process notices
and offset notices can be sent via first class mail, email, text
message, or other reasonable means. Agencies should determine that the
method used for delivering information to an address is consistent with
relevant law and security policies. With regard to due process notices,
agencies should also determine that the address used to send notice is
reasonably calculated to reach the debtor. This definition's broad view
of the term ``address'' does not require an agency to use non-
traditional means of mail.
Centralized offset. The proposed definition is consistent with the
existing TOP regulations. It refers to offsets conducted to collect
debts that have been referred to TOP and includes TOP's processing of
offsets of Federal payments (whether disbursed by Fiscal Service or by
another disbursing official) and State payments. This term excludes
offsets conducted by the payment agency prior to disbursement (e.g.,
internal offsets conducted by the payment agency before the payment
agency certifies the payment for disbursement).
Covered benefit payment. This term is similar to the term in the
existing TOP regulations. However, some concepts that were included in
the definition for
[[Page 60036]]
``covered benefit payment'' have now been moved to more logical places
within the proposed rule.
Creditor agency. The proposed definition includes Federal agencies
and States that seek to collect debts through TOP. The term also
includes Indian Tribes and Tribal organizations that receive funding
under section 455(f) of the Social Security Act (``Tribal IV-D
agencies'') in the context of tax refund offset to collect past-due
support. The term also includes agencies acting on behalf of the
creditor agency. For example, where there is a requirement that the
creditor agency take some action, such as providing notice or informing
Fiscal Service as to changes in the status of a debt previously
referred to TOP, such actions may be taken on behalf of the creditor
agency (including, for example, through Fiscal Service's Cross-
Servicing program).
Days delinquent. This term is not defined in the existing TOP
regulations. The proposed definition clarifies when Federal agencies
must refer their debts to TOP (i.e., by when the debt is over 120 days
delinquent) and is consistent with the requirements of 31 U.S.C.
3716(c)(6)(A). For administrative (i.e., non-loan) debts, for example,
the delinquency clock generally begins running from the date of the
initial demand for payment. The fact that a debt is in a delinquent
status does not necessarily mean that there are immediate adverse
consequences (e.g., late charges) to the debtor. For administrative
debts, there is typically a 30-day grace period from the date of
initial demand for payment (i.e., day one of delinquency to day 30 of
delinquency) before there are adverse consequences due to delinquency
(see 31 CFR 901.2(b)(3)). For loan debts to be re-paid in installments
pursuant to a promissory note, each missed payment generally
constitutes a delinquent debt, until all amounts owed are accelerated
into a single debt.
Debt. The proposed definition is generally consistent with the
existing TOP regulations, but also now distinguishes between ``Federal
debt'' and ``State debt.'' It also adds past-due support owed to a
Tribal IV-D agency.
Debt record. The proposed definition encompasses the terms ``record
of debt,'' ``debt record,'' ``debtor record,'' ``delinquent debtor
record,'' and ``delinquent debt record,'' as used in the existing TOP
regulations.
Debtor. The proposed definition harmonizes the definition of
``debtor'' across the different types of offset. Depending on the type
of offset involved, a debtor can be a person who owes a debt to a
Federal agency, a State, or a Tribal IV-D agency.
Delinquent or past-due. The proposed definition is consistent with
the existing TOP regulations. However, this definition clarifies that
not all payment arrangements avoid or cure delinquency. For example, a
debt's delinquent status is generally not altered by a due date in a
post-delinquency payment agreement. A post-delinquency payment
agreement should only restart the clock on delinquency if the agreement
explicitly cures the delinquency. Many post-delinquency payment
agreements used by Fiscal Service in its Cross-Servicing program (see
31 CFR 285.12, proposed to be redesignated as 31 CFR 285.112), for
example, are not meant to cure delinquency, but are meant to provide
relief from certain types of collection actions. Also see the
definition of ``Days delinquent.'' As another example, an
administrative debt generally is delinquent as of the date of the
agency's initial demand for payment, even if the agency provides a
thirty-day grace period in which to pay the debt. However, the agency
generally may take no adverse action to collect the debt (such as
through TOP) until after the grace period. If the debt is not paid by
the end of the grace period, it will generally be deemed to have been
delinquent as of the date of the agency's initial demand for payment.
Disbursing official. The proposed definition is consistent with the
existing TOP regulations.
Disposable pay. The proposed definition is consistent with the
existing TOP regulations.
Federal agency. The proposed definition is intended to distinguish
between Federal agencies, States, and Tribal IV-D agencies. The
existing TOP regulations use the term ``agency,'' which can be
ambiguous when talking about Federal agencies, State agencies, and
Tribal IV-D agencies.
Federal benefit payment. This term is not defined in the existing
TOP regulations. The proposed definition is intended to distinguish
between amounts a debtor may receive under ``Federal benefit programs
cited under clause (i) within a 12-month period'' and ``all Federal
benefit payments made during such 12-month period.'' See 31 U.S.C.
3716(c)(3)(ii).
Federal debt or Federal nontax debt. The proposed definition is
consistent with the existing TOP regulations.
Federal employee. The proposed definition is consistent with the
existing TOP regulations.
Federally recognized Tribe. This term is not used or defined in the
existing TOP regulations. The existing TOP regulations use the term
``Indian tribe.'' This definition is added for clarity.
Federal nontax payment. This term is not defined in the existing
TOP regulations. The proposed definition is intended to more clearly
distinguish between types of payments.
Federal payment. This term is used but not defined in the existing
TOP regulations. The proposed definition is consistent with the
statutory text and current operational practice. The term
``administrative offset'' is defined by statute as ``withholding funds
payable by the United States . . . to, or held by the United States
for, a person to satisfy a claim.'' 31 U.S.C. 3701(a)(1). Agencies are
permitted to collect their debts by ``administrative offset.'' 31
U.S.C. 3716(a). And, disbursing officials are required to offset ``the
amount of a payment which a payment certifying agency has certified to
the disbursing official for disbursement.'' 31 U.S.C. 3716(c)(1)(A).
Given the language of the applicable statutes, Fiscal Service has
consistently taken the position that any payment that is certified to a
disbursing official is subject to administrative offset, unless the
payment is otherwise exempt from offset. The proposed definition makes
clear that the source of funds for a payment, such as whether the
payment is made from public funds or funds held in trust, has no
bearing on whether the payment is a ``Federal payment.''
The proposed definition also makes clear that the term ``Federal
payment'' includes any payment made by the United States through an
escrow agent or other person with the responsibility to hold and/or
further disburse the funds to a person.
Federal payment offset. This term is not defined in the existing
TOP regulations. The proposed definition is intended to more clearly
distinguish between types of offset.
Fiscal Service. The proposed definition is consistent with the
existing TOP regulations.
HHS. The proposed definition is consistent with the existing TOP
regulations.
Internal Revenue Code. This term is not defined in the existing TOP
regulations. It is added for clarity.
IRS. The proposed definition is consistent with the existing TOP
regulations.
Legally enforceable. The proposed definition is consistent with the
existing TOP regulations.
Lump-sum benefit payment. This term is not defined in the existing
TOP regulations. The proposed definition reflects a substantive change
regarding
[[Page 60037]]
the offset of benefit payments that are paid as a lump sum. Under the
proposed rule, offset of one-time payments of benefits that have
accrued over a period of more than one month can be offset by no more
than 15% and must leave a minimum floor (see proposed Sec.
285.30(c)(2)(viii)). The existing TOP regulations do not clearly
address how the $9,000 floor (required by 31 U.S.C. 3716(c)(3)(A)(ii))
should be applied for lump-sum benefit payments and how it should be
prorated. The proposed rule explains how the floor should be
calculated.
Because the statute, in establishing the offset floor, refers to
the amount that a debtor may ``receive'' under the specified Federal
benefit programs within a 12-month period, Fiscal Service determined
that the floor for a lump-sum benefit payment should generally be the
lesser of: (1) $9,000; or (2) an amount equal to $750 times the number
of months' worth of benefits represented by the lump-sum benefit
payment. While the floor should generally be the lower amount of those
two calculations, Fiscal Service may select the first option when it
lacks sufficient information to calculate the second option or when it
is more administratively feasible to do so.
The calculation of the floor can be further complicated in the
event the person entitled to payment was receiving other amounts as
Federal benefit payments; in such circumstances, Fiscal Service can
reduce the floor by those other amounts, if it determines that it is
administratively feasible and otherwise appropriate to do so.
The following examples demonstrate how this calculation would work:
Example #1: If a debtor is being paid a lump-sum benefit payment of
$10,000, representing 13 months of accrued benefit payments, and was
not receiving any other Federal benefit payments, the offset floor
would be $9,000, calculated as the lesser of: (1) $9,000; or (2) $750
times 13 (i.e., $9,750). Because taking an offset of 15% of the $10,000
payment (i.e., $1,500) would reduce the payment below the lump-sum
benefit payment floor (i.e., $10,000 minus $1,500 is less than $9,000),
the offset would be $1,000 (i.e., $10,000 minus $9,000).
Example #2: If a debtor is being paid a lump-sum benefit payment of
$6,000, representing 3 months of accrued benefit payments, and was not
receiving any other Federal benefit payments, the offset floor would be
$2,250, calculated as the lesser of: (1) $9,000; or (2) $750 times 3
(i.e., $2,250). Because taking an offset of 15% of the payment (i.e.,
$900) would not reduce the payment below the lump-sum benefit payment
floor (i.e., $6,000 minus $900 is more than $2,250), the offset amount
would be $900.
Example #3: If a debtor is being paid a lump-sum benefit payment of
$10,000, representing an unknown number of months of accrued benefit
payments, and had received $8,000 of OPM annuity payments over the past
12 months, the lump-sum benefit payment floor would be $1,000,
calculated as the lesser of: (1) $9,000; or (2) $750 times 12 minus
$8,000 (i.e., $1,000). Because taking an offset of 15% of the payment
(i.e., $1,500) would not reduce the payment below the lump-sum benefit
payment floor (i.e., $10,000 minus $1,000 is more than $1,000), the
offset amount would be $1,500.
Lump-sum benefit payment floor. This term is not defined in the
existing TOP regulations. See the proposed definition for ``lump-sum
benefit payment'' for an explanation.
Match. The existing regulations describe their treatment of what
constitutes a match between a payment record and a debt record. This
treatment could differ depending on the type of offset being conducted.
For example, current section 285.1, which governs the offset of Federal
nontax payments for the collection of past-due support, requires that
the TIN of a payment record be the ``same'' as the TIN of a debt
record. Current section 285.5, which governs offset of Federal payments
to collect Federal nontax debts, implies that a derivative of the TIN
can be used to determine whether the TIN on the payment and debt
records are the ``same.'' The proposed definition defines the term
``match'' for offset purposes in a manner that restores statutory
flexibility for disbursing officials in determining when the person
entitled to payment on a payment record is the same person as the
debtor on a debt record. The proposed definition would allow disbursing
officials to determine whether there is a match by using information
derived from the payment and debt records, which would not necessarily
require an exact match on the name or TIN. The relevant statutory
provisions do not require that the name (or name control) and TIN be
exact matches on the debt record and the payment record. A person
entitled to payment and the debtor may be the same person in
circumstances where the name and TIN are not exact matches (for
example, because either the debt record or payment record contains a
transcription or other human input error). This definition would allow
(but not require) disbursing officials to use an algorithm to correct
for such errors on names and TINs in a manner that results in more
accurate matches. It would also allow disbursing officials to use
information (other than the name and TIN) from the payment and debt
records to determine whether the payee and debtor are the same person.
This more flexible definition of ``match'' will enable disbursing
officials to more closely comply with their requirements under the
offset statutes.
Means-tested program. This term's definition is embedded into the
text of current sections 285.1(k) and 285.5(e)(7)(i), rather than in
the definition sections for sections 285.1 and 285.5. The proposed
definition is added for clarity.
Monthly benefit payment. This term is not defined in the existing
TOP regulations. The proposed definition for ``monthly benefit
payment'' is consistent with the term ``monthly covered benefit
payment,'' as used in the existing TOP regulations.
OASDI overpayment. The proposed definition is consistent with the
existing TOP regulations.
Offset. The proposed definition is consistent with the existing TOP
regulations but uses the more precise term of ``PEP'' rather than
``payee.''
Participating SRP State. This term is not defined in the existing
TOP regulations. It is consistent with the term ``participating
State,'' as used in the existing TOP regulations.
Past-due support. The proposed definition expands the definition to
include debts owed to Tribal IV-D agencies, to implement the new
authority to collect child support debts from the Supporting America's
Children and Families Act, codified in relevant part at 26 U.S.C.
6402(c), and is otherwise consistent with existing TOP regulations.
Payee. The proposed definition clarifies the difference between the
terms ``payee'' and ``person entitled to payment'' or ``PEP.'' While
the payee and the PEP are generally the same person, there may be some
circumstances where they are different people. For example, a nursing
home might serve as the representative payee for a beneficiary that is
entitled to benefit payments. Or, an attorney representing an
individual who has a claim against the United States might receive
payment to her attorney trust account as a payee, while her client is
the ``person entitled to payment.''
Payment. This proposed definition is added for clarity.
Payment agency. The proposed definition incorporates the definition
for this term in the existing TOP regulations
[[Page 60038]]
and adds a sentence that covers States making payments in the context
of offsets under reciprocal agreements. It is intended to broadly cover
agencies making payments, whether such agencies disburse payments on
their own or through another agency. In the context of Federal
payments, the function of the payment agency and the disbursing
official are often, though not always, segregated. The payment agency,
through a certifying officer, is generally responsible for determining
that the payment is permitted by law, that funds have been appropriated
for the payment, that the name, address, and dollar amount are correct,
whether the payment is subject to offset, and that the payment is not a
duplicate payment. The disbursing official, on the other hand,
disburses payments properly certified by a payment agency's certifying
officer and/or withholds all or part of the payment to satisfy a
delinquent debt.
