Supplementary Security Income; Overpayment Recovery by Offset of Federal Income Tax Refund

SOCIAL SECURITY ADMINISTRATION

20 CFR Part 416

RIN 0960-AE67

Supplementary Security Income; Overpayment Recovery by Offset of

Federal Income Tax Refund

AGENCY: Social Security Administration.

ACTION: Proposed rules.

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SUMMARY: These proposed regulations govern use of the Federal income

tax refund offset program established under section 2653 of the Deficit

Reduction Act of 1984, Pub. L. No. 98-369. They would permit the

recovery of supplemental security income (SSI) overpayments through the

withholding of amounts due to former SSI recipients as Federal income

tax refunds. In these proposed rules, we reflect the provisions of the

statute and explain the procedures that we will follow in referring SSI

overpayments to the

[[Page 33779]]

Department of the Treasury for income tax refund offset (TRO).

DATES: To be sure your comments are considered, we must receive them no

later than July 23, 1997.

ADDRESSES: Comments should be submitted in writing to the Commissioner

of Social Security, P.O. Box 1585, Baltimore, Maryland 21235, sent by

telefax to (410) 966-2830, sent by E-mail to ``[email protected],''

or delivered to the Division of Regulations and Rulings, Social

Security Administration, 3-B-1 Operations Building, 6401 Security

Boulevard, Baltimore, MD 21235 between 8:00 a.m. and 4:30 p.m. on

regular business days. Comments may be inspected during these same

hours by making arrangements with the contact person shown below.

FOR FURTHER INFORMATION CONTACT: Robert J. Augustine, Legal Assistant,

Division of Regulations and Rulings, Social Security Administration,

6401 Security Boulevard, Baltimore, MD 21235, (410) 966-5121. For

information on eligibility or claiming benefits, call our national

toll-free number, 1-800-772-1213.

SUPPLEMENTARY INFORMATION: Section 2653 of the Deficit Reduction Act of

1984, codified at 31 U.S.C. 3720A and 26 U.S.C. 6402(d), authorized the

Secretary of the Treasury, upon receiving notice from a Federal agency

that a named individual owes the agency a past-due, legally enforceable

debt, to withhold all or a part of any income tax refund that is due to

the debtor and pay the amount withheld to the agency. Section 2653

specifically precluded the use of these procedures to recover

overpayments of Social Security benefits paid under title II of the

Social Security Act (the Act). Under 31 U.S.C. 3720A, a Federal agency

that is owed a past-due, legally enforceable debt by an individual may

notify the Secretary of the Treasury of the debt in accordance with

regulations issued by the Department of the Treasury. The applicable

Treasury regulations are codified at 26 CFR 301.6402-6. Before an

agency may refer a debt to Treasury, it must, under 31 U.S.C. 3720A,

take the following actions: (1) Notify the debtor that the agency

proposes to refer the debt for tax refund offset; (2) give the debtor

at least 60 days to present evidence that all or part of the debt is

not past-due or not legally enforceable; (3) consider all evidence the

debtor presents in determining that all or a part of the debt is past-

due and legally enforceable; and (4) satisfy any other conditions that

the Secretary of the Treasury may prescribe to ensure that the agency's

findings are valid and that the agency has made reasonable efforts to

obtain the payment of the debt.

Although section 2653 gave us the authority to use the TRO

provisions to recover overpayments made to recipients of supplemental

security income (SSI) payments under title XVI of the Act, we elected

not to do so at that time because we did not think it appropriate to

use a procedure we were precluded from using to recover title II

overpayments to recover overpayments made under the needs-based title

XVI program.

Section 5129 of the Omnibus Budget Reconciliation Act of 1990 (OBRA

90) removed the restriction on using the TRO provisions to recover

title II overpayments. Section 5129 added several additional conditions

to the referral of title II overpayments for offset. These included:

(1) The overpaid individual may not be currently entitled to Social

Security benefits under title II of the Act; (2) the notice that we

send to the overpaid individual concerning our intent to seek the

offset must describe the conditions under which we are required to

waive recovery of an overpayment under section 204(b) of the Act; and

(3) if the overpaid individual requests that we waive recovery of the

overpayment within the 60-day period allowed under the program for

presenting evidence that the debt is not past due or not legally

enforceable, we may not certify the overpayment to Treasury without

first issuing a determination on the waiver request. We issued final

regulations on October 21, 1991 (56 FR 52466) implementing these

statutory changes.

