Referral of Debts to the Internal Revenue Service for Tax Refund Offset

SUMMARY: The Environmental Protection Agency (EPA), as a participant in

the Federal Tax Refund Offset Program, is issuing interim regulations

to govern the referral of delinquent debts to the Internal Revenue

Service (IRS) for offset against the income tax refunds of persons

owing money to EPA. These regulations allow EPA to collect debts by

means of offset from the income tax refunds of persons owing money to

EPA provided certain conditions are met. This rule establishes

procedures to be followed by EPA in requesting the IRS to offset tax

refunds due to taxpayers who have past-due legally enforceable debt

obligations to the EPA.

DATES: Interim rule is effective on January 5, 1994. Written comments

must be received on or before March 7, 1994.

ADDRESSES: Send comments to: Stephen B. Hess, Claims and Property Law

Branch (2376), Office of General Counsel, Environmental Protection

Agency, 401 M Street, SW., Washington, DC 20460.

FOR FURTHER INFORMATION CONTACT: Stephen B. Hess, Office of General

Counsel. Telephone 202-260-7512.

SUPPLEMENTARY INFORMATION: This interim rule provides procedures for

EPA to refer past-due legally enforceable debts to the IRS for offset

against the income tax refunds of persons owing debts to EPA. This rule

is authorized by 31 U.S.C. 3720A, the purpose of which is to improve

the ability of the government to collect money owed it while adding

certain notice requirements and other protections applicable to the

government's relationship to the debtor.

This rule implements 31 U.S.C. 3720A, which directs any Federal

agency that is owed a past-due legally enforceable debt by a named

person to notify the Secretary of the Treasury in accordance with

regulations issued by the Department of the Treasury at 26 CFR

301.6402-6. Before a Federal agency may give such notice, however, it

must first:

(1) Notify the debtor that the agency proposes to refer the debt

for a tax refund deduction;

(2) Give the debtor 60 days from the date of the notification to

present evidence that all or part of the debt is not past-due or

legally enforceable;

(3) Consider any evidence presented by the debtor and determine

whether any amount of such debt is past-due and legally enforceable;

and

(4) Satisfy such other conditions as the Secretary of the Treasury

may prescribe to ensure that the agency's determination is valid and

that the agency has made reasonable efforts to obtain payment of the

debt.

This rule, in accordance with IRS regulations, provides that before

EPA refers a debt to Treasury (through IRS), a notice of intention

(Notice of Intent) will be sent to the debtor. This Notice of Intent

will inform the debtor of the amount of the debt and that unless the

debt is repaid within 60 days from the date of EPA's Notice of Intent,

EPA intends to collect the debt by requesting the IRS to offset any tax

refund payable to the debtor. In addition, the Notice of Intent will

state that the debtor has a right, during such period, to present

evidence that all or part of the debt is not past-due or legally

enforceable. This rule also establishes procedures for the debtor to

present such evidence.

Executive Order 12866

Under Executive Order 12866 (58 FR 51735, October 4, 1993) the

Agency must determine whether the regulatory action is ``significant''

and therefore subject to Office of Management and Budget (OMB) review

and the requirements of the Executive Order. The Order defines

``significant regulatory action'' as one that is likely to result in a

rule that may: (1) Have an annual effect on the economy of $100 million

or more or adversely affect in a material way the economy, a sector of

the economy, productivity, competition, jobs, the environment, public

health or safety, or State, local, or tribal governments or

communities; (2) create a serious inconsistency or otherwise interfere

with an action taken or planned by another agency; (3) materially alter

the budgetary impact of entitlements, grants, user fees, or loan

programs or the rights and obligations of recipients thereof; or (4)

raise novel legal or policy issues arising out of legal mandates, the

President's priorities, or the principles set forth in the Executive

Order.

It has been determined that this rule is not a ``significant

regulatory action'' under the terms of Executive Order 12866 and is

therefore not subject to OMB review.