Payment record. The proposed definition incorporates the definition
for this term in the existing TOP regulations and adds a sentence that
covers States making payments in the context of offsets under
reciprocal agreements.
PEP or person entitled to payment. This term is not used or defined
in the existing TOP regulations; the existing regulations use the
phrase ``person entitled to receive the benefit of all or part of the
payment.'' The proposed definition was added to distinguish between the
terms ``payee'' and ``person entitled to payment.''
Person. The proposed definition is consistent with the existing TOP
regulations.
Reciprocal agreement. The proposed definition is consistent with
the existing TOP regulations.
Recurring payment. The proposed definition is consistent with the
existing TOP regulations.
Salary offset. The proposed definition is consistent with the
existing TOP regulations.
Salary payment agency. This term is used in the existing TOP
regulations but is not defined. The proposed definition is added for
clarity.
Secretary. The proposed definition is consistent with the existing
TOP regulations.
Separate guidance. This term is not used or defined in the existing
TOP regulations. Fiscal Service may issue more detailed guidance on
certain aspects of this rule. Such guidance may include instructions to
agencies on how to comply with the rules set forth in the proposed rule
(e.g., how to submit a debt to the TOP system) or specify how Fiscal
Service or an agency may exercise discretion within the bounds
permitted by the proposed rule (e.g., the dollar threshold for
referrals of debt to TOP, which may be changed based on costs of
collection; or time periods on agency action, which may be changed
based on operational capabilities).
State. The proposed definition is consistent with the existing TOP
regulations.
State debt. The proposed definition is consistent with the existing
TOP regulations, except that it excludes debts owed by Federally
recognized Tribes. With regard to the State Reciprocal Program, Fiscal
Service determined that certain debts should be excluded from
collection through Federal payment offset. In the existing TOP
regulations, debts that are excluded from the definition of ``State
debt'' include debts owed to a State by the United States, a foreign
sovereign, another State, or local governments within a State. The
rationale for these exclusions is that TOP is not an appropriate tool
for resolving issues of indebtedness between a State and local
government, a State and a State, or a State and a foreign government.
This rationale applies equally to issues of indebtedness between States
and Federally recognized Tribes. Federally recognized Tribes possess
certain inherent rights of self-government. As a result of this Tribal
sovereignty, these Tribes have a special relationship with the United
States. The proposed definition would codify the current operational
practice to exclude debts owed by Federally recognized Tribes from the
types of debts that a State may collect under a reciprocal agreement.
This rule would not change or affect any other rights or remedies
States may have to collect debts owed to them by Federally recognized
Tribes outside of TOP. While States may not collect debts owed to them
by Federally recognized Tribes through TOP, Federal agencies may
collect debts owed by Federally recognized Tribes through TOP.
State income tax obligation. The proposed definition is consistent
with the definition used in the existing TOP regulations.
State payment. This term is used but not defined in the existing
TOP regulations. The proposed definition is added for clarity.
State payment offset. The proposed definition is consistent with
the definition used in the existing TOP regulations.
State reciprocal program. This term is not used or defined in the
existing TOP regulations. The proposed definition is added for clarity.
Tax refund offset. The proposed definition is consistent with the
existing TOP regulations.
Tax refund payment. The proposed definition is consistent with the
existing TOP regulations.
Taxpayer identifying number or TIN. The proposed definition is
consistent with the existing TOP regulations. For individuals, the TIN
is generally (but not always) the individual's social security number.
TINs also include employer identification numbers and individual
taxpayer identification numbers issued by the IRS.
Treasury Offset Program or TOP. This term is used but not defined
in the existing TOP regulations. The proposed definition is added for
clarity.
Tribal IV-D agency. This term is not used or defined in the
existing TOP regulations. It is added to implement the new authority to
collect child support debts from the Supporting America's Children and
Families Act, codified in relevant part at 26 U.S.C. 6402(c). The term
refers to Indian Tribes and Tribal organizations that receive funding
under section 455(f) of Title IV, Part D, of the Social Security Act.
Unemployment compensation debt. The proposed definition is
consistent with the existing TOP regulations.
Section 285.2--General Provisions
The existing TOP regulations repeat certain general rules for each
type of offset, at times using slightly different language to describe
the same requirements. This proposed section would consolidate general
offset rules into a single section that would apply to all types of
offset under TOP. This will improve consistency and clarity and avoid
unnecessary repetition. To the extent specific rules are required for a
specific type of offset, those rules will be spelled out in a separate
section for each type of offset.
(a) Scope. Proposed paragraph (a) describes the scope of this
subpart, which governs the centralized offset of Federal payments and
State payments to collect delinquent debts owed to the United States or
a State. This subpart does not apply to administrative offsets that
occur outside of TOP (known as ``non-centralized offsets''). Non-
centralized offsets are governed by other law, including but not
limited to common law, the Federal Claims Collection Standards (see 31
CFR 901.3(c)), and agency-specific regulations. Laws governing
garnishments and levies do not apply to offsets under this subpart.
Offsets are not garnishments or levies. An offset occurs when the
United States or a State withholds money owed to a person to
[[Page 60039]]
satisfy a claim owed by that same person to the United States or a
State. Garnishment is a process whereby a creditor attaches wages or
other property belonging to a debtor which is in the possession of a
third party (for example, see 31 U.S.C. 3720D). A levy is the means by
which the Internal Revenue Service or other tax collecting authority
seizes the delinquent taxpayer's property. See 26 U.S.C. 6331.
This subpart applies only to Federal payments and State payments
(as those terms are defined) made to or on behalf of a PEP. See the
definitions for ``PEP'' and ``payee.'' It generally does not apply to
downstream PEPs and payees. For example, in the context of purchases
made by Federal agencies using a government credit card, the vendor is
paid by the financial institution that issues the credit card, and the
United States pays the financial institution. Absent an agreement
between the financial institution and the United States requiring the
payment from the financial institution to be offset for debts owed by
the vendor, the payment by the financial institution to the vendor is
not subject to offset under this subpart. On the other hand, the
payment from the United States to the financial institution is subject
to offset for debts owed by the financial institution. When determining
whether to use a government purchase card, agencies must determine
whether the use of the purchase card is an appropriate payment
mechanism. See proposed section 285.2(e)(2)(iii).
Lastly, the pursuit or receipt of collections pursuant to this
subpart does not preclude a creditor agency from pursuing all other
available debt collection remedies simultaneously.
(b) General rules for Federal agencies. Proposed paragraph (b) is
consistent with the existing TOP regulations. Proposed paragraph
(b)(1)(iii) clarifies that agencies must complete the 60-day
notification process prior to the debt becoming 121 days delinquent, so
that the agency can complete the due process prerequisites and refer
the debt to TOP by the statutory deadline.
(c) General rule for States and Tribal IV-D agencies. Proposed
paragraph (c) is consistent with the existing TOP regulations. It also
incorporates Tribal IV-D agencies to implement the new authority in the
Supporting America's Children and Families Act.
(d) Requirements for all creditor agencies. Proposed paragraph (d)
is generally consistent with the existing TOP regulations. However,
notable clarifications and/or changes are as follows:
<bullet> Proposed paragraph (d)(1)(i)(C) modifies the debt
eligibility requirements to remove the reference to a $25 minimum
threshold. Under both the existing TOP regulations and the proposed
rule, Fiscal Service is permitted to establish a dollar threshold
for referred debts. Fiscal Service may adjust this threshold as
appropriate in separate guidance. In establishing this threshold,
Fiscal Service may consider, among other things, the cost of
conducting an offset.
<bullet> Proposed paragraph (d)(1)(i)(D) explains the
circumstances in which a debt is not eligible for referral when
referral would interfere with a Federal agency's ability to preserve
its rights to collateral and when referral would interfere with the
United States' interest in enforcing antitrust laws or protecting
its interests when it becomes aware of the possibility of fraud,
false claim, or misrepresentation with regard to the debt.
<bullet> Proposed paragraph (d)(1)(ii) sets forth the due
process prerequisites with which the creditor agency must comply. As
required by statute, these due process prerequisites include the
requirement to provide the debtor with the opportunity to review the
creditor agency's determination regarding the debt.
<bullet> Proposed paragraph (d)(3) describes the facts to which
creditor agencies must certify upon referral of a debt to TOP.
Creditor agencies can (and generally do) provide the written
certification electronically.
<bullet> Proposed paragraph (d)(4) adds language that more
explicitly addresses creditor agencies' obligations to correct and
update data on debts subject to collection in TOP. This obligation
is provided for under the existing TOP regulations, but the added
language will remind agencies of the importance of maintaining
accurate and up-to-date information. This will reduce the risk of
improper collections and will assist Fiscal Service in delivering
offset notices to the correct addresses. This paragraph makes clear
that creditor agencies may make updates to increase the debt balance
when they have complied with other prerequisites; this, however,
does not permit creditor agencies to aggregate more than one debt
into a single debt record, unless otherwise permitted by Fiscal
Service.
(e) Federal payments. Proposed paragraph (e) is generally
consistent with the existing TOP regulations. However, notable
clarifications and/or changes are as follows:
<bullet> Proposed paragraph (e)(2)(i) explicitly addresses the
requirement to identify the PEP or PEPs, as is current operational
practice. The existing TOP regulations reflect this requirement, but
do not distinguish between ``payee'' and ``PEP.'' When paying more
than one PEP, the proposed paragraph also requires payment agencies
to determine whether the payment is owed jointly to the PEPs or if
it must be allocated among the PEPs. These requirements help ensure
that payments are matched for PEPs, rather than payees who might not
be PEPs. This paragraph also permits agencies to make a payment to a
person other than the PEP if the payment agency determined that the
PEP does not owe a debt.
<bullet> Proposed paragraph (e)(2)(iii) addresses the mechanisms
through which payment may be made. Each year, the Federal government
disburses billions of payments. Most of these payments are
automatically matched against the TOP database during the
disbursement process. A small portion of these payments are
disbursed in a manner that, due to current operational restraints,
do not allow the payment to be automatically matched with debts in
TOP. The proposed rule explicitly addresses the requirement that
payment agencies work with Fiscal Service to identify and employ
alternative processes to avoid missed offset collections when
payment mechanisms do not allow for automated matching in TOP.
For example, payments for purchases made using a government
credit card are not automatically matched against the TOP database
because, in such a scenario, the PEP, i.e., the vendor, is actually
being paid by the financial institution issuing the credit card, and
not a Federal agency. Similarly, payments made by class
administrators who are responsible for disbursing payments to PEPs
do not automatically match against TOP.
Before using a payment mechanism that does not allow for
automated matching in TOP, a Federal agency should determine whether
a PEP owes a delinquent debt that has been referred to TOP. Fiscal
Service can assist agencies with making this determination. If no
such debt is owed, then this provision would not preclude the
Federal agency from proceeding with making the payment through that
mechanism. However, if such a debt is owed, then the payment agency
must make the payment in a manner that will permit the payment to be
offset.
(f) Procedures for centralized offset. Proposed paragraph (f) is
generally consistent with the existing TOP regulations. However,
notable clarifications and/or changes are as follows:
<bullet> Proposed paragraph (f)(1) describes the requirement for
a disbursing official to take an offset. There must be a match
between the debtor (from the debt record) and the PEP (from the
payment record). See the definition for ``match.'' For operational
reasons, this match may take place several days before the date of
the offset. For example, some payment agencies submit batch payment
records to Fiscal Service. To properly process these records, Fiscal
Service may need to receive those batch records and conduct the
matching process prior to the date on which the payment will be
disbursed in accordance with the payment agency's instructions.
<bullet> Proposed paragraphs (f)(2) and (4) describe related,
but different concepts. Paragraph (f)(2) describes circumstances
where the PEP directs delivery of the payment to a different person
but does not assign the legal ownership of the payment to that
person. For example, a nursing home might serve as the
representative payee for an elderly person who is entitled to social
security benefit payments. In this case, the elderly person did not
assign her legal ownership of the benefit payments to her
[[Page 60040]]
nursing home but directed the payments to be paid to the nursing
home and administered by the nursing home for her benefit, because
she is unable to manage her own finances. As such, the benefit
payments would be subject to offset for debts owed by the elderly
person, but not for debts owed by the nursing home.
<bullet> Proposed paragraph (f)(4) describes assigned payments.
The proposed paragraph is intended to simplify and clarify how TOP
treats assigned payments.
[cir] A request by a PEP to legally transfer to a third party
the right to a payment is typically referred to as an
``assignment.'' To be valid as to the United States, the
``transfer'' or ``assignment'' of a claim against the United States
must meet the requirements of applicable law, including the Anti-
Assignment Act, 31 U.S.C. 3727, and the laws that apply to TOP. If
the requirements are not satisfied, the assignment is not valid as
to the United States for purposes of this rule.
[cir] Nothing in this proposed rule would require Fiscal Service
(absent instructions from a payment agency), a payment agency, or a
creditor agency to recognize an assignment.
[cir] In general, assigned payments are legally subject to
offset for debts of both the assignor (i.e., the original PEP) and
the assignee (i.e., the person to whom the payment was assigned,
also a PEP).
[cir] In general, disbursing officials should offset the payment
first for debts owed by the assignor and then, if anything is left,
for debts owed by the assignee. Under current operations, a payment
agency generally must issue a payment to the assignor, unless the
payment agency confirms that the assignor does not owe any debts in
TOP, in which case the payment agency may make the payment to the
assignee (assuming the payment agency had authority to recognize the
assignment). Fiscal Service provides specific rules to payment
agencies regarding how to issue payments in the context of assigned
payments in separate guidance.
