# 60 FR 33612: Food Stamp Program: Collecting Food Stamp Recipient Claims From Federal Income Tax Refunds and Federal Salaries

> Federal · Regulations · In force

URL: https://www.frixlaw.com/law-library/statutes/FR_PRORULE_95-15887

## Section

- **Citation:** 60 FR 33612
- **Heading:** Food Stamp Program: Collecting Food Stamp Recipient Claims From Federal Income Tax Refunds and Federal Salaries
- **Jurisdiction:** Federal
- **Kind:** Regulations
- **Status:** In force
- **Text as of:** August 14, 2026
- **Source:** Compiled text
- **Location:** Federal Register / Vol. 60 / 60 FR 33612

## Text

Part VII

Department of Agriculture

_______________________________________________________________________

Food and Consumer Service

_______________________________________________________________________

7 CFR Part 271 et al.

Collecting Food Stamp Recipient Claims From Federal Income Tax Refunds
and Federal Salaries; Proposed Rule

Proposed Rules

DEPARTMENT OF AGRICULTURE

Food and Consumer Service

7 CFR Parts 271, 272 and 273

[Amdt. No. 367]
RIN 0584-AB89

Food Stamp Program: Collecting Food Stamp Recipient Claims From
Federal Income Tax Refunds and Federal Salaries

AGENCY: Food and Consumer Service, USDA.

ACTION: Proposed rule.

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SUMMARY: This rule proposes collecting two types of Food Stamp Program
(FSP) recipient claims from Federal income tax refunds and from Federal
salaries. The two types of recipient claims are inadvertent household
error (IHE) and intentional Program violation (IPV) claims. These
claims represent amounts of benefits which households received but to
which they were not entitled. This rule proposes to collect these types
of claims from individuals who are no longer participating in the FSP.
This rule proposes operating procedures, due-process notices, and
appeal rights and other rights and responsibilities of individuals. The
Department has been testing the Federal income tax refund offset
program (FTROP) since 1992 and is currently testing the Federal salary
offset program (salary offset).

DATES: Comments must be received on or before July 28, 1995 to be
assured of receiving consideration.

ADDRESSES: Comments should be addressed to James I. Porter, Supervisor,
Issuance and Accountability Section, State Administration Branch,
Program Accountability Division, Food Stamp Program, 3101 Park Center
Drive, Room 907, Alexandria, Virginia 22302. Comments can be reviewed
at that address during normal business hours.
d on or before July 28, 1995 to be
assured of receiving consideration.

ADDRESSES: Comments should be addressed to James I. Porter, Supervisor,
Issuance and Accountability Section, State Administration Branch,
Program Accountability Division, Food Stamp Program, 3101 Park Center
Drive, Room 907, Alexandria, Virginia 22302. Comments can be reviewed
at that address during normal business hours.

FOR FURTHER INFORMATION CONTACT: Mr. Porter at the above address or by
telephone at (703) 305-2385.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

This proposed rule has been determined to be significant and was
reviewed by the Office of Management and Budget under Executive Order
12866.

Executive Order 12372

The Food Stamp Program is listed in the Catalog of Federal Domestic
Assistance under No. 10.551. For the reasons set forth in the final
rule and related notice to 7 CFR 3015, Subpart V (48 FR 29115), this
Program is excluded from the scope of Executive Order 12372 which
requires intergovernmental consultation with State and local officials.

Regulatory Flexibility Act

This proposed action has been reviewed with regard to the
requirements of the Regulatory Flexibility Act of 1980 (Pub. L. 96-354,
94 Stat. 1164, September 19, 1980). William E. Ludwig, Administrator of
the Food and Consumer Service, has certified that this rule does not
have a significant economic impact on a substantial number of small
entities. This rule will affect the State and local agencies which
administer the Food Stamp Program and certain individuals who have
received excess food stamp benefits. Half of substantially all State
and local administrative costs for administering the Food Stamp Program
are reimbursed by the Department.

Executive Order 12778
a significant economic impact on a substantial number of small
entities. This rule will affect the State and local agencies which
administer the Food Stamp Program and certain individuals who have
received excess food stamp benefits. Half of substantially all State
and local administrative costs for administering the Food Stamp Program
are reimbursed by the Department.

Executive Order 12778

This rulemaking has been reviewed under Executive Order 12778,
Civil Justice Reform. This rule is intended to have preemptive effect
with respect to any State or local laws, regulations or policies which
conflict with its provisions or which would otherwise impede its full
implementation. This rule is not intended to have retroactive effect.
Prior to any judicial challenge to the provisions of this rule or the
application of its provisions, all applicable administrative procedures
must be exhausted.