Regulatory Flexibility Act Certification

This rule does not have a significant impact on a substantial

number of small entities (5 U.S.C. 601 et seq.).

Paperwork Reduction Act

No additional information and record keeping requirements are

imposed by this rule.

National Environmental Policy Act

Promulgation of this rule does not represent a major Federal action

with significant environmental impact. Therefore, preparation of an

environmental assessment or environmental impact statement under the

National Environmental Policy Act of 1969, as amended (42 U.S.C. 4321

et seq.) is not required.

Public Comments

Pursuant to an agreement between the IRS, the Financial Management

Service, and EPA regarding EPA's participation in the Tax Refund Offset

Program for 1994, EPA is required to have promulgated regulations

regarding referral of debts to IRS for tax refund offset prior to EPA's

participation in the program. EPA is issuing interim final regulations

to take effect today in order to fulfill that requirement. Although EPA

will respond to written comments on today's notice, EPA is not holding

a hearing, providing an opportunity for prior comments, or delaying the

effective date because this regulation is mostly procedural and because

there are no significant issues of law or fact or relevant substantial

impacts on the Nation or large numbers of persons of which EPA could

take account consistent with law. Moreover, issuance of immediately

effective interim final regulations does not prejudice the due process

rights of debtors and is essential in order for EPA to participate in

the 1994 program. Written comments are solicited for 60 days after

publication of this document in the Federal Register. A final document

discussing any comments received and revisions required will be

published in the Federal Register as soon as possible after the close

of the comment period.

Other Matters

These procedures are being codified in the Agency's regulations

pursuant to statutory requirements regarding publication of rules of

procedure in the Federal Register, 5 U.S.C. 552(a)(1)(C). However, the

procedures described in the rule will be utilized before it becomes

effective with respect to persons who are provided actual notice of the

procedures through the notices required under the procedures. See 5

U.S.C. 552(a)(1).

List of Subjects in 40 CFR Part 13

Environmental protection, Administrative practice and procedure,

Claims, Government employees, Income taxes, Wages.

Dated: December 28, 1993.

Carol M. Browner,

Administrator.

In consideration of the foregoing, the Environmental Protection

Agency hereby amends part 13 of title 40 of the Code of Federal

Regulations as set forth below.

PART 13--[AMENDED]

1. The authority citation for part 13 is revised to read as

follows:

Authority:5 U.S.C. 552a, 5512, and 5514; 31 U.S.C. 3711 et seq.

and 3720A; 4 CFR parts 101-10.

2. Subpart H is added to part 13 to read as follows:

Subpart H--Referral of Debts to IRS for Tax Refund Offset

Sec.

13.34 Purpose.

13.35 Applicability and scope.

13.36 Administrative charges.

13.37 Notice requirement before offset.

13.38 Review within the Agency.

13.39 Agency determination.

13.40 Stay of offset.

Supbart H--Referral of Debts to IRS for Tax Refund Offset

Sec. 13.34 Purpose.

This subpart establishes procedures for the Environmental

Protection Agency (EPA) to refer past-due debts to the Internal Revenue

Service (IRS) for offset against the income tax refunds of persons

owing debts to EPA. It specifies the Agency procedures and the rights

of the debtor applicable to claims for the payment of debts owed to

EPA.

Sec. 13.35 Applicability and scope.

(a) This subpart implements 31 U.S.C. 3720A, which authorizes the

IRS to reduce a tax refund by the amount of a past-due legally

enforceable debt owed to the United States.