[cir] A frequent scenario involving assigned payments is the
award of attorneys' fees under the Equal Access to Justice Act
(EAJA), where the ``prevailing party'' (i.e., the PEP) wants to
assign an EAJA award to their attorney, 28 U.S.C. 2412. In such
cases, the agency may recognize the assignment only if the
prevailing party does not owe any debts that could be collected
through offset of the EAJA payment. The Supreme Court unanimously
held in Astrue v. Ratliff, 560 U.S. 586 (2010), that the EAJA term
``prevailing party'' refers to a claimant and not the claimant's
attorney, and thus the offset of an EAJA award to collect a
claimant's debt to the government is proper. If the prevailing party
does not owe any debts, the payment agency could recognize the
assignment to the attorney, and the payment would be subject to
offset for debts owed by the attorney (i.e., the new PEP).
<bullet> Proposed paragraph (f)(3) explains that payments that
are jointly owed to more than one PEP (such as a joint tax refund
payment) are subject to offset for the debts owed by any PEP.
<bullet> Proposed paragraph (f)(5), among other things, more
clearly addresses the amount to be offset when a payment being
disbursed is subject to partial exemption and the payment has been
subject to an internal offset prior to payment certification and
submission of the payment instructions to the disbursing official.
For example, payment agencies might conduct their own internal
offset prior to certifying the payment to Fiscal Service for offset,
but Fiscal Service may lack knowledge of whether an internal offset
has occurred prior to payment certification or, if so, how much of
the payment was offset. Because Fiscal Service has decided, as a
policy matter, that it would like to have the flexibility to
calculate the percentage that may be offset of a partially exempt
payment by accounting for prior offsets when it knows that a prior
offset has taken place, Fiscal Service has determined that a
disbursing official may either: (1) not offset the payment if the
disbursing official knows that the payment agency has already taken
an offset from the payment, or (2) if the disbursing official has
sufficient information about the prior offset, calculate the
additional amount by which the payment may be offset. Additionally,
Fiscal Service would have the flexibility to disregard any prior
offset conducted by the payment agency. For example, if Fiscal
Service is disbursing a covered benefit payment certified by the
Social Security Administration (SSA), and it knows that SSA already
offset the payment, but does not know by how much the payment was
offset, the Fiscal Service disbursing official could bypass offset
for that payment; alternatively, if SSA informed Fiscal Service that
the payment that it is certifying for disbursement for $1,950 was
originally $2,000 (i.e., it took a $50 internal offset), Fiscal
Service could take another $250 (because $250 + $50 is 15% of the
original payment amount). However, the disbursing official may also
choose to disregard any prior offset when calculating the
appropriate offset amount. For example, if the original payment
amount was $2,000, but SSA certified a payment in the amount of
$1,950, the Fiscal Service disbursing official could offset $292.50
(i.e., 15% of $1,950). Fiscal Service also notes that, when
calculating the offset amount, the disbursing official must
disregard any prior levy on that payment. For example, if a covered
benefit payment, certified in the amount of $2,000, was levied by
15% for a Federal tax debt through TOP, a disbursing official must
offset that payment by another 15% for a nontax debt in TOP. In such
a scenario, after levy and offset, the payment amount that would be
disbursed to the payee would be $1,400 (with $300 going to the IRS
and another $300 going to the other agency). The proposed paragraph
is consistent with the last paragraph in 31 U.S.C.
3716(c)(3)(A)(ii).
<bullet> Proposed paragraph (f)(6) describes the priority scheme
for how a payment must be applied when the person entitled to the
payment owes multiple debts. While this subpart does not apply to
the way in which Fiscal Service levies payments for the purpose of
collecting Federal tax debts, the proposed paragraph acknowledges
that such levies take priority over the collection of debts through
offset under this subpart. Within each category, Fiscal Service will
generally give priority to older debts first. In some circumstances,
for operational reasons, Fiscal Service may alter this intra-
category priority. For example, if a Federal agency refers to TOP a
Federal nontax debt, and Fiscal Service starts collecting that debt
through salary offset, Fiscal Service may continue collecting that
debt through salary offset, even if another Federal agency later
refers an older Federal nontax debt that is also eligible for
collection through salary offset.
(g) Notification of offset to debtor. Proposed paragraph (g)
contains the following notable clarifications and/or changes:
<bullet> Proposed paragraph (g) would revise the requirement in
the existing TOP regulations that a warning notice be sent to the
debtor prior to commencing offset of recurring payments, and would
go beyond what is required by statute, which does not require any
warning notice but does, in the case of periodic benefit payments,
require notice be sent on or before the date of the offset. See 31
U.S.C. 3716(c)(7)(B). The proposed rule would generally require that
a disbursing official (or Fiscal Service on behalf of the disbursing
official) send a warning notice to a debtor before commencing offset
of monthly benefit payments. This requirement would not apply to any
other recurring payments or one-time payments. The requirement would
also not apply when it is administratively infeasible for the
disbursing official (or Fiscal Service on behalf of the disbursing
official) to send the letter, such as when a current address is
unavailable or when a system glitch results in the failure of such
letters to be sent. Fiscal Service will generally send warning
notices before offsetting recurring payments, but notes that it is
statutorily obligated to conduct offset and that its failure to send
a notice does not change this obligation or impair any future offset
taken.
<bullet> Proposed paragraph (g) also clarifies the address to
which this notice can be sent.
[cir] The term ``payee'' is used by 31 U.S.C. 3716, but section
3716's use of this term conflates the concepts of ``payee'' and
``PEP'' (see the proposed definitions of these terms).
[cir] Consistent with Congress' intent to provide notification
of the offset to the affected person, the proposed rule clarifies
that this notice can be sent either to the payee or the PEP,
depending on the address available.
[ssquf] If the disbursing official has an address only for the
payee, the disbursing official may send the notice to the payee,
even if the payee is a different person than the PEP.
[ssquf] Similarly, if the disbursing official has an address
only for the PEP, the disbursing official may send the notice to the
PEP, even if the PEP is a different person than the payee.
[ssquf] If the disbursing official has an address for both the
payee and the PEP, the disbursing official may determine which
address to use, regardless of whether the payee and the PEP are the
same person. Under current operational practice, which is subject to
change, Fiscal Service generally sends the notice to the payee,
rather than the
[[Page 60041]]
debtor/PEP, since the address for the payee would be obtained from
the payment record which generally would have been submitted to
Fiscal Service more recently than the debt record. If the payment
record does not include an address for the payee, the disbursing
official generally will use the address on the debt record. Fiscal
Service's current operational practice generally assumes that the
more current information is likely better information. However, the
proposed rule would give Fiscal Service the flexibility to change
its current operational approach.
<bullet> Proposed paragraph (g) also makes clear that the
failure of a disbursing official to send a notice (or the failure of
a payee or PEP to receive such a notice) does not impair the
validity of the offset. There may be circumstances where the
address(es) provided on the payment record and the debt record are
incorrect or outdated. In other circumstances, the addresses may be
missing from those records. Such circumstances make it difficult, if
not impossible, for the disbursing official to deliver a notice of
offset. The disbursing official, however, is still under a statutory
requirement to offset certain payments. Thus, the inability to send
a notice to a valid address does not preclude offset.
(h) Notification of offset to creditor and payment agencies.
Proposed paragraph (h) is consistent with the existing TOP regulations.
(i) Disposition of amounts collected. Proposed paragraph (i) is
consistent with the existing TOP regulations. However, proposed
paragraph (i)(2) addresses the status of an offset when the payment
that was offset was made in error. Except as specified in Sec.
285.42(e), addressing tax refund offset to collect past-due support,
there is no time limitation on when a payment agency may request a
payment reversal.
(j) Fees. Proposed paragraph (j) restores statutory flexibility to
Fiscal Service's fee-charging authority. The existing TOP regulations
do not address Fiscal Service's fee-charging authority consistently.
Some provisions in the existing regulations require Fiscal Service to
charge creditor agencies for the full cost for certain types of offset,
even though the applicable statutes permit Fiscal Service to charge
``up to'' full cost. Where the statute permits Fiscal Service to charge
up to full cost, the proposed rule would allow Fiscal Service to charge
anywhere between $0 and full cost. Statutes permitting Fiscal Service
to charge between $0 and full cost include: 26 U.S.C. 6402(e) (offset
of tax refund payments to collect State income tax obligations); 26
U.S.C. 6402(f) (offset of tax refund payments to collect unemployment
compensation debt); and 31 U.S.C. 3716(c)(4) (offset of Federal nontax
payments and State payments). Statutes that require Fiscal Service to
charge full cost include: 42 U.S.C. 664(b) (offset of tax refund
payments to collect past-due support obligations); and 31 U.S.C.
3720A(d) (offset of tax refund payments to collect Federal nontax
debts).
(k) Social Security Numbers. Proposed paragraph (k) is consistent
with the existing TOP regulations and addresses the restrictions
imposed by the Social Security Number Fraud Prevention Act of 2017,
Public Law 115-59.
Section 285.30--Offset of Federal Nontax Payments and State Payments
This section consolidates the rules that apply generally to the
offset of Federal nontax payments and State payments.
(a) Scope. Proposed paragraph (a) describes the scope of this and
its related sections (i.e. Sec. Sec. 285.30, 285.31, 285.32, 285.33,
and 285.34), which govern offset of Federal nontax payments and State
payments. It also describes that the scope of sections 285.30 through
285.34 do not apply to Federal debts or Federal payments arising under
the tariff laws of the United States or the Social Security Act, except
to the extent provided under sections 204(f) and 1631(b)(4) of such Act
and 31 U.S.C. 3716(c). This limitation is required due to the language
of 31 U.S.C. 3701(d), which states that 31 U.S.C. 3711(e) and 3716-3719
``do not apply to a claim or debt under, or to an amount payable
under--(1) the Internal Revenue Code of 1986 (26 U.S.C. 1 et seq.), (2)
the Social Security Act (42 U.S.C. 301 et seq.), except to the extent
provided under sections 204(f) and 1631(b)(4) of such Act and section
3716(c) of this title, or (3) the tariff laws of the United States.''
The definition of ``Federal debt'' excludes debts arising under the
Internal Revenue Code, and the definition or ``Federal nontax payment''
excludes payments arising under the Internal Revenue Code. The
provision excluding Federal debts or Federal payments arising under the
Social Security Act except to the extent provided under sections 204(f)
and 1631(b)(4) of such Act and 31 U.S.C. 3716(c) means that, among
other things, Federal debts and Federal payments arising under the
Social Security Act are subject to TOP as long as they are carried out
in accordance with the applicable requirements provided for in the
cross-referenced statutory provisions.
(b) General rule. Proposed paragraph (b) describes the payments
generally subject to offset.
(c) Exemptions of Federal nontax payments from centralized offset.
Proposed paragraph (c) describes Fiscal Service's authority to exempt
payments from offset under TOP. It also lists the Federal payments that
are exempt from offset under TOP.
<bullet> Proposed paragraph (c)(1) explains how Federal payment
agencies may request that a class of payments be exempted from
offset under TOP. It describes Fiscal Service's authority to grant
and withdraw payment exemptions.
<bullet> Proposed paragraph (c)(2) lists certain payment types
that are exempt by statute and by the existing TOP regulations. It
also lists payment types that Fiscal Service proposes to exempt
through this proposed rule, including the following:
[cir] Proposed paragraph (c)(2)(viii) describes the treatment of
lump-sum benefit payments. See the proposed definition for ``lump-
sum benefit payment.''
[cir] Proposed paragraph (c)(2)(ix) describes Fiscal Service's
authority to establish minimum thresholds for the referral of debt.
This assists Fiscal Service in recognizing that, in certain
circumstances, the costs of an offset warrant exemption from offset.
For example, in some cases, a payment amount may be so small that
the only amount that could be collected from the payment is the cost
of an offset or less; offset in such a scenario would not be
warranted. See 31 CFR 903.3(a)(3).
[cir] Proposed paragraphs (c)(2)(x) and (xi) describe that
payments are exempted from offset through TOP when they are for: (1)
attorneys' fees and litigation costs for class counsel made under
prevailing party fee-shifting statutes to satisfy court judgments or
settlements in actions certified as class actions pursuant to
Federal Rule of Civil Procedure 23(b)(2) when the members of the
class are not ascertainable; or (2) attorneys' fees and litigation
costs for class counsel and administrative costs for distributing
settlements made under prevailing party fee-shifting statutes to
satisfy settlements in actions certified as class actions pursuant
to Federal Rule of Civil Procedure 23(b)(3). In both these
situations, the person legally entitled to a fee or cost payment is
the prevailing party (i.e., each member of the class), not the class
counsel or class administrator. As such, absent exemption, fee and
cost payments awarded under these class actions would be allocated
among the various class members and would be subject to offset for
the debts of those class members, rather than for the debts of the
class counsel or class administrator.
[cir] In actions certified as class actions pursuant to Federal
Rule of Civil Procedure 23(b)(2), offset may not be administratively
feasible. Rule 23(b)(2) allows a person to sue on behalf of a class
of litigants a person who has taken or refused to take action with
respect to the class where injunctive or declaratory relief is
sought as final relief. An incidental claim for monetary relief may
also be included, such as where the substantive law under which the
class is suing provides for attorneys' fees to be paid to the
prevailing party (i.e., every member of the class). However, in some
situations, it would be impractical--and sometimes impossible--to
[[Page 60042]]
identify all of the persons who fall within a Rule 23(b)(2) class
(i.e., the persons whose debts would be properly offset in the
absence of an exemption from offset). As such, an exemption from
offset for these situations is warranted.
[cir] In actions certified as class actions pursuant to Federal
Rule of Civil Procedure 23(b)(3), the Department of Justice has
informed Fiscal Service that offsetting these payments for the debts
of the class members risks adversely affecting the Government's
ability to settle these cases on the most favorable terms to the
United States and interferes with its plenary authority over
litigation. The Department of Justice further noted that offset
would further complicate negotiation dynamics that are already
highly charged and challenging. For example, the Department of
Justice stated that class counsel might attempt to negotiate higher
settlement amounts to ensure that their fees would not be reduced by
the offsets for the debts of class members. Because offset of these
types of payments runs the substantial risk of interfering with the
Government's ability to effectively represent the interests of the
United States in litigation, exemption is appropriate.