Paperwork Reduction Act

This proposed rule contains information collection requirements
subject to review by the Office of Management and Budget (OMB) under
the Paperwork Reduction Act of 1980 (44 U.S.C. Section 3507).
This is a new public information collection burden. The reporting
and recordkeeping requirements for it were described in a General
Notice titled ``Food Stamp Program: Recipient Claims Collection: Test
of Offsetting Federal Income Tax Refunds,'' published August 20, 1991
at 56 FR 41325. Because State agencies are continuing to join FTROP,
with a resulting increase in the number of individuals subject to
collection, average numbers were used to estimate the information
collection burden. These were: 30 State agencies and 250,000
individuals. Of the total 58,555 hour estimated information collection
burden, 50,330 hours is associated with due-process notices and appeals
under FTROP. The burden is shared between State agencies and
individuals, the two types of respondents
ndividuals subject to
collection, average numbers were used to estimate the information
collection burden. These were: 30 State agencies and 250,000
individuals. Of the total 58,555 hour estimated information collection
burden, 50,330 hours is associated with due-process notices and appeals
under FTROP. The burden is shared between State agencies and
individuals, the two types of respondents. State agencies had 13,122
hours, of which more than 12,000 hours is associated with the
production of due-process notices. Individuals had 37,208 hours, almost
all of which is associated with responding to due process notices.
As mentioned above, collecting food stamp recipient claims from
Federal salaries is currently being tested. If that test indicates that
full implementation of salary offset would result in a measurable
increase in the approved information collection burden, the Department
will submit an adjustment to that estimate and provide the public due
notice and opportunity to comment on that adjustment. An adjustment to
reflect the decreased State agency FTROP reporting as proposed in this
rule will be submitted if warranted.
On September 27, 1993 OMB approved the information collection
requirements through September 30, 1996 (OMB No. 0584-0446). The title
of the information collection is ``Expansion of Test of Offsetting
Federal Income Tax Refunds.'' Comments regarding this estimated
information collection burden, including suggestions for reducing the
burden, should be sent to the Department of Agriculture Clearance
Officer, Office of Information Resources Management, Room 404-W,
Washington, D.C. 20250. Such comments should also be sent to the Office
of Management and Budget, Paperwork Reduction Project (OMB No. 0584-
0446), Washington, D.C. 20503.

Comment Period
imated
information collection burden, including suggestions for reducing the
burden, should be sent to the Department of Agriculture Clearance
Officer, Office of Information Resources Management, Room 404-W,
Washington, D.C. 20250. Such comments should also be sent to the Office
of Management and Budget, Paperwork Reduction Project (OMB No. 0584-
0446), Washington, D.C. 20503.

Comment Period

The Department believes that a 30-day comment period for this rule
is sufficient because while this is a proposed rule, it addresses
comments the Department received about the General Notices under which
FTROP has been tested. These comments were from a major public interest
group and from several State agencies. The rule clarifies several
matters and proposes changes in FTROP procedures based on those
comments, on numerous State agency questions raised during annual
training sessions and submitted to FCS regional offices during the test
of FTROP.

Background

A. General

Individuals currently owe the Department about $800 million for IHE
and IPV recipient claims. A substantial portion of the $800 million is
not being repaid. The Department is concerned about this situation and
is augmenting its policies and procedures to improve
collections of this debt. FTROP and salary offset are
major initiatives in this effort.
Both collection methods would require that State agencies submit
claims to FCS for referral to the Internal Revenue Service (IRS) for
collection through FTROP. Automated data processing would be conducted
under strict data security procedures and confidentiality restrictions
to assure that information about individual debtors would be used only
for the authorized purposes of the proposed collection methods. Under
the proposed rule, prior to any adverse action (the collection
efforts), notice about the intended collection efforts, including
advice of appeal rights, must be provided individuals identified as
owing FSP recipient claims
confidentiality restrictions
to assure that information about individual debtors would be used only
for the authorized purposes of the proposed collection methods. Under
the proposed rule, prior to any adverse action (the collection
efforts), notice about the intended collection efforts, including
advice of appeal rights, must be provided individuals identified as
owing FSP recipient claims. Both FTROP and salary offset would only be
used when none of the household members liable for the recipient claims
to be collected are participating in the State which would be
initiating the collection action. FTROP and salary offset would be
applied only to IHE and IPV claims meeting this condition because,
under current food stamp regulations, both IHE and IPV claims owed by
participating households must be collected either by a repayment method
of the household's choice or by allotment reduction.
The IRS requires that Federal agencies participating in FTROP use
all reasonable collection efforts before referring a debt for
collection from Federal income tax refunds. The IRS views salary offset
as such an effort and therefore requires participation in salary offset
or at a minimum, deletion of claims which can be collected from Federal
employees from lists of claims submitted under FTROP. (See 26 CFR
301.6402-6 (b)(1)(iii) and (c)(2) of IRS regulations.)