(b) For purposes of this section, a past-due legally enforceable

debt referable to the IRS is a debt which is owed to the United States

and:

(1) Except in the case of a judgment debt, has been delinquent for

at least three months but has not been delinquent for more than ten

years at the time the offset is made;

(2) Cannot be currently collected pursuant to the salary offset

provisions of 5 U.S.C. 5514(a)(1);

(3) Is ineligible for administrative offset under 31 U.S.C. 3716(a)

by reason of 31 U.S.C. 3716(c)(2) or cannot be collected by

administrative offset under 31 U.S.C. 3716(a) by the Agency against

amounts payable to or on behalf of the debtor by or on behalf of the

Agency;

(4) With respect to which EPA has given the taxpayer at least 60

days from the date of notification to present evidence that all or part

of the debt is not past-due or not legally enforceable, has considered

evidence presented by such taxpayer, if any, and has determined that an

amount of such debt is past-due and legally enforceable;

(5) Has been disclosed by EPA to a consumer reporting agency as

authorized by 31 U.S.C. 3711(f), unless a consumer reporting agency

would be prohibited from using such information by 15 U.S.C. 1681c, or

unless the amount of the debt does not exceed $100.00;

(6) With respect to which EPA has notified or has made a reasonable

attempt to notify the taxpayer that the debt is past-due and, unless

repaid within 60 days thereafter, the debt will be referred to the IRS

for offset against any overpayment of tax;

(7) Is at least $25.00; and

(8) All other requirements of 31 U.S.C. 3720A and the Department of

the Treasury regulations at 26 CFR 301.6402-6 relating to the

eligibility of a debt for tax return offset have been satisfied.

Sec. 13.36 Administrative charges.

In accordance with Sec. 13.11, all administrative charges incurred

in connection with the referral of a debt to the IRS shall be assessed

on the debt and thus increase the amount of the offset.

Sec. 13.37 Notice requirement before offset.

A request for reduction of an IRS tax refund will be made only

after EPA makes a determination that an amount is owed and past-due and

provides the debtor with 60 days written notice. EPA's notice of

intention to collect by IRS tax refund offset (Notice of Intent) will

state:

(a) The amount of the debt;

(b) That unless the debt is repaid within 60 days from the date of

EPA's Notice of Intent, EPA intends to collect the debt by requesting

the IRS to reduce any amounts payable to the debtor as refunds of

Federal taxes paid by an amount equal to the amount of the debt and all

accumulated interest and other charges;

(c) That the debtor has a right to present evidence that all or

part of the debt is not past-due or not legally enforceable; and

(d) A mailing address for forwarding any written correspondence and

a contact name and phone number for any questions.

Sec. 13.38 Review within the Agency.

(a) Notification by debtor. A debtor who receives a Notice of

Intent has the right to present evidence that all or part of the debt

is not past-due or not legally enforceable. To exercise this right, the

debtor must:

(1) Send a written request for a review of the evidence to the

address provided in the notice;

(2) State in the request the amount disputed and the reasons why

the debtor believes that the debt is not past-due or is not legally

enforceable; and

(3) Include in the request any documents which the debtor wishes to

be considered or state that additional information will be submitted

within the remainder of the 60-day period.

(b) Submission of evidence. The debtor may submit evidence showing

that all or part of the debt is not past-due or not legally enforceable

along with the notification required by paragraph (a) of this section.

Failure to submit the notification and evidence within 60 days will

result in an automatic referral of the debt to the IRS without further

action by EPA.

(c) Review of the evidence. EPA will consider all available

evidence related to the debt. Within 30 days, if feasible, EPA will

notify the debtor whether EPA has sustained, amended, or cancelled its

determination that the debt is past-due and legally enforceable.

Sec. 13.39 Agency determination.

(a) Following review of the evidence, EPA will issue a written

decision.

(b) If EPA either sustains or amends its determination, it shall

notify the debtor of its intent to refer the debt to the IRS for offset

against the debtor's Federal income tax refund. If EPA cancels its

original determination, the debt will not be referred to IRS.

Sec. 13.40 Stay of offset.

If the debtor timely notifies the EPA that he or she is exercising

the right described in Sec. 13.38(a) and timely submits evidence in

accordance with Sec. 13.38(b), any notice to the IRS will be stayed

until the issuance of a written decision which sustains or amends its

original determination.

[FR Doc. 94-76 Filed 1-4-94; 8:45 am]

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