[cir] Proposed paragraph (c)(2)(xii) describes that payments are
exempted from offset through TOP when offset is impractical, as
determined by Fiscal Service in separate guidance. Such guidance may
address, for example, situations in which the payment agency is
unable to obtain a TIN for the PEP. Payment agencies are required to
include a TIN on their certified payment vouchers (see the proposed
definition for ``payment record'' and 31 U.S.C. 3325(d)). Disbursing
officials are responsible for examining certified payment vouchers
to determine whether such vouchers are in the proper form. 31 U.S.C.
3325(a)(2)(A). And, TOP's matching process requires TIN information
to be on the payment record for an offset to take place. If a TIN is
missing from a payment voucher, there is the potential for a missed
offset. However, there are some circumstances where obtaining a TIN
on a required payment is impossible or impractical. Some of the
barriers to collecting and providing TINs include, for example:
[ssquf] payments to foreign persons who do not have TINs;
[ssquf] payments under a witness protection program, for
undercover operations, or to informants where collection of the TIN
information may interfere with the Government's efforts to protect a
person's identity or otherwise have a detrimental effect on a law
enforcement operation, military operation, national security, or
emergency relief effort; and
[ssquf] payments made by a payment agency that does not have the
legal authority to require a PEP to submit a TIN and in which the
agency cannot independently obtain a TIN through reasonable efforts.
[cir] There are certain statutes that explicitly exempt payments
from ``offset'' or ``setoff.'' See, e.g., 31 U.S.C. 3701(d),
3716(c)(1)(C); 47 U.S.C. 309(j)(8)(C)(ii). Proposed paragraph
(c)(2)(xiii) explicitly states that such payments are exempt from
offset under this subpart. Other statutes exempt the payment from
levies, garnishments, and other legal process; these statutes do not
affect an agency's authority to conduct offsets.
[cir] Proposed paragraph (c)(2)(xiv) exempts classes of payments
for which the Secretary has granted an exemption.
(d) Certification of amount to be offset if different than maximum
allowed by law. Proposed paragraph (d) describes the authority of a
creditor agency to reduce the amount by which a payment is offset if it
determines the reduction is necessary given the debtor's financial
situation. This applies to the offset of State payments and Federal
nontax payments; it does not apply to the offset of tax refund
payments.
Section 285.31--Offset of Covered Benefit Payments To Collect Federal
Nontax Debts
(a) Scope. Proposed paragraph (a) describes the scope of this
section, which governs the offset of covered benefit payments. This
section does not govern the offset of lump-sum benefit payments. See
proposed Sec. 285.30(c)(2)(viii).
(b) General Rule. Proposed paragraph (b) states the general rule
that Federal agencies collect their delinquent debt through the offset
of covered benefit payments.
(c) Offset amount. Proposed paragraph (c)(1) describes the
limitation on the amount by which a monthly benefit payment may be
offset. It restates the limitations that are specified in the existing
TOP regulations. Proposed paragraph (c)(2) would permit, but not
require, disbursing officials to aggregate the amount of Federal
benefit payments received by a PEP within a 12-month period (or within
the prior month, on a prorated basis). This more closely aligns with 31
U.S.C. 3716(c)(3)(A)(ii).
Section 285.32--Offset of Federal Salary Payments To Collect Federal
Nontax Debts
(a) Scope. Proposed paragraph (a) describes the scope of this
section, which governs salary offset. This section does not apply to
the offset of final lump-sum payments of Federal salary, which are
subject to 100% offset and are not subject to the additional procedures
required for salary offset.
(b) General Rule. Proposed paragraph (b) restates the general rule
that, like other types of offset, Federal agencies must refer certain
debts to TOP for collection through salary offset. Because of the
additional and generally more costly due process requirements for
salary offset (as compared with other types of offset), Fiscal Service
has determined that salary offset only be required for debts over a
certain amount, as Fiscal Service may prescribe in separate guidance.
Creditor agencies would be permitted, but not required, to conduct
salary offset for lower dollar debts, subject to minimums that Fiscal
Service may establish. If a creditor agency has complied with all the
prerequisites for collecting a debt through offset except for the
prerequisites regarding the offset of salary payments, it may refer the
debt to TOP for offset against all payments other than salary payments;
if salary offset is required, the creditor agency must work toward
completing the prerequisites for salary offset after such a referral.
(c) Additional due process. Proposed paragraph (c) describes the
requirement that the creditor agency make a reasonable attempt to
provide a debtor with the opportunity for a hearing prior to attempting
to collect the debt through salary offset. This is consistent with the
existing TOP regulations.
(d) Procedures for salary offset. Proposed paragraph (d) sets forth
the procedures for salary offset. These procedures are consistent with
the existing TOP regulations.
In the existing TOP regulations, there is a provision regarding the
establishment of an interagency consortium. The establishment and
maintenance of this consortium is required by 5 U.S.C. 5514(a)(1).
While Fiscal Service maintains this consortium, it determined that
there was no need to address this in regulations. This proposed rule,
therefore, proposes to eliminate that provision. While the proposed
rule would eliminate this provision, Fiscal Service notes that the
consortium will continue to exist.
Section 285.33--Offset of Federal Nontax Payments To Collect Past-Due
Support
The introductory text clarifies that HHS, acting on behalf of a
State, is the creditor agency for purposes of this section.
(a) Scope. Proposed paragraph (a) describes the scope of this
section, which governs the offset of Federal nontax payments to collect
past-due support that is referred to TOP by HHS. It does not govern the
offset of Federal nontax payments to collect past-due support that is
referred to TOP directly by a State.
(b) General Rule. Proposed paragraph (b) describes that disbursing
officials will collect past-due support through offset of Federal
nontax payments, in accordance with the provisions of this subpart.
[[Page 60043]]
For purposes of this section, there is no requirement that States
conduct offset to collect Federal debts. By referring a debt to TOP (or
to HHS for the purpose of referring to TOP), the State agrees to the
terms of this regulation, which constitutes the reciprocal agreement
required by 31 U.S.C. 3716(h)(1)(B).
(c) Due process. Proposed paragraph (c) explains that the due
process described in proposed Sec. 285.2(d)(1)(ii) must be provided,
but that the notice described in that section need only be sent a
minimum of 30 days prior to referring the debt to TOP (as opposed to 60
days).
(d) Coordination. Proposed paragraph (d) requires HHS and States to
coordinate to ensure that the same debt is not referred to TOP twice.
(e) Payments not subject to offset. Proposed paragraph (e) lists
the types of Federal payments that may not be offset to collect past-
due support under this section. As with offset of Federal nontax
payments to collect other types of debt, payments can be partially or
fully exempt. However, unlike the collection of other types of debt,
covered benefit payments may not be offset through TOP to collect past-
due support. Offset of tax refund payments for past due support is
covered by Sec. 285.42.
(f) Special provisions applicable to Federal salary payments.
Proposed paragraph (f) describes the way in which Federal salary
payments may be offset to collect past-due support. It describes the
amount by which Federal salary payments may be offset and the due
process requirements.
Section 285.34--Offset Under Reciprocal Agreements With States
(a) Scope. Proposed paragraph (a) describes the scope of this
section, which governs offsets under the State Reciprocal Program,
which is a program within TOP through which certain Federal debts and
State debts are collected under the terms of reciprocal agreements
through the offset of State payments and Federal nontax payments.
(b) General Rule. Proposed paragraph (b) states that Fiscal Service
and disbursing officials and participating SRP States will comply with
the terms of the applicable reciprocal agreement.
(c) Reciprocal agreements. Proposed paragraph (c) describes what
terms must be in a reciprocal agreement. Neither Fiscal Service nor a
State is required to enter into a reciprocal agreement.
(d) Offsetting Federal payments to collect State debt. Proposed
paragraph (d) describes the requirement that States certify that their
debts meet certain prerequisites prior to referring the debts to TOP.
It also describes the types of Federal payments that are exempt from
offset under the State Reciprocal Program.
(e) Offsetting State payments to collect Federal debt. Proposed
paragraph (e) describes the requirement that a creditor agency must
certify its Federal debt for it to be collected under the State
Reciprocal Program.
(f) Fees. Proposed paragraph (f) describes that Fiscal Service may
charge participating SRP States a fee for the cost of offsetting a
Federal payment to collect a State debt. The amount of that fee may be
anywhere between $0 and the full cost of applying the offset procedure.
While Fiscal Service may charge a participating SRP State a fee, the
participating SRP State may not charge Fiscal Service or the creditor
agency a fee.
Section 285.40--Offset of Tax Refund Payments To Collect Federal Nontax
Debts, State Debts, and Debts Owed to Tribal IV-D Agencies
This section consolidates the rules that apply generally to the
offset of tax refund payments.
(a) Scope. Proposed paragraph (a) describes the scope of this and
its related sections (i.e. Sec. Sec. 285.40, 285.41, 285.42, and
285.43), which govern the offset of tax refund payments through TOP.
(b) General Rule. Proposed paragraph (b) describes the general rule
that tax refund payments are subject to collection for Federal debts,
for certain State debts, and for certain debts owed to Tribal IV-D
agencies.
(c) Reasonable efforts. Proposed paragraph (c) describes the
requirement that a creditor agency must make a reasonable effort to
collect the debt prior to attempting to collect the debt through tax
refund offset. Sending a demand letter and complying with statutory and
regulatory prerequisites is an example of making reasonable efforts to
collect.
(d) Notification of offset to the debtor. Proposed paragraph (d)
describes the requirement to send the person or persons entitled to the
tax refund payment a notice that the offset has occurred.
Section 285.41--Offset of Tax Refund Payments To Collect Federal Nontax
Debts
The introductory text clarifies the definition for the term
``match,'' when used as noun, as applied to this section. The
definition is essentially the same as the definition provided in
section 285.1, except that it requires the use of a name control and a
TIN (or derivatives thereof). The definition for ``match'' in section
285.1, does not necessarily require the use of a name (or name control)
and a TIN, though TOP does make use of those data points currently and
anticipates doing so in the foreseeable future. The definition for
``match'' in the introductory text of Sec. 285.41, on the other hand,
does require the use of name control and TIN, though an exact match on
those data fields is not required. See 31 U.S.C. 3720A(h)(3)
(describing a ``match'' in the context of the offset of tax refund
payments to collect Federal nontax debt). Note, the term ``name
control'' is a term used by the IRS and generally refers to a sequence
of characters derived from the name of a taxpayer.
(a) Scope. Proposed paragraph (a) describes the scope of this
section, which governs tax refund offset to collect Federal debts
through TOP.
(b) General Rule. Proposed paragraph (b) states that Federal
agencies generally must collect Federal debts over 120 days delinquent
by referring them to TOP for tax refund offset.
(c) OASDI overpayment. Proposed paragraph (c) describes the
additional requirements to collecting an OASDI overpayment through tax
refund offset.
(d) Proposed paragraph (d) recognizes that, unlike many other types
of offset that permit Fiscal Service to charge anywhere from $0 per
offset up to the full cost of offset (see proposed Sec. 285.2(j)),
Fiscal Service must charge Federal agencies for the full cost of
applying the offset procedure in the context of tax refund offset to
collect Federal nontax debts. See 31 U.S.C. 3720A(d).
Section 285.42--Offset of Tax Refund Payments To Collect Past-Due
Support
(a) Scope. Proposed paragraph (a) describes the scope of this
section, which governs tax refund offset to collect past-due support
through TOP.
(b) General Rule. Proposed paragraph (b) describes the
circumstances under which HHS, a State, or a Tribal IV-D agency may
refer past-due support to TOP.
(c) Referral of past-due support to TOP. Proposed paragraph (c)
explains the circumstances under which HHS may submit past-due support
to TOP. It also permits States and Tribal IV-D agencies to refer past-
due support to TOP, but only if authorized by HHS rules.
(d) Additional due process. Proposed paragraph (d) describes the
additional due process requirements for past-due support that is being
enforced by more than one State or Tribal IV-D agency.
(e) Time limitation on reversals. Proposed paragraph (e) addresses
the
[[Page 60044]]
time limitation imposed on IRS for reversing an improper tax refund
payment. This time limitation was imposed on December 30, 2015, through
an interim final rule (80 FR 81463). The comments received pursuant to
that interim final rule will be addressed along with comments to this
proposed rule.
(f) Fees. Proposed paragraph (f) recognizes that, unlike many other
types of offset that permit Fiscal Service to charge anywhere from $0
per offset up to the full cost of offset (see proposed Sec. 285.2(j)),
Fiscal Service must charge States and Tribal IV-D agencies for the full
cost of applying the offset procedure in the context of tax refund
offset to collect past-due support. See 42 U.S.C. 664(b). If the full
cost of an offset exceeds the statutory maximum (currently $25), Fiscal
Service will charge the statutory maximum.
Section 285.43--Offset of Tax Refund Payments To Collect State Income
Tax and Unemployment Compensation Debts
There are no additional definitions unique to this section.
(a) Scope. Proposed paragraph (a) describes the scope of this
section, which governs tax refund offset to collect State income tax
obligations and unemployment compensation debts.
(b) General Rules. Proposed paragraph (b) states that States may
(but are not required to) refer to TOP State income tax obligations and
unemployment compensation debts. If States refer such debts, Fiscal
Service will collect those debts through offset, subject to the
provisions of the proposed rule.
(c) Additional due process. Proposed paragraph (c) explains the due
process requirements (beyond those required under the proposed Sec.