B. FTROP

1. Authorities for FTROP
The authority for FTROP is Section 2653 of the Deficit Reduction
Act of 1984 (Pub. L. 98-369) as amended by Public Law 101-508 (1990)
and Public Law 102-589 (1992) (DEFRA). The FTROP provisions are
codified at 31 U.S.C. 3720A, 26 U.S.C. 6402 and 26 U.S.C. 6103. As
originally enacted in Public Law 98-369, authority for FTROP had a
sunset clause and would have expired on January 1, 1989. That date was
extended twice, first by Public Law 100-203 and then by Public Law 100-
485. The Emergency Unemployment Act of 1991 (Pub. L. 102-164) made the
authority to conduct FTROP permanent
isions are
codified at 31 U.S.C. 3720A, 26 U.S.C. 6402 and 26 U.S.C. 6103. As
originally enacted in Public Law 98-369, authority for FTROP had a
sunset clause and would have expired on January 1, 1989. That date was
extended twice, first by Public Law 100-203 and then by Public Law 100-
485. The Emergency Unemployment Act of 1991 (Pub. L. 102-164) made the
authority to conduct FTROP permanent. In addition, section 4(c) of the
Food Stamp Act of 1977 provides broad authority to the Secretary of
Agriculture to issue such regulations as the Secretary deems necessary
or appropriate for effective and efficient administration of the Food
Stamp Program (7 U.S.C. 2013(c)).
The Department began testing FTROP in 1992 pursuant to a General
Notice published August 20, 1991 at 56 FR 41325. That General Notice
described the procedures for operating FTROP, including associated due-
process notices, appeal rights and related responsibilities of
individuals with respect to recipient claims subject to collection
under FTROP. The test of FTROP was conducted in conformance with
applicable IRS regulations. The IRS initially implemented FTROP with
temporary regulations at 26 CFR 301.6402-6T. Final IRS regulations (26
CFR 301.6402-6) were published April 15, 1992 at 57 FR 13035.
The test of FTROP for the FSP was continued and expanded during
1993 and 1994. (See General Notices published August 28, 1992 at 57 FR
39176 and August 12, 1993 at 58 FR 42937.) The policies and procedures
contained in those Notices, modified as a result of the test of FTROP,
are contained in this proposed rule.
The Department notes that a final rule published January 19, 1994
at 59 FR 2725 modified several aspects of FSP recipient claims policy
and corrected two technical errors. Parties interested in this proposed
rule may want to make sure that their version of FSP regulations
incorporates the just cited rule.
2. Overview of FTROP
a. Operations. FTROP is an optional program for State agencies
le.
The Department notes that a final rule published January 19, 1994
at 59 FR 2725 modified several aspects of FSP recipient claims policy
and corrected two technical errors. Parties interested in this proposed
rule may want to make sure that their version of FSP regulations
incorporates the just cited rule.
2. Overview of FTROP
a. Operations. FTROP is an optional program for State agencies. The
first step for participating State agencies is to develop automated
lists of FSP recipient claims which meet the criteria for claims which
are referable for collection under FTROP. The lists are developed
annually, are discrete from lists for other years and are identified by
offset year. The term ``offset year'' means a calendar year during
which offsets may be made to collect a particular group of recipient
claims from individuals' Federal income tax refunds. The rule proposes
at section 272.2 adding this definition of ``offset year'' to the list
of definitions of terms for the FSP. During the year preceding the
offset year, State agencies submit automated files of recipient claims
to FCS which tests them for compatibility with IRS record
specifications and refers them to the IRS. Through FCS the IRS provides
State agencies with addresses for individuals contained in the IRS
master file of taxpayer addresses. These activities make up the ``pre-
offset'' phase of FTROP. State agencies then use IRS-provided addresses
to send due-process (60-day) notices to individuals. The 60-day notices
advise individuals of the intended collection action and provide
information on how to repay the claim voluntarily and how to appeal the
intended action. State agencies then certify to FCS a final list of FSP
recipient claims for offset from Federal income tax refunds. Once State
agencies submit the certified list to the FCS, claims cannot be added
to the list and amounts of claims on the list cannot be increased.
At this point the offset phase begins
ide
information on how to repay the claim voluntarily and how to appeal the
intended action. State agencies then certify to FCS a final list of FSP
recipient claims for offset from Federal income tax refunds. Once State
agencies submit the certified list to the FCS, claims cannot be added
to the list and amounts of claims on the list cannot be increased.