Since that time, we have been modifying our computer systems to

extend the TRO provisions to various subgroups of former title II

program beneficiaries. We now have the necessary systems modifications

in place to permit us to extend the TRO provisions to the title XVI

program, as well. These title XVI rules closely follow the existing

rules for the title II program, including the same conditions that the

OBRA 90 legislation required for the title II program. That is, these

rules provide that (1) The overpaid individual may not currently be

eligible to receive SSI payments under title XVI of the Act; (2) the

notice we send to the overpaid individual concerning our intent to seek

offset must describe the conditions under which we are required to

waive recovery of an overpayment under section 1631(b)(1)(B) of the

Act; and (3) if the overpaid individual requests that we waive recovery

of the overpayment within the 60-day period allowed under the program

for presenting evidence that the debt is not past due or legally

enforceable, we may not certify the overpayment to Treasury without

first issuing a determination on the waiver request.

Explanation of Changes to Regulations

We propose to add new Secs. 416.580 through 416.586 to our

regulations to explain our rules on recovery of title XVI overpayments

through the withholding of amounts due to former SSI recipients as

Federal income tax refunds. Section 416.580 would provide general

information about the tax refund offset program and explain that we may

pursue collection of an overpayment through this program if the

overpaid individual is not eligible for benefits. This new regulatory

section also explains that we will not initiate the tax refund offset

to collect an overpayment more than 10 years after our right to collect

the overpayment first accrued.

Section 416.581 would explain that, before we refer an overpayment

to the Treasury Department, we will notify the overpaid individual of

our intention to do so. This notice will advise the individual of the

amount of the overpayment and the conditions under which we will waive

recovery of an overpayment under section 1631(b)(1)(B) of the Act. The

notice will also explain that unless, within 60 days from the date of

our notice, the overpaid individual repays the overpayment, presents

evidence that the overpayment is not past due or not legally

enforceable, or requests a waiver of the overpayment, we will refer the

overpayment to the Department of the Treasury to offset any tax refund

payable to the overpaid individual. The notice additionally will advise

the individual of the right to inspect and copy our records related to

the overpayment.

Sections 416.582 and 416.583 would explain our procedures for

reviewing and making findings when an overpaid individual submits

evidence that an overpayment is not past due or not legally

enforceable.

Section 416.584 would explain our procedures for the overpaid

individual who wishes to review our records related to the overpayment.

Section 416.585 would explain that if, within 60 days after the

date of our notice of intent to seek an offset, an individual presents

evidence that the overpayment is not past due or not legally

enforceable or asks us to waive collection of the overpayment, we will

suspend our referral of the overpayment to the Department of the

Treasury for offset until we issue written findings

[[Page 33780]]

that affirm that all or a part of the overpayment is past due and

legally enforceable and, where appropriate, determine that waiver of

the overpayment is unwarranted.

Section 416.586 would set out our intention, in cases where a tax

refund is insufficient in a tax year to satisfy the amount of the

overpayment, to continue to offset in succeeding years any amount of

the overpayment that remains, as long as the remainder of the

overpayment continues to meet the criteria for referral under the tax

refund offset program in succeeding years. This differs from our title

II rules on TRO which provide that, where a tax refund is insufficient

to recover an overpayment in a given year, we will recertify the

remainder for offset in the following year. This proposed section

reflects the fact that the Department of the Treasury has the systems

capability to retain the overpaid amount in their records for offset

against future tax refunds the individual may be due. We are developing

a separate proposed rule dealing with title II overpayments that will

make this same change in the title II TRO rules.

We also propose to add to Sec. 416.1403(a) a new paragraph (17)

that would include in the list of administrative actions that are not

initial determinations findings on whether we can collect an SSI

overpayment by using the Federal income tax refund offset procedure.

Administrative actions that are not initial determinations may be

reviewed by us, but they are not subject to the administrative review

process provided by subpart N of our regulations, and they are not

subject to judicial review.

Electronic Version

The electronic file of this document is available on the Federal

Bulletin Board (FBB) at 9:00 a.m. on the date of publication in the

Federal Register. To download the file, modem dial (202) 512-1387. The

FBB instructions will explain how to download the file and the fee.

This file is in WordPerfect and will remain on the FBB during the

comment period.

Regulatory Procedures

Executive Order 12866

We have consulted with the Office of Management and Budget (OMB)

and determined that these proposed rules do not meet the criteria for a

significant regulatory action under Executive Order 12866. Thus, they

were not subject to OMB review.