285.2(d)(1)(ii)) for collecting State income tax obligations and
unemployment compensation debts through tax refund offset.
Fiscal Service invites commenters' views on all aspects of the
proposed rule, including whether the proposed rule is appropriately
tailored and clear.
III. Procedural Analyses
Federalism
This proposed rule has been reviewed under Executive Order 13132,
Federalism. This proposed rule would not have substantial direct
effects on States, on the relationship between the national government
and the States, or on distribution of power and responsibilities among
the various levels of government. Therefore, in accordance with
Executive Order 13132, it is determined that this proposed rule does
not have sufficient federalism implications to warrant the preparation
of a federalism summary impact statement.
Paperwork Reduction Act
The Paperwork Reduction Act does not apply because this proposed
rule would not impose information collection requirements that require
the approval of the Office of Management and Budget under 44 U.S.C.
3501, et seq.
Regulatory Flexibility Act Analysis
Pursuant to the Regulatory Flexibility Act (5 U.S.C. 601 et seq.),
it is hereby certified that the proposed rule would not have a
significant economic impact on a substantial number of small entities
because this rule only impacts persons who receive payments from
Federal agencies or States and who are delinquent on debts owed to
Federal agencies, States, or Tribal IV-D agencies. Accordingly, an
initial regulatory flexibility analysis under the Regulatory
Flexibility Act is not required. Fiscal Service seeks comment on
whether the certification made herein should be reconsidered and, if
so, on what basis.
Regulatory Planning and Review
This proposed rule is not a significant rule for purposes of
Executive Order 12866 and has not been reviewed by the Office of
Management and Budget. This rule is anticipated to be designated a
deregulatory action for purposes of Executive Order 14192.
Unfunded Mandates Act of 1995
Section 202 of the Unfunded Mandates Reform Act of 1995, 2 U.S.C.
1532 (Unfunded Mandates Act), requires that the agency prepare a
budgetary impact statement before promulgating any rule likely to
result in a Federal mandate that may result in the expenditure by
State, local, and Tribal governments, in the aggregate, or by the
private sector, of $100 million or more in any one year. If a budgetary
impact statement is required, section 205 of the Unfunded Mandates Act
also requires the agency to identify and consider a reasonable number
of regulatory alternatives before promulgating the rule. We have
determined that this rule would not result in expenditures by State,
local, and Tribal governments, or by the private sector, of $100
million or more in any one year. Accordingly, we have not prepared a
budgetary impact statement or specifically addressed any regulatory
alternatives.
List of Subjects
31 CFR Part 5
Claims, Government employees, Income taxes, Wages.
31 CFR Part 256
Claims.
31 CFR Part 285
Administrative practice and procedure, Black lung benefits, Child
support, Child welfare, Claims, Credit, Disability benefits,
Garnishment of wages, Government employees, Income taxes, Loan
programs, Privacy, Railroad retirement, Railroad unemployment
insurance, Social Security, Supplemental Security Income, Taxes,
Unemployment compensation, Veteran, Wages.
For the reasons set forth in the preamble, Treasury proposes to
amend 31 CFR part 5 and Fiscal Service proposes to amend 31 CFR parts
256 and 285 as follows:
PART 5--TREASURY DEBT COLLECTION
0
1. The authority citation for part 5 continues to read as follows:
Authority: 5 U.S.C. 5514; 26 U.S.C. 6402; 31 U.S.C. 321, 3701,
3711, 3716, 3717, 3718, 3720A, 3720B, 3720D.
Sec. Sec. 5.1, 5.4, 5.9, 5.11, 5.13, 5.17, 5.20 [Amended]
0
2. In the table below, for each section indicated in the left column,
remove the reference indicated in the middle column from wherever it
appears in the section, and add the reference indicated in the right
column:
------------------------------------------------------------------------
Section Remove Add
------------------------------------------------------------------------
5.1............................... 285.11 285.111
5.1............................... 285.2(a) 285.1
5.4............................... 285.13 285.113
5.9............................... 285.12 285.112
5.9............................... 285.12(b)(2) 285.112(b)(2)
5.9............................... 285.12(i) 285.112(i)
[[Page 60045]]
5.9............................... 285.12(g) 285.112(g)
5.11.............................. 285.2 285.40
5.11.............................. 285.2(d) 285.40(c)
5.13.............................. 285.11 285.111
5.13.............................. 285.11(f) 285.111(f)
5.13.............................. 285.11(f)(4) 285.111(f)(4)
5.13.............................. 285.11(f)(5) 285.111(f)(5)
5.17.............................. 285.13 285.113
5.20.............................. 285.2 285.40
------------------------------------------------------------------------
PART 256--OBTAINING PAYMENTS FROM THE JUDGMENT FUND AND UNDER
PRIVATE RELIEF BILLS
0
3. The authority citation for part 256 continues to read as follows:
Authority: 31 U.S.C. 1304, 3728; 41 U.S.C. 612; 5 U.S.C. 2301
note.
Sec. 256.21 [Amended]
0
4. Amend Sec. 256.21 by removing ``285.5'' and adding in its place
``part 285, subpart A,''.
PART 285--DEBT COLLECTION AUTHORITIES UNDER THE DEBT COLLECTION
IMPROVEMENT ACT OF 1996
0
5. The authority citation for part 285 continues to read as follows:
Authority: 5 U.S.C. 5514; 26 U.S.C. 6402; 31 U.S.C. 321, 3701,
3711, 3716, 3719, 3720A, 3720B, 3720D; 42 U.S.C. 664; E.O. 13019, 61
FR 51763, 3 CFR, 1996 Comp., p. 216.
Sec. Sec. 285.11 through 285.13 [Redesignated as Sec. Sec. 285.111
through 285.113]
0
6. Redesignate Sec. Sec. 285.11 through 285.13 within subpart B as
Sec. Sec. 285.111 through 285.113, respectively.
0
7. Revise subpart A to read as follows:
Subpart A--Disbursing Official Offset
Sec.
285.1 Definitions.
285.2 General provisions.
285.30 Offset of Federal nontax payments and State payments.
285.31 Offset of covered benefit payments to collect Federal nontax
debts.
285.32 Offset of Federal salary payments to collect Federal nontax
debts.
285.33 Offset of Federal nontax payments to collect past-due
support.
285.34 Offset under reciprocal agreements with States.
285.40 Offset of tax refund payments to collect Federal nontax
debts, State debts, and debts owed to Tribal IV-D agencies.
285.41 Offset of tax refund payments to collect Federal nontax
debts.
285.42 Offset of tax refund payments to collect past-due support.
285.43 Offset of tax refund payments to collect State income tax and
unemployment compensation debts.
Subpart A--Disbursing Official Offset
Sec. 285.1 Definitions.
As used in this subpart, unless otherwise specified, the following
definitions will apply:
Address means physical street address, post office box number,
electronic address (including electronic mail and telephone numbers
capable of receiving text messages or similar alerts), or other
reasonable address through which written notice can be delivered to a
debtor or payee. For the purposes of Sec. 285.43(b)(2)(i), the term
``address'' is limited to a physical street address or post office box.
Centralized offset means offset conducted through TOP.
Covered benefit payment means a Federal payment payable to an
individual under the Social Security Act (42 U.S.C. 301 et seq.), part
B of the Black Lung Benefits Act, or any law administered by the
Railroad Retirement Board (other than payments that such Board
determines to be tier 2 benefits).
Creditor agency means any Federal agency that is owed a debt that
seeks to collect that debt through offset of Federal or State payments.
For purposes of Sec. Sec. 285.2, 285.30, 285.33, 285.34, 285.40,
285.42, and 285.43, the term ``creditor agency'' also includes any
State that is owed a debt that seeks to collect the debt through offset
of Federal payments. For purpose of Sec. 285.42, the term ``creditor
agency'' also includes Tribal IV-D agencies.
Days delinquent refers to the number of days that a debt has been
in a delinquent status. For administrative debts (e.g., debts arising
from fines, penalties, and overpayments), the first day of delinquency
generally is the date of the creditor agency's initial written demand
for payment. For debts that arise from the extension of credit through
direct loans, loan guarantees, or insurance, the date of delinquency
generally is the due date specified in the applicable agreement or
instrument.
Debt means Federal debt, State debt, and/or past-due support owed
to a Tribal IV-D agency. For purposes of Sec. Sec. 285.31, 285.32, and
285.41, the term ``debt'' means Federal debt. For purposes of
Sec. Sec. 285.2, 285.30, 285.34, and 285.40, the term ``debt'' means
either a Federal debt, a State debt, or a debt owed to a Tribal IV-D
agency. For the purposes of Sec. 285.42, the term ``debt'' means State
debt or past-due support owed to a Tribal IV-D agency. For the purposes
of Sec. Sec. 285.33 and 285.43, the term ``debt'' means State debt.
Debt record means information about a debt in TOP, including, but
not limited to, the amount of the debt and the debtor's name, address,
and taxpayer identifying number.
Debtor means a person who owes a debt.
Delinquent or past-due refers to the status of a debt and means a
debt has not been paid by the date specified in the creditor agency's
initial written demand for payment or applicable agreement or
instrument, unless other payment arrangements satisfactory to the
creditor agency have been made and such payment arrangements cure the
delinquency.
Disbursing official, in the context of the offset of a Federal
payment, means an official who has authority to disburse money pursuant
to Title 31, Subtitle III, Chapter 33, Subchapter II of the United
States Code or another Federal law and, in the context of the offset of
a State payment, means the participating SRP State.
Disposable pay means that part of current basic pay, special pay,
incentive pay, retired pay, retainer pay, or in the case of an employee
not entitled to basic pay, other authorized pay remaining after the
deduction of any amount required by law to be withheld (other than
deductions to execute garnishment orders in accordance with parts 581
and 582 of this chapter). Among the legally required deductions that
must be applied first to determine disposable pay are levies pursuant
to the Internal Revenue Code (title 26, United States Code) and
deductions described in Sec. 581.105(b) through (f) of this chapter.
See 5 CFR 550.1103.
Federal agency means a department, agency, subagency, court, court
[[Page 60046]]
administrative office, or instrumentality in the executive, judicial,
or legislative branch of the Federal Government, including government
corporations.
Federal benefit payment is a payment made under a Federal
entitlement program or for an annuity, including, but not limited to,
payments for Social Security, Supplemental Security Income, Black Lung,
Civil Service Retirement, Railroad Retirement annuity and Railroad
Unemployment and Sickness benefits, Department of Veterans Affairs
Compensation and Pension, and Worker's Compensation.
Federal debt or Federal nontax debt has the meaning contained in 31
U.S.C. 3701(b)(1), except that it excludes debts arising under the
Internal Revenue Code. The term ``Federal debt'' includes debt
administered by a third party acting as an agent for the Federal
Government. The term ``Federal debt'' also includes interest,
penalties, and administrative costs that have been assessed on the
principal amount of the debt.
Federal employee means a current employee of a Federal agency,
including a current member of the Armed Forces or a Reserve of the
Armed Forces, an employee of the United States Postal Service, and any
seasonal or temporary employee.
Federally recognized Tribe means an entity listed on the Department
of the Interior's list under the Federally Recognized Indian Tribe List
Act of 1994, which the Secretary of the Interior currently acknowledges
as an Indian Tribe and with which the United States maintains a
government-to-government relationship.
Federal nontax payment is a Federal payment other than an amount
payable under the Internal Revenue Code.
Federal payment is any payment certified by a payment agency to a
disbursing official on a voucher or other similar form in accordance
with Title 31, Subtitle III, Chapter 33, Subchapter II of the United
States Code or other Federal disbursement authority. The term ``Federal
payment'' also includes any payment made by the United States through
an escrow agent or other person with the responsibility to hold and/or
further disburse the funds to a person. Types of Federal payments
include, but are not limited to, wage, salary, retirement, vendor,
expense reimbursement, benefit, travel advances, travel reimbursement,
grant, fee, refund (including a tax refund payment), judgment
(including those certified for payment pursuant to 31 U.S.C. 1304 or
3728), return of funds held by the United States for a person, and any
other payment type made by the United States (including payments made
by the United States on behalf of a State government) to a person.
Federal payment offset means, in the context of offset under a
reciprocal agreement, offset of a Federal payment to collect a State
debt.
Fiscal Service means the Bureau of the Fiscal Service, a bureau of
the Department of the Treasury.
HHS means the Department of Health and Human Services, Office of
Child Support Enforcement.
Internal Revenue Code means the Internal Revenue Code of 1986, as
amended.
IRS means the Internal Revenue Service, a bureau of the Department
of the Treasury.
Legally enforceable refers to a characteristic of a debt and means
there has been a final agency determination that the debt, in the
amount stated, is due, and there are no legal bars to collection by
offset. A debt would not be legally enforceable, for example, if the
debt is:
(1) Subject to the automatic stay in bankruptcy proceedings;
(2) The subject of a pending administrative review required by a
statute or regulation that prohibits collection action during the
review process; or
(3) Governed by a statute that precludes collection through offset.
Lump-sum benefit payment is a covered benefit payment and refers to
a one-time payment made in lieu of recurring payments (or a portion of
such payments) that would otherwise be paid over a period of time.
Lump-sum benefit payment floor is calculated, in Fiscal Service's
discretion and depending on the information available, as one of the
following:
(1) $9,000;
(2) $750 times the number of months to which the lump-sum benefit
payment relates;
(3) $750 times the number of months to which the lump-sum benefit
payment relates minus any other amounts the PEP received as Federal
benefit payments during those months; or
(4) $9,000 minus any other amounts the PEP received as Federal
benefit payments within a 12-month period.
Match, when used as a noun, means that the person entitled to
payment on a payment record is the same person as the debtor on a debt
record, as determined by Fiscal Service using information derived from
the payment record and the debt record. When used as a verb, the term
``match'' means to conduct the process that results in a match.