At this point the offset phase begins. During the offset phase IRS
offsets the certified claims against any tax refunds otherwise payable
to the individual, and notifies the individual and FCS of offsets which
have been made. Also, each week of the offset year beginning in late
January, State agencies must provide data deleting claims and reducing
amounts of claims on the certified file to reflect changes in the
status of the claims due to such actions as voluntary payments from
individuals.
b. Reasons for the Present Rulemaking. Two factors make it
appropriate to add FTROP as a permanent part of the FSP now. First, as
mentioned above, Congress has provided permanent authority for FTROP.
Second, the Department stated in the August 1991 General Notice that if
the test indicated that FTROP was feasible and cost-effective, the
procedures would be incorporated into FSP regulations. The Department
believes that the test has proven FTROP feasible and cost-effective and
a significantly effective method of collecting FSP recipient claims due
to IHE's and IPV's. The number of State agencies participating has
increased from two in 1992 to 21 for 1994. Eleven more State agencies
will begin participating in 1995. With respect to costs, the Department
estimates Federal operational costs for the 1994 calendar year, for
example, will be less than $1 million. The Department concludes that
FTROP has been cost effective for participating State agencies to
operate. About 25 percent of the dollar value of claims which meet the
criteria for collection under FTROP is being collected
begin participating in 1995. With respect to costs, the Department
estimates Federal operational costs for the 1994 calendar year, for
example, will be less than $1 million. The Department concludes that
FTROP has been cost effective for participating State agencies to
operate. About 25 percent of the dollar value of claims which meet the
criteria for collection under FTROP is being collected. For example,
the 21 State agencies participating during offset year 1994 sent out
60-day notices to individuals owing more than $101 million in claims.
Through September 1994 collections totaled more than $30 million, more
than $27.7 million from Federal income tax refunds and an additional
$2.8 million from individuals who paid voluntarily. For
calendar year 1993, based on information from the Department of the
Treasury, 38.4 percent of recipient claims submitted to the IRS were
offset, and 28.1 percent of the dollar value of claims submitted were
collected. Both the percentage of debt collected in whole or in part,
and percentage of dollars collected for the FSP were the highest among
Federal agencies participating in FTROP.
c. Discussion of Comments on the General Notices. The August 1991
General Notice solicited comments from the public. The Department
responded to those comments in the August 1992 General Notice. The
August 1992 General Notice also solicited comments from the public. Two
comment letters were received on the August 1992 General Notice.
One of those letters was from a State agency which suggested that
there should be a priority for offsetting debts from tax refunds and
that the first priority should be delinquent child support collections.
The priorities for tax refund offsets are established by 26 U.S.C.
6402(d)(2), and IRS regulations state them at 26 CFR 301.6402-6(g). The
first priority for FTROP is tax liabilities owed the IRS. The second
priority is childsupport payments assigned to a State under certain
specified provisions of the Social Security Act
that the first priority should be delinquent child support collections.
The priorities for tax refund offsets are established by 26 U.S.C.
6402(d)(2), and IRS regulations state them at 26 CFR 301.6402-6(g). The
first priority for FTROP is tax liabilities owed the IRS. The second
priority is childsupport payments assigned to a State under certain
specified provisions of the Social Security Act. The third priority,
which includes FSP recipient claims, is past-due, legally enforceable
debts owed Federal agencies. The fourth priority is for child-support
payments not assigned to a State.
The second comment letter was from a research and action group
concerned with nutrition and related issues. This action group made a
series of comments on the August 1992 General Notice. The Department is
responding to several of the action group's general comments just below
and to comments addressing specific aspects of FTROP in pertinent
sections of this preamble.
The action group stated that the Department should rescind the
August 1991 Notice until the rulemaking process could resolve the
numerous issues which the group raised, especially relating to apparent
inconsistencies between FTROP as tested and the Food Stamp Act of 1977,
as amended (7 U.S.C. 2011) (the Act). The group stated that Section
13(b)(2) of the Act (7 U.S.C 2022(b)(2)) authorizes collection of IHE