In order to use the TRO provisions to recover title XVI

overpayments from income tax refunds payable in 1998, the final rules

must be effective in early October 1997, so that we can begin notifying

individuals that we propose to refer their overpayments to the

Department of the Treasury for offset. Any delay in sending the notices

and referring these debts to Treasury will result in lost program

savings of up to $6 million. For that reason, we are providing a 30-day

(rather than the usual 60-day) public comment period. These proposed

rules, which closely follow our existing TRO rules for the title II

program and on which we received only minor public comments when

promulgated in 1991, benefit the public while adequately safeguarding

the rights of former SSI recipients by giving overpaid individuals the

right to repay the amount, present evidence that the overpayment is not

past due or not legally enforceable, or request us to waive collection

of the overpayment, before referral to the Department of the Treasury

is made. We will issue written findings affirming that all or part of

the overpayment is past due and legally enforceable and, where

appropriate, determine that waiver of the overpayment is unwarranted

before making such a referral. In view of the above, we believe a 30-

day comment period provides ample opportunity for the public to review

and comment on these rules.

Regulatory Flexibility Act

We certify that these proposed regulations, if promulgated, will

not have a significant economic impact on a substantial number of small

entities because they affect only individuals. Thus, a regulatory

flexibility analysis as provided in the Regulatory Flexibility Act, as

amended, is not required.

Paperwork Reduction Act

These proposed regulations will impose no additional reporting or

recordkeeping requirements requiring OMB clearance.

(Catalog of Federal Domestic Assistance Programs: No. 96.006

Supplemental Security Income)

List of Subjects in 20 CFR Part 416

Administrative practice and procedure, Aged, Blind, Disability

benefits, Public assistance programs, Reporting and recordkeeping

requirements, Supplemental Security Income (SSI).

Approved: June 12, 1997.

John J. Callahan,

Acting Commissioner of Social Security.

Subparts E and N of Part 416 of Chapter III of Title 20 of the Code

of Federal Regulations are proposed to be amended to read as follows:

1. The authority citation for subpart E is revised to read as

follows:

Authority: Secs. 702(a)(5), 1601, 1602, 1611(c) and (e), and

1631 (a)-(d) and (g) of the Social Security Act (42 U.S.C.

902(a)(5), 1381, 1381a, 1382(c) and (e), and 1383(a)-(d) and (g));

31 U.S.C. 3720A.

2. Sections 416.580, 416.581, 416.582, 416.583, 416.584, 416.585,

and 416.586 are added to subpart E to read as follows:

Sec. 416.580 Referral of overpayments to the Department of the

Treasury for tax refund offset--General.

(a) The standards we will apply and the procedures we will follow

before requesting the Department of the Treasury to offset income tax

refunds due taxpayers who have an outstanding overpayment are set forth

in Secs. 416.580 through 416.586 of this subpart. These standards and

procedures are authorized by the Deficit Reduction Act of 1984 [31

U.S.C. Sec. 3720A], as implemented through Department of the Treasury

regulations at 26 CFR 301.6402-6.

(b) We will use the Department of the Treasury tax refund offset

procedure to collect overpayments that are certain in amount, past due

and legally enforceable, and eligible for tax refund offset under

regulations issued by the Secretary of the Treasury. We will use these

procedures to collect overpayments only from individuals who are not

currently entitled to monthly supplemental security income benefits

under title XVI of the Act. We will refer an overpayment to the

Secretary of the Treasury for offset against tax refunds no later than

10 years after our right to collect the overpayment first accrued.

Sec. 416.581 Notice to overpaid individual.

A request for reduction of a Federal income tax refund will be made

only after we determine that an amount is owed and past due and provide

the overpaid individual with 60 calendar days written notice. Our

notice of intent to collect an overpayment through Federal income tax

refund offset will state:

(a) The amount of the overpayment;

(b) That unless, within 60 calendar days from the date of our

notice, the overpaid individual repays the overpayment, sends evidence

to us at the address given in our notice that the overpayment is not

past due or not legally enforceable, or asks us to waive collection of

the overpayment under section 1631(b)(1)(B) of the Act, we intend to

seek collection of the

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overpayment by requesting that the Department of the Treasury reduce

any amounts payable to the overpaid individual as refunds of Federal

income taxes by an amount equal to the amount of the overpayment;

(c) The conditions under which we will waive recovery of an

overpayment under section 1631(b)(1)(B) of the Act;

(d) That we will review any evidence presented that the overpayment

is not past due or not legally enforceable;

(e) That the overpaid individual has the right to inspect and copy

our records related to the overpayment as determined by us and will be

informed as to where and when the inspection and copying can be done

after we receive notice from the overpaid individual that inspection

and copying are requested.