Means-tested program refers to a program that bases eligibility on
a determination that the income and/or assets of the PEP are inadequate
to provide the PEP with an adequate standard of living without program
assistance.
Monthly benefit payment is a Federal payment and means a covered
benefit payment payable on a recurring basis at monthly intervals.
OASDI overpayment means any overpayment of benefits made to an
individual under title II of the Social Security Act (42 U.S.C. 401 et
seq.) (Federal Old Age, Survivors and Disability Insurance).
Offset means withholding funds payable by the United States
(including funds payable by the United States on behalf of a State
government) or a State to, or held by the United States or a State for,
a PEP to collect a debt owed by the PEP.
Participating SRP State means a State that has entered into a
reciprocal agreement.
Past-due support means the amount of a delinquency, determined
under a court order or an order of an administrative procedure
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. The term ``child'' as used in this definition is not limited
to minor children. ``Past-due support'' also includes any past-due
support being enforced by a State, including but not limited to amounts
a State is enforcing pursuant to a cooperative agreement with an Indian
Tribe or Tribal organization that receives funding under section 455(f)
of the Social Security Act. For purposes of Sec. 285.42, past-due
support also means the amount of a delinquency, determined under a
court order or an order of an administrative procedure established
under Tribal 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.
Payee means any person identified on the payment record as the
recipient of the payment. Typically, the payee and PEP are the same
person.
Payment means a Federal payment or a State payment.
Payment agency means, with regard to a Federal payment, any Federal
agency that transmits payment requests, in the form of certified
payment vouchers or other similar forms, to a disbursing official for
disbursement. For Sec. 285.34, the term ``payment agency'' also
includes, with regard to a State payment, a participating SRP State.
Payment record, for purposes of Federal payments, means information
contained on a payment request, in the
[[Page 60047]]
form of a certified payment voucher or other similar form that has been
transmitted to a disbursing official for disbursement in accordance
with the provisions of 31 U.S.C. 3325 and 3528 or other applicable law.
For the purposes of State payments, the term ``payment record'' means
information in a State's records regarding a State payment eligible for
offset under a reciprocal agreement.
PEP or person entitled to payment means the person legally entitled
to the payment.
Person means an individual, corporation, partnership, association,
organization, State or local government, Federally recognized Tribe, or
any other type of entity other than the United States or a Federal
agency.
Reciprocal agreement means a written agreement between Fiscal
Service and a State, entered into pursuant to 31 U.S.C. 3716(h), that
provides for Federal payment offset and State payment offset.
Recurring payment means a payment to an individual that is expected
to be payable at regular intervals, at least four times annually,
except that the term ``recurring payment'' does not include payments
made pursuant to a Federal contract, grant, or cooperative agreement.
Salary offset means the collection of a debt through offset of
disposable pay.
Salary payment agency means the agency that employs the Federal
employee who owes the debt and authorizes the payment of their pay. A
salary payment agency also includes any Federal agency that performs
payroll services on behalf of the employing agency.
Secretary means the Secretary of the Treasury.
Separate guidance refers to guidance that Fiscal Service may issue
regarding the operation of TOP, which may include a chapter in the
Treasury Financial Manual, Federal Register documents, technical
bulletins, rules of behavior, requirements documents, or other similar
guidance.
State means each of the several States of the United States, the
District of Columbia, American Samoa, Guam, the United States Virgin
Islands, the Commonwealth of the Northern Mariana Islands, and the
Commonwealth of Puerto Rico. The term ``State'' includes agencies of
the State.
State debt means any amount of money, funds, or property that has
been determined by an appropriate State official to be owed to that
State by a person, including debt administered by a third party acting
as an agent for the State. State debt also includes past-due support.
For the purposes of ``State debt,'' a ``person'' does not include a
foreign sovereign, a Federally recognized Tribe, another State, or any
local government within a State.
State income tax obligation is a type of State debt and means
``past-due, legally enforceable State income tax obligation,'' as
defined by 26 U.S.C. 6402(e)(5), and includes any local income tax
administered by the chief tax administration agency of the State.
State payment means an amount payable by a State to a person, as
specified in a reciprocal agreement.
State payment offset means offset of a State payment to collect a
Federal debt.
State Reciprocal Program or SRP refers to the program under which
debts are collected pursuant to a reciprocal agreement.
Tax refund offset means offset of a tax refund payment to collect a
debt.
Tax refund payment includes any overpayment of Federal taxes to be
refunded to the person(s) making the overpayment after the IRS makes
the appropriate credits as provided in 26 U.S.C. 6402(a) for any
Federal tax liabilities on the part of the person(s) who made the
overpayment.
Taxpayer identifying number means the identifying number described
under section 6109 of the Internal Revenue Code.
Treasury Offset Program or TOP refers to the program administered
by Fiscal Service through which Fiscal Service and other disbursing
officials conduct offsets.
Tribal IV-D agency means an Indian Tribe or Tribal organization
that receives funding under section 455(f) of the Social Security Act.
Unemployment compensation debt is a type of State debt and means
``covered unemployment compensation debt,'' as defined in 26 U.S.C.
6402(f)(4).
Sec. 285.2 General provisions.
(a) Scope. (1) This subpart governs the centralized offset of
Federal payments and State payments to collect delinquent debts owed to
the United States, a State, or a Tribal IV-D agency in accordance with
31 U.S.C. 3716 and 3720A, 5 U.S.C. 5514, 26 U.S.C. 6402, and 42 U.S.C.
664.
(2) This section sets forth the general rules applicable to
centralized offset. Specific rules for each type of offset are set
forth in Sec. Sec. 285.30 through 285.34 and 285.40 through 285.43. To
the extent there is a conflict between the general rules and the
specific rules, the specific rules apply.
(3) The receipt of collections pursuant to this subpart does not
preclude a creditor agency from pursuing other debt collection remedies
in conjunction with centralized offset.
(b) General rules for Federal agencies--(1) Mandatory referral of
delinquent debts. Federal agencies must refer debts to TOP for offset
against all payment types subject to offset through TOP in accordance
with this subpart.
(i) The requirement in this paragraph (b)(1) applies to any debt
over 120 days delinquent, other than debts owed by foreign sovereigns
or debts that fail to meet the requirements of paragraph (d)(1)(i) of
this section.
(ii) If a debt that is over 120 days delinquent is not legally
enforceable solely because it is under review as described in paragraph
(d)(1)(ii)(C) of this section, the Federal agency must refer the debt
to TOP within 30 days after completing its review.
(iii) Federal agencies must send the 60-day notice required in
section (d)(1)(ii) at least 60 days prior to the debt becoming 121 days
delinquent.
(2) Discretionary referral of delinquent debts. Federal agencies
may refer to TOP a debt that is owed by a foreign sovereign or is less
than 121 days delinquent.
(3) Federal agency regulations. Before referring a debt to TOP,
Federal agencies must prescribe regulations in accordance with the
requirements of 31 U.S.C. 3716(b) and 31 U.S.C. 3720A(a). Before
referring debts to TOP for salary offset, Federal agencies must also
prescribe regulations pursuant to 5 U.S.C. 5514(b) and 5 CFR 550.1104.
(c) General rule for States and Tribal IV-D agencies. States and
Tribal IV-D agencies may refer delinquent debts to TOP in accordance
with this subpart.
(d) Requirements for all creditor agencies--(1) Referral
prerequisites. (i) A debt referred to TOP must be:
(A) Past-due in the amount stated by the creditor agency;
(B) Legally enforceable;
(C) More than the dollar threshold established by Fiscal Service in
separate guidance; and
(D) To the extent it is a Federal debt:
(1) Not secured by collateral subject to a pending foreclosure
action, unless the creditor agency determines that offset will not
adversely affect the creditor agency's rights to the secured collateral
or the creditor agency has determined it may relinquish rights to such
collateral;
(2) Not based in whole or in part on conduct in violation of the
antitrust laws; and
(3) Not appearing to arise from or involve fraud, a false claim, or
a misrepresentation, except to the extent permitted by the Department
of Justice or if the provisions of 31 CFR 900.3 do not apply.
[[Page 60048]]
(ii) The creditor agency must have made a reasonable attempt to
provide each debtor with:
(A) Written notification, at least 60 days before referring the
debt to TOP, to the debtor's address last known to the creditor agency,
identifying:
(1) The nature and the amount of the debt;
(2) The intention of the creditor agency to collect the debt
through the offset of Federal and State payments; and
(3) The debtor's rights and how the debtor may exercise those
rights;
(B) An opportunity to inspect and copy the records of the creditor
agency pertaining to the debt;
(C) An opportunity for a review within the creditor agency of the
determination of indebtedness, including an opportunity to present
evidence that all or part of the debt is not past-due or legally
enforceable; and
(D) An opportunity to enter into a written repayment agreement with
the creditor agency.
(2) Delinquent debt information requirements. For each debt
referred to TOP, the creditor agency must provide to Fiscal Service the
following:
(i) The name and taxpayer identifying number of the debtor;
(ii) The debtor's address last known to the creditor agency, if
known;
(iii) The amount of the debt;
(iv) The date on which the debt became delinquent;
(v) Contact information for an individual or office within the
creditor agency who will handle questions, concerns or communications
regarding the debt;
(vi) Written certification as required in paragraph (d)(3) of this
section; and
(vii) Any other information requested by Fiscal Service.
(3) Creditor agency certification. At the time the creditor agency
refers a debt to TOP, the creditor agency must provide, in the manner
required by Fiscal Service, written certification that:
(i) The debt meets the requirements described in paragraph
(d)(1)(i) of this section;
(ii) The creditor agency has satisfied all the requirements
described in paragraph (d)(1)(ii) of this section;
(iii) The creditor agency has complied with all statutes,
regulations, policies, and contract provisions applicable to the
creditor agency's assessment of interest, penalties, and administrative
costs, and has provided written notice to each debtor explaining the
creditor agency's obligations to accrue and assess any such charges;
(iv) The creditor agency has satisfied any other requirements
applicable to the collection of the debt through offset as set forth in
this subpart;
(v) The creditor agency has satisfied such other requirements as
Fiscal Service may impose; and
(vi) The individual making the certification has the delegated
authority to do so on behalf of the head of the creditor agency.
(4) Correcting and updating debt information. (i) After a debt has
been referred to TOP, the creditor agency must provide, at least
annually, in the manner and timeframes required by Fiscal Service,
written certification that the debt continues to be legally enforceable
and that all the information in the debt record, including the amount
of the debt, is correct.
(ii) On an ongoing basis, the creditor agency must update:
(A) The amount of the debt in the debt record to reflect any
collections the creditor agency receives outside of TOP;
(B) Address information for the debtor; and
(C) Any other information on the debt record.
(iii) The creditor agency may update debt records to reflect any
increases in the amount of the debt referred to TOP so long as the
creditor agency has complied with the requirements of paragraph
(d)(1)(ii) of this section with regard to the increased amounts.
Creditor agencies may not update a debt record to add an amount
associated with a separate debt, unless otherwise permitted by Fiscal
Service.
(iv) The creditor agency must notify Fiscal Service immediately of
any change in the legal enforceability of the debt, including notice
that the debtor has filed for bankruptcy protection.
(5) Duplication not required. Nothing in this subpart requires any
creditor agency to duplicate any notice or opportunity for hearing or
review before referral of the debt to TOP.
(e) Federal payments--(1) Payments eligible for centralized offset.
All Federal nontax payments, except as set forth in Sec. 285.30(c)(2),
and all tax refund payments, except as exempted by statute, are
eligible for centralized offset.
(2) Payment agency responsibilities--(i) Determination of PEP or
PEPs. (A) Unless the payment agency determines (in a time and manner
specified by Fiscal Service in separate guidance) that the PEP does not
owe a debt that has been referred to TOP:
(1) The payment agency must identify the PEP on the payment record,
and
(2) the payment agency must submit a separate payment voucher for
each PEP, unless a payment is owed jointly to more than one PEP.
(B) If the payment agency determines that the PEP does not owe a
debt that has been referred to TOP, these regulations do not prohibit
the payment agency from making the payment to a different person from
the PEP, if otherwise appropriate.
(ii) Payment vouchers. Payment agencies must prepare, submit, and
certify payment vouchers in the manner prescribed by the disbursing
official, including for the purpose of ensuring that all eligible
payments will be subject to centralized offset for debts owed by PEPs
and that all ineligible payments will not be subject to centralized
offset.
(iii) Payment mechanism. In general, unless a payment is exempt
from offset, a payment agency must ensure its payment is disbursed
through a payment mechanism that will automatically match with debts
that have been referred to TOP. This may limit the circumstances in
which an agency may use a credit card to make a payment. To the extent
a payment agency disburses its payments through a payment mechanism
that does not automatically match with debts that have been referred to
TOP, or to the extent the payment agency makes a payment to a third
party who subsequently disburses the money to the PEPs, the payment
agency must work with Fiscal Service to match the payments through a
manual process.
(3) Payment agencies and disbursing officials have satisfied the
obligation underlying the payment. When an offset occurs, the debtor
has received payment in full for the underlying obligation represented
by the payment. Pursuant to 31 U.S.C. 3716(c)(2)(A), neither the
disbursing official nor the payment agency may be held liable for the
amount of the offset on the basis that the underlying obligation was
not satisfied.
(f) Procedures for centralized offset--(1) Disbursing official
requirement. When a match occurs and all other requirements for
centralized offset have been met, the disbursing official will offset a
payment to satisfy, in whole or part, any debt owed by the PEP.
(2) Payments offset for debts owed by PEPs. If a payment is made to
a payee that is not a PEP with respect to that payment and if the
payment agency properly identifies the PEP and payee in the payment
record, the disbursing official will offset that payment only to
collect debts owed by the PEP.
(3) Payments made jointly to more than one PEP. If more than one
person is jointly entitled to a payment (i.e., there is more than one
PEP for a payment), the entire payment will be subject to offset for a
debt of any PEP, unless otherwise prohibited by law. If a
[[Page 60049]]
tax refund payment is offset, any non-debtor PEP filing a joint return
with a debtor may secure their proper share of a tax refund payment
from which an offset was made by filing a Form 8379, Injured Spouse
Allocation, or successor form, with the IRS. IRS will then pay the non-
debtor PEP their share of the refund and request that Fiscal Service
deduct that amount from amounts payable to the creditor agency. Fiscal
Service and the creditor agency will adjust their debt records
accordingly. A successful injured spouse claim does not mean that the
initial tax refund payment was erroneous or otherwise not due to the
taxpayer.
(4) Assigned payments. Unless prohibited by Federal statute, if a
person (an ``assignor'') assigns the right to receive a Federal payment
to a third party (an ``assignee''), the assigned payment will be
subject to centralized offset to collect any delinquent debt owed by
either the assignee or the assignor.
(5) Offset amount. The disbursing official will offset the lesser
of:
(i) The amount of the payment as shown on the payment record;
(ii) The amount of the debt;
(iii) The amount specified by a creditor agency, pursuant to Sec.
285.30(d); or
(iv) In the case of a payment that is partially exempted under
Sec. 285.30(c), at the disbursing official's option:
(A) The amount of the un-exempted portion of the payment,
calculated based on the amount of the payment as shown on the payment
record;
(B) The amount specified in paragraph (f)(5)(iv)(A) of this section
less any reduction taken by the payment agency through internal offset;
or
(C) If the amount specified in paragraph (f)(5)(iv)(B) of this
section cannot be calculated, $0.
(6) Priority of offsets. (i) A levy pursuant to the Internal
Revenue Code takes precedence over offsets under this subpart.
(ii) When a debtor owes more than one debt referred under this
subpart, amounts offset will be applied:
(A) First, to satisfy any past-due support;
(B) Second, to satisfy any Federal debts; and
(C) Third, to any State debts other than past-due support.
(iii) To the extent a debtor owes more than one debt in one of the
categories specified in paragraph (f)(6)(ii) of this section, amounts
offset will be applied first against older debts or as otherwise
determined by Fiscal Service in separate guidance.
(g) Notification of offset to debtor--(1) Warning Letter. Before
offsetting a recurring payment, the disbursing official (or Fiscal
Service on behalf of the disbursing official) may, but is not required,
to notify either the payee or the PEP (depending on what address
information is available) in writing of when offsets are expected to
begin and any other such information that the disbursing official (or
Fiscal Service on behalf of the disbursing official) deems appropriate.
With regard to monthly benefit payments, when administratively
feasible, the disbursing official (or Fiscal Service on behalf of the
disbursing official) will notify either the payee or the PEP (depending
on what address information is available) in writing of when offsets
are expected to begin and any other such information that the
disbursing official (or Fiscal Service on behalf of the disbursing
official) deems appropriate. The disbursing official (or Fiscal Service
on behalf of the disbursing official) will determine in its discretion
whether sending this notice is administratively feasible and may
consider factors such as whether it has an accurate address to which to
send such a letter and whether systems are functioning as expected. If
the offset of a stream of monthly benefit payment is suspended or
reduced for any reason, the disbursing official (or Fiscal Service on
behalf of the disbursing official) need not send any additional notice.
Failure to send a warning notice will not affect the validity of any
offset.
(2) Post-Offset Notification Letter. When an offset occurs under
this subpart, the disbursing official (or Fiscal Service on behalf of
the disbursing official) will notify either the payee or the PEP
(depending on what address information is available) in writing of the
offset. Failure to send an offset notice will not affect the validity
of any offset. The offset notice will include:
(i) A description of the payment, the amount of the offset, and the
date on which the offset occurred;
(ii) The purpose of the offset (e.g., to satisfy past-due support,
Federal debt, State income tax obligation, or unemployment compensation
debt, or other State debt);
(iii) The identity of the creditor agency requesting the offset;
and
(iv) Contact information for an individual or office within the
creditor agency who will handle concerns regarding the offset.
(h) Notification of offset to creditor and payment agencies--(1)
Notification to creditor agencies. Fiscal Service will notify the
creditor agency of all offsets made to collect the creditor agency's
debts. This notification will include identifying information for each
debtor, the total amounts collected from each debtor's payment with
regard to the creditor agency's debts, and the amount of any fees
charged to the creditor agency by Fiscal Service and any other
disbursing official conducting offsets. Except as provided in paragraph
(h)(2) of this section or in separate guidance, Fiscal Service and
other disbursing officials generally will not advise the creditor
agency of the source of payment from which the offset amounts were
collected.
(2) Notification to HHS. Upon request from HHS, Fiscal Service and
other disbursing officials will share with HHS information contained in
the payment records of persons who owe past-due support if that
information would assist in the collection of such debts.
(3) Notification to Fiscal Service. When a non-Treasury disbursing
official conducts an offset, that disbursing official will transmit to
Fiscal Service all of the information necessary for Fiscal Service to
send the notification under paragraphs (g) and (h) of this section,
including the amount of any fees that the creditor agency is
responsible for paying.
(4) Notification to payment agencies. Fiscal Service will make
available to the payment agency the information contained in the offset
notice so the payment agency may direct any questions about the offset
to the appropriate contact point in the creditor agency.
(i) Disposition of amounts collected--(1) Transmission of amounts
collected. Fiscal Service will transmit amounts collected through
centralized offset, less fees charged pursuant to paragraph (j) of this
section, to the appropriate creditor agency or agencies. Alternatively,
Fiscal Service may transmit all amounts collected through centralized
offset and then separately bill the creditor agency or agencies for any
fees charged pursuant to paragraph (j) of this section.
(2) Payment errors. If a payment agency discovers that a payment
that was offset (either in whole or in part) should not have been made
and determines that the payment should be reversed, the payment agency
must promptly reverse the amount of the payment that is available for
reversal. Fiscal Service will notify the creditor agency of the
reversal and, in Fiscal Service's discretion, will either:
(i) Deduct the portion of the reversed payment that was offset from
future amounts payable to the creditor agency; or
(ii) Require the creditor agency to return promptly to the
disbursing official an amount equal to the portion of the reversed
payment that was offset.
[[Page 60050]]
(3) Refunds. In the event that a refund of an offset is
appropriate, the disbursing official is generally not responsible for
refunding the amount of the offset. The creditor agency must make any
appropriate refunds and must notify Fiscal Service if it refunds all or
any part of an offset taken through TOP.
(4) Records. If any payment (or portion thereof) that was offset is
reversed or if any amount of an offset is refunded, Fiscal Service and
the creditor agency will adjust their records accordingly.
(j) Fees. Unless otherwise provided by statute, Fiscal Service may
charge creditor agencies fees sufficient to cover up to the full cost
of implementing the offset procedures described in this subpart.
(k) Social Security numbers. Fiscal Service will ensure that an
individual's social security number will not be visible on the outside
of any package it sends by mail. In addition, Fiscal Service generally
will redact or partially redact social security numbers in documents it
sends by mail; however, to administer TOP, Fiscal Service (and other
disbursing officials) may need to include social security numbers in
mailed documents, including, for example:
(1) In interoffice and interagency communications;
(2) In notices, including notices to the PEP or payee that an
offset has or will occur, when the social security number is (or is
embedded in) a creditor agency's account number, debt identification
number, or debtor identification number;
(3) In response to a request of a debtor or a debtor's
representative for records of Fiscal Service's offset activities; and
(4) When required by law.
Sec. 285.30 Offset of Federal nontax payments and State payments.
(a) Scope. This section and Sec. Sec. 285.31 through 285.34 set
forth rules applicable to the offset of Federal nontax and State
payments. This section and Sec. Sec. 285.31 through 285.34 do not
apply to Federal debts or Federal payments arising under:
(1) the tariff laws of the United States; or
(2) the Social Security Act, except to the extent provided under
sections 204(f) and 1631(b)(4) of such Act and 31 U.S.C. 3716(c).
(b) General rule. Except as set forth in paragraph (c)(2) of this
section, all Federal nontax payments are eligible for centralized
offset for the collection of Federal debts and, to the extent permitted
under Sec. Sec. 285.33 and 285.34, for State debts. State payments are
eligible for centralized offset for the collection of Federal debts to
the extent permitted under Sec. 285.34.
(c) Exemptions of Federal nontax payments from centralized offset--
(1) Agency requests for exemptions. To request an exemption of a
Federal nontax payment from centralized offset pursuant to 31 U.S.C.
3716(c)(3)(B), the head of a payment agency must make a request for an
exemption in writing and in compliance with the procedures established
by Fiscal Service in separate guidance. Fiscal Service may only exempt
classes of payments from centralized offset and will not consider
requests to exempt classes of debt from centralized offset. Fiscal
Service may withdraw a previously granted exemption if it determines
that the exemption is no longer warranted.
(i) Means-tested program payments. Fiscal Service will exempt from
centralized offset classes of payments made under means-tested programs
upon the request of the payment agency.
(ii) Payments made under programs that are not means-tested. Fiscal
Service may exempt from centralized offset classes of payments that are
not made under means-tested programs upon the request of the payment
agency. Payment agencies may request that Fiscal Service exempt 100% or
a specific lesser percentage or amount of each payment in a payment
class. Fiscal Service will consider such requests under standards it
prescribes in separate guidance. Such standards will give due
consideration to whether offset would tend to interfere substantially
with or defeat the purpose of the payment agency's program.
(2) Exempted payments. The following payments are exempt from
centralized offset:
(i) Black Lung Part C benefit payments;
(ii) Railroad Retirement tier 2 payments;
(iii) Payments made under the tariff laws of the United States;
(iv) Payments made under any program administered by the Secretary
of Education under title IV of the Higher Education Act of 1965 for
which payments are certified by the Department of Education;
(v) Federal loan payments (other than travel advances);
(vi) 75% of the amount of the payment as shown on the payment
record of any payment of retirement annuity certified by the Office of
Personnel Management;
(vii) 85% of the amount of a payment as shown on the payment record
of a covered benefit payment;
(viii) In the case of a lump-sum benefit payment, the greater of:
(A) the amount specified in paragraph (c)(2)(vii) of this section;
and
(B) the lump-sum benefit payment floor;
(ix) Any payment that is below the threshold established by Fiscal
Service under Sec. 285.2(d)(1)(i)(C);
(x) Any payment for attorneys' fees and/or litigation costs for
class counsel made under prevailing party fee-shifting statutes to
satisfy court judgments or settlements in actions certified as class
actions pursuant to Federal Rule of Civil Procedure 23(b)(2) when the
members of the class are not ascertainable;
(xi) Any payment for attorneys' fees and/or litigation costs for
class counsel and administrative costs for distributing settlements
made under prevailing party fee-shifting statutes to satisfy
settlements in actions certified as class actions pursuant to Federal
Rule of Civil Procedure 23(b)(3);
(xii) Any payment type for which offset is impracticable, as
determined by Fiscal Service in separate guidance;
(xiii) Any other payments for which an exemption is explicitly
provided for by Federal statute; and
(xiv) Any other payments for which an exemption has been granted in
accordance with 31 U.S.C. 3716(c)(3)(B).
(d) Certification of amount to be offset if different than maximum
allowed by law. If the creditor agency determines and certifies to
Fiscal Service that the maximum amount allowed by law to be offset from
Federal nontax payments would result in financial hardship to the
debtor and that a lesser offset amount (specified either in dollar
amount or as a percentage of the payment) is reasonable and appropriate
based on the debtor's financial circumstances, then the disbursing
official will offset such lesser amount specified by the creditor
agency.
Sec. 285.31 Offset of covered benefit payments to collect Federal
nontax debts.
(a) Scope. This section sets forth special rules applicable to the
offset of covered benefit payments, other than lump-sum benefit
payments, to collect delinquent Federal debts through TOP.
(b) General rule. To the extent required by Sec. 285.2(b)(1),
Federal agencies must refer delinquent debts to TOP for collection
through the offset of monthly benefit payments.
(c) Offset amount. (1) The amount offset from a monthly benefit
payment will be the lesser of:
(i) The amount of the debt;
(ii) An amount equal to 15% of the monthly benefit payment; or
(iii) The amount, if any, by which the monthly benefit payment
exceeds $750.
(2) The disbursing official may disregard the offset limitation
specified
[[Page 60051]]
in paragraph (c)(1)(iii) of this section if the PEP has received
either:
(i) An amount equal to at least $9,000 in Federal benefit payments
within the prior 12 months; or
(ii) An amount equal to at least $750 in Federal benefit payments
within the prior month.
Sec. 285.32 Offset of Federal salary payments to collect Federal
nontax debts.
(a) Scope. (1) This section sets forth special rules applicable to
salary offset to collect delinquent Federal debts through TOP.
(2) This section does not govern offset of final salary payments or
lump-sum payments made to employees who have left a Federal agency's
employ.
(b) General rule. To the extent required by Sec. 285.2(b)(1),
Federal agencies must refer debts to TOP for collection through salary
offset. The requirement to collect debts through salary offset applies
only with regard to debts over a threshold that Fiscal Service may
establish in separate guidance.
(c) Additional due process. In addition to the requirements of
Sec. 285.2(d)(1)(ii), the creditor agency must have made a reasonable
attempt to provide each debtor with an opportunity for a hearing, in
accordance with 5 U.S.C. 5514 and agency regulations issued in
accordance with 5 CFR 550.1104.
(d) Procedures for salary offset. (1) Each salary payment agency
will compare debt records with records of Federal salary payments that
it will disburse or certify to a disbursing official for disbursement.