Sec. 416.582 Review within SSA that an overpayment is past due and

legally enforceable.

(a) Notification by overpaid individual. An overpaid individual who

receives a notice as described in Sec. 416.581 of this subpart has the

right to present evidence that all or part of the overpayment is not

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

individual must notify us and present evidence regarding the

overpayment within 60 calendar days from the date of our notice.

(b) Submission of evidence. The overpaid individual may submit

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

legally enforceable as provided in paragraph (a) of this section.

Failure to submit the notification and evidence within 60 calendar days

will result in referral of the overpayment to the Department of the

Treasury, unless the overpaid individual, within this 60-day time

period, has asked us to waive collection of the overpayment under

section 1631(b)(1)(B) of the Act and we have not yet determined whether

we can grant the waiver request. If the overpaid individual asks us to

waive collection of the overpayment, we may ask that evidence to

support the request be submitted to us.

(c) Review of the Evidence. After a timely submission of evidence

by the overpaid individual, we will consider all available evidence

related to the overpayment. We will make findings based on a review of

the written record, unless we determine that the question of

indebtedness cannot be resolved by a review of the documentary

evidence.

Sec. 416.583 Findings by SSA.

(a) Following the review of the record, we will issue written

findings which include supporting rationale for the findings. Issuance

of these findings concerning whether the overpayment or part of the

overpayment is past due and legally enforceable is the final Agency

action with respect to the past-due status and enforceability of the

overpayment. If we make a determination that a waiver request cannot be

granted, we will issue a written notice of this determination in

accordance with the regulations in subpart E of this part. Our referral

of the overpayment to the Department of the Treasury will not be

suspended under Sec. 416.585 of this subpart pending any further

administrative review of the waiver request that the individual may

seek.

(b) Copies of the findings described in paragraph (a) of this

section will be distributed to the overpaid individual and the overpaid

individual's attorney or other representative, if any.

(c) If the findings referred to in paragraph (a) of this section

affirm that all or part of the overpayment is past due and legally

enforceable and, if waiver is requested and we determine that the

request cannot be granted, we will refer the overpayment to the

Department of the Treasury. However, no referral will be made if, based

on our review of the overpayment, we reverse our prior finding that the

overpayment is past due and legally enforceable or, upon consideration

of a waiver request, we determine that waiver of our collection of the

overpayment is appropriate.

Sec. 416.584 Review of our records related to the overpayment.

(a) Notification by the overpaid individual. An overpaid individual

who intends to inspect or copy our records related to the overpayment

as determined by us must notify us stating his or her intention to

inspect or copy.

(b) Our response. In response to a notification by the overpaid

individual as described in paragraph (a) of this section, we will

notify the overpaid individual of the location and time when the

overpaid individual may inspect or copy our records related to the

overpayment. We may also, at our discretion, mail copies of the

overpayment-related records to the overpaid individual.

Sec. 416.585 Suspension of offset.

If, within 60 days of the date of the notice described in

Sec. 416.581 of this subpart, the overpaid individual notifies us that

he or she is exercising a right described in Sec. 416.582(a) of this

subpart and submits evidence pursuant to Sec. 416.582(b) of this

subpart or requests a waiver under Sec. 416.550 of this subpart, we

will suspend any notice to the Department of the Treasury until we have

issued written findings that affirm that an overpayment is past due and

legally enforceable and, if applicable, make a determination that a

waiver request cannot be granted.

Sec. 416.586 Tax refund insufficient to cover amount of overpayment.

If a tax refund is insufficient to recover an overpayment in a

given year, the case will remain with the Department of the Treasury

for succeeding years, assuming that all criteria for certification are

met at that time.

3. The authority citation for subpart N is revised to read as

follows:

Authority: Secs. 702(a)(5), 1631, and 1633 of the Social

Security Act (42 U.S.C. 902(a)(5), 1383, and 1383b); 31 U.S.C.

3720A.

4. Section 416.1403 is amended by deleting the word ``and'' at the

end of paragraph (a)(15), replacing the period at the end of paragraph

(a)(16) with ``; and'', and adding paragraph (a)(17) to read as

follows:

Sec. 416.1403 Administrative actions that are not initial

determinations.

(a) * * *

(17) Findings on whether we can collect an overpayment by using the

Federal income tax refund offset procedure. (See Sec. 416.583).

* * * * *

[FR Doc. 97-16132 Filed 6-20-97; 8:45 am]

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