When a match occurs and all other requirements for salary offset have
been met:
(i) The disbursing official will offset the Federal employee's
salary payment to satisfy, in whole or part, the debt owed by the
Federal employee; or
(ii) The salary payment agency, on behalf of the disbursing
official, will deduct the offset amount from a Federal employee's
disposable pay before it certifies the Federal employee's salary
payment to a disbursing official for disbursement.
(2) Offset amount. (i) The amount offset from a salary payment
under this section will be the lesser of:
(A) The amount of the debt;
(B) An amount equal to 15% of the debtor's disposable pay. The
salary payment agency will use such records as it deems necessary to
accurately calculate the debtor's disposable pay; or
(C) The amount determined under Sec. 285.30(d).
(ii) Alternatively, the amount offset may be an amount greater than
the amount specified in paragraph (d)(2)(i) of this section if agreed
upon, in writing, by the debtor and the creditor agency.
Sec. 285.33 Offset of Federal nontax payments to collect past-due
support.
As used in this section, HHS, acting on behalf of a State, is the
creditor agency.
(a) Scope. This section sets forth special rules applicable to the
offset of Federal nontax payments to collect past-due support through
TOP. This section applies only to the referral of past-due support by
HHS. For referral of past-due support directly by a State that has
entered into a reciprocal agreement with Fiscal Service, see Sec.
285.34.
(b) General rule. A disbursing official will offset any Federal
nontax payment subject to offset under this subpart to collect past-due
support.
(c) Due process. Either the State to which the past-due support is
owed or HHS must provide the due process specified by Sec.
285.2(d)(1)(ii), except that the notice referred to in that section may
be sent 30 days prior to referral of the past-due support to TOP.
(d) Coordination. HHS and the States will coordinate to ensure that
there are no duplicative referrals of past-due support to TOP.
(e) Payments not subject to offset. The following Federal payments
are not eligible for offset under this section:
(1) Payments exempted from offset under Sec. 285.30(c)(2);
(2) Covered benefit payments; and
(3) Tax refund payments.
(f) Special provisions applicable to Federal salary payments--(1)
Offset amount. (i) Unless a lower maximum offset limitation is provided
by applicable State law, the maximum part of a Federal salary payment
subject to offset to collect past-due support may not exceed those
amounts set forth in 15 U.S.C. 1673(b)(2)(A) and (B). If a lower
maximum offset limitation is provided by applicable State law, the
creditor agency must advise Fiscal Service of the lower maximum offset
limitation.
(ii) Garnishment for support. The maximum allowable offset amount
must be reduced by the amount of any deductions in pay resulting from a
garnishment order for support. Nothing in this section will alter any
rules applicable to processing garnishment orders for child support or
alimony.
(2) Pre-offset notice. At least 30 days before offset, the
disbursing official will send written notice to the debtor:
(i) Requesting that the debtor submit documentation that the
disbursing official determines is needed to determine the applicable
offset limitation under 15 U.S.C. 1673(b)(2)(A) and (B); and
(ii) Providing the amount (by percentage or otherwise) that will be
deducted if the debtor fails to submit the requested documentation.
Sec. 285.34 Offset under reciprocal agreements with States.
(a) Scope. This section sets forth the special rules applicable to
offset of Federal nontax payments and State payments to collect debt
under reciprocal agreements with participating SRP States.
(b) General rule. In accordance with the terms of any applicable
reciprocal agreement and this section, Fiscal Service and other
disbursing officials will conduct Federal payment offset to collect
delinquent State debts, and participating SRP States will conduct State
payment offset to collect delinquent Federal debts.
(c) Reciprocal agreements. (1) Fiscal Service and a State may enter
into a reciprocal agreement.
(2) A reciprocal agreement must:
(i) Set forth all of the State's requirements associated with State
payment offset, including requirements of State law and any
prohibitions on offsetting joint payments in accordance with Sec.
285.2(f)(3);
(ii) Require the State to prescribe procedures to govern the
collection of delinquent State debts;
(iii) Require that the State notify the payee or PEP of the State
payment offset, providing the information required by Sec. 285.2(g);
(iv) Set forth the types of Federal payments that will be subject
to offset to collect the State's debts;
(v) Set forth the types of State payments that will be subject to
offset to collect Federal debts;
(vi) Not impose any due process requirements on the collection of
Federal debts beyond what is already required by this subpart; and
(vii) Contain any other requirements that Fiscal Service considers
appropriate.
(d) Offsetting Federal payments to collect State debt--(1)
Certification of State debt. At the time a participating SRP State
refers a debt to TOP for collection by Federal payment offset under
this section, the State must provide, in the manner required by Fiscal
Service, written certification that:
(i) The debt meets the requirements described in Sec. 285.2(d)(1);
(ii) The State has complied with all Federal and State statutes,
regulations, policies, and contract provisions applicable to the
collection of the debt through offset under this subpart;
[[Page 60052]]
(iii) The individual making the certification has the delegated
authority to make the certification on behalf of the State;
(iv) With regard to past-due support, the State is authorized by
HHS rules to refer the past-due support directly to TOP; and
(v) The State has met such other requirements as Fiscal Service may
from time to time impose.
(2) Federal payments exempt from offset under this section. The
following Federal payments are not eligible for offset under this
section:
(i) Payments exempted from offset under Sec. 285.30(c)(2);
(ii) Covered benefit payments; and
(iii) Tax refund payments.
(e) Offsetting State payments to collect Federal debt. Fiscal
Service will refer a Federal debt to a participating SRP State only if
Fiscal Service has received a certification from the creditor agency
that the prerequisites specified in Sec. 285.2(b) have been satisfied.
(f) Fees. Fiscal Service may charge creditor agencies fees
sufficient to cover up to the full cost of implementing Federal payment
offset and State payment offset. A participating SRP State may not
charge any Federal agency a fee for its cost of implementing offset
under this section.
Sec. 285.40 Offset of tax refund payments to collect Federal nontax
debts, State debts, and debts owed to Tribal IV-D agencies.
(a) Scope. This section and Sec. Sec. 285.41 through 285.43 set
forth rules applicable to the offset of tax refund payments through
TOP.
(b) General rule. All tax refund payments are eligible for
centralized offset for the collection of Federal debts and, to the
extent permitted under Sec. Sec. 285.42 and 285.43, for State debts,
and to the extent permitted under Sec. 285.42, for past-due support
owed to Tribal IV-D agencies.
(c) Reasonable efforts. Before referring a debt to TOP for
collection by tax refund offset, the creditor agency must make
reasonable efforts to collect the debt. The requirement to make
reasonable efforts can be satisfied by making written demand for
payment from the debtor and complying with any other prerequisites
established by the creditor agency.
(d) Notification of offset to the debtor. When a tax refund offset
occurs, Fiscal Service will notify the debtor PEP and, if applicable,
any non-debtor PEP. In addition to the requirements of Sec. 285.2(g),
this notice will also include information regarding the steps any non-
debtor PEP who may have filed a joint return with the debtor may take
to secure their proper share of the tax refund. Failure to send an
offset notice will not affect the validity of any offset.
Sec. 285.41 Offset of tax refund payments to collect Federal nontax
debts.
With respect to the term ``match,'' as applied to this section, the
Fiscal Service will use information to determine that the person
entitled to payment on a payment record is the same person as the
debtor on a debt record, including name control, taxpayer identifying
number, and other necessary identifiers, if any.
(a) Scope. This section sets forth special rules applicable to the
offset of tax refund payments to collect delinquent Federal debts
through TOP.
(b) General rule. To the extent required by Sec. 285.2(b)(1),
Federal agencies must refer debts to TOP for collection through offset
of tax refund payments, except that any agency subject to section 9 of
the Act of May 18, 1933 (16 U.S.C. 831h) may, but is not required to,
refer delinquent debts to TOP for collection through offset of tax
refund payments.
(c) OASDI overpayments. Prior to referring a debt that resulted
from an OASDI payment to an individual to TOP, the Social Security
Administration must:
(1) Determine that the individual is not currently entitled to
monthly insurance benefits under title II of the Social Security Act;
(2) In addition to the notice described in Sec.
285.2(d)(1)(ii)(A), notify the debtor of the conditions under which the
Social Security Administration is required to waive recovery of an
overpayment, as provided under section 204(b) of the Social Security
Act; and
(3) If the waiver referred to in paragraph (c)(2) of this section
is requested within the 60-day period referred to in Sec.
285.2(d)(1)(ii)(A), render a decision on the waiver request under
section 204(b) of the Social Security Act.
(d) Fees. Fiscal Service will charge creditor agencies a fee to
reimburse it for the full cost of applying the offset procedure.
Sec. 285.42 Offset of tax refund payments to collect past-due
support.
As used in this section, the terms ``debt'' and ``past-due
support'' are synonymous.
(a) Scope. This section sets forth special rules applicable to the
offset of tax refund payments to collect past-due support through TOP.
(b) General rule. In accordance with this section, HHS, a State, or
a Tribal IV-D agency may refer past-due support to TOP, if either:
(1) There has been an assignment of the support obligation to the
State or Tribal IV-D agency; or
(2) The State or Tribal IV-D agency is providing support collection
services under 42 U.S.C. 654(4) or 45 CFR part 309 and the amount of
the past-due support is not less than $500.00.
(c) Referral of past-due support to TOP--(1) By HHS. (i) A State or
Tribal IV-D agency notifying HHS of past-due support must:
(A) Do so in the manner and format prescribed by HHS; and
(B) Certify that it has complied with the requirements in paragraph
(d) of this section and with any of other requirements under State or
Tribal law applicable to the offset of Federal tax refund payments to
collect past-due support.
(ii) HHS will refer to TOP the past-due support about which it
received notice under paragraph (c)(1)(i) of this section.
(iii) When HHS has knowledge that the debt is being enforced by a
State or Tribal IV-D agency, HHS will inform any such State or Tribal
IV-D agency when it receives any collections through offset under this
subpart.
(2) By States or Tribal IV-D agencies. (i) If authorized by HHS
rules, a State or Tribal IV-D agency may refer past-due support
directly to TOP. Otherwise, the State or Tribal IV-D agency must notify
HHS of past-due support in accordance with the provisions of paragraph
(c)(1) of this section.
(ii) A State or Tribal IV-D agency referring past-due support
directly to TOP must:
(A) Do so in the manner and format prescribed by Fiscal Service in
separate guidance; and
(B) Certify that it has complied with all requirements of this
subpart and applicable State or Tribal law.
(iii) When a State or Tribal IV-D agency has knowledge that the
debt is being enforced by more than one State or Tribal IV-D agency,
the State or Tribal IV-D agency referring the debt to TOP must inform
any such other State or Tribal IV-D agency when it receives any
collections through offset under this subpart.
(d) Additional due process. The State or Tribal IV-D agency, or HHS
if the State or Tribal IV-D agency requests and HHS agrees, must
provide the due process specified by Sec. 285.2(d)(1)(ii). In cases
when a debt is being enforced by more than one State or Tribal IV-D
agency, the written notification to the debtor must also advise the
debtor of their opportunities to request a review with the State or
Tribal IV-D agency enforcing collection or the State or
[[Page 60053]]
Tribal IV-D agency issuing the support order as prescribed by the
provisions of 42 U.S.C. 664(a)(3), 45 CFR 303.72(e), and 45 CFR part
309.
(e) Time limitation on reversals. Notwithstanding Sec.
285.2(i)(2), Fiscal Service will not reverse the offset of a tax refund
payment that was erroneous or otherwise not due to the taxpayer if:
(1) IRS notifies Fiscal Service that a tax refund payment that was
offset was erroneous or otherwise not due to the taxpayer;
(2) The date of IRS's notification to Fiscal Service under
paragraph (e)(1) of this section is more than six months after the date
the tax refund payment was offset (i.e., the tax refund payment date);
and
(3) The State or Tribal IV-D agency has already forwarded the funds
collected through the offset as required or authorized by 42 U.S.C. 657
or 45 CFR 309.115.
(f) Fees. Fiscal Service will charge States and Tribal IV-D
agencies a fee to reimburse it for the full cost of applying the offset
procedure. To the extent full costs exceed the amount specified by 42
U.S.C. 664(b)(2)(B), Fiscal Service will charge a fee equal to the
amount specified by 42 U.S.C. 664(b)(2)(B).
Sec. 285.43 Offset of tax refund payments to collect State income tax
and unemployment compensation debts.
As used in this section, the term ``debt'' means a State income tax
obligation or unemployment compensation debt.
(a) Scope. This section sets forth special rules applicable to the
offset of tax refund payments to collect State income tax obligations
and unemployment compensation debts.
(b) General rules. (1) States may refer to TOP State income tax
obligations and unemployment compensation debts.
(2) Fiscal Service will offset tax refund payments in accordance
with this subpart to collect:
(i) State income tax obligations, but only if the address shown on
the Federal tax return for the taxable year of the overpayment is an
address within the State seeking the offset; and
(ii) Unemployment compensation debts.
(c) Additional due process. In addition to the requirements of
Sec. 285.2(d)(1)(ii), a State must:
(1) With respect to an unemployment compensation debt described by
26 U.S.C. 6402(f)(4)(A), provide the debtor an opportunity to dispute
the State's determination that the debt resulted from fraud or the
debtor's failure to report earnings; and
(2) With respect to State income tax obligations:
(i) Send the notice referred to in Sec. 285.2(d)(1)(ii) by
certified mail, return receipt requested; and
(ii) Where the debtor claims that they are immune from State
taxation by reason of being an enrolled member of a Federally
recognized Tribe who lives on a reservation and derives all of their
income from that reservation, have procedures that include a de novo
review on the merits, unless such claims have been previously
adjudicated by a court of competent jurisdiction.
Gary Grippo,
Acting Fiscal Assistant Secretary.
[FR Doc. 2025-23704 Filed 12-22-25; 8:45 am]
BILLING CODE 4810-AS-P
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</html>Indexed from Federal Register on December 23, 2025.
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.