claims through recoupment but not through alternative means such as
FTROP, and that such alternative means apply only to IPV claims and
claims due to State agency error. This is incorrect. Section 13 of the
Act provides collection authorities as follows: First, subparagraph
C. 2011) (the Act). The group stated that Section
13(b)(2) of the Act (7 U.S.C 2022(b)(2)) authorizes collection of IHE
claims through recoupment but not through alternative means such as
FTROP, and that such alternative means apply only to IPV claims and
claims due to State agency error. This is incorrect. Section 13 of the
Act provides collection authorities as follows: First, subparagraph
(b)(1)(A) requires that households pay IPV claims by agreeing to an
allotment reduction (recoupment) or a cash repayment schedule, in lieu
of which the claim is collected through allotment reduction. Second,
subparagraph (b)(1)(B) provides, in principal part, that IPV claims not
collected by recoupment or cash, may be collected through ``other means
of collection.'' Third, subparagraph (b)(2)(A) requires that IHE claims
be collected through recoupment. Fourth, subparagraph (b)(2)(B)
provides that State agencies may use ``other means of collection'' for
any claim not collected by the three preceding methods. Consequently,
the Food Stamp Act authorizes ``other means of collection,'' for IPV
and IHE claims.
The group also pointed out that Section 13(b)(2)(A) of the Act sets
a ceiling on the rate of recoupment on IHE claims at 10 percent or $10
per month, whichever would result in a faster collection rate, but that
with FTROP the Department has implemented a 100 percent recoupment
rate. The statutory limitation applies to collecting overpayments by
reducing the monthly allotments of participating households. Since
FTROP is used to collect claims from individuals who are not
participating in the FSP, the statutory limitation on the rate of
recoupment does not apply to collections made under FTROP.
The action group stated that FTROP defeats Congressional intent
because it collects recipient claims from the Earned Income Tax Credit
(EITC). The group pointed out that Congress has repeatedly expressed
its support for EITC by continuing to expand its scope
ho are not
participating in the FSP, the statutory limitation on the rate of
recoupment does not apply to collections made under FTROP.
The action group stated that FTROP defeats Congressional intent
because it collects recipient claims from the Earned Income Tax Credit
(EITC). The group pointed out that Congress has repeatedly expressed
its support for EITC by continuing to expand its scope. The Department
does not disagree that Congress has expanded EITC. However, since
Congress has not enacted legislation excluding EITC from such debt
collection through FTROP, the Department does not believe that
collecting food stamp recipient claims from EITC's is inconsistent with
Congressional intent.
The action group also stated that it believed that FTROP is unduly
punitive and causes severe hardship for poor families. The Department
disagrees. First, recipient claims subject to FTROP were caused by the
households themselves and are uncollected because households did not
pay them in response to demand letters. Second, the 60-day notice (the
due-process notice) offers individuals a second opportunity to pay in
full or negotiate a payment schedule before claims are referred for tax
offset. In addition, food stamp regulations at 7 CFR 273.18(g)(2)(i)
provide that if a claim cannot be paid within three years, the State
agency may reduce the claim to an amount that the household can pay
within three years.
The action group asserted that FTROP would not be cost-effective.
In this regard, the group referred to a comment at a public meeting in
February 1991 by an FCS official who expressed concern that the
priority order for collection from tax refunds might adversely affect
the cost-effectiveness of FTROP. Since the IRS does not provide Federal
agencies information about debts which are uncollected because of a
higher priority debt, the effect of this factor on FSP recipient claims
referred to the IRS under FTROP cannot be determined
ruary 1991 by an FCS official who expressed concern that the
priority order for collection from tax refunds might adversely affect
the cost-effectiveness of FTROP. Since the IRS does not provide Federal
agencies information about debts which are uncollected because of a
higher priority debt, the effect of this factor on FSP recipient claims
referred to the IRS under FTROP cannot be determined. The priorities
for offset from tax refunds notwithstanding, as demonstrated above, the
test of FTROP has demonstrated that FTROP is cost-effective.
The action group also commented that the Department lacked criteria
for evaluating FTROP in terms of feasibility and cost-effectiveness.
The Department disagrees. The test has fully demonstrated the
feasibility and cost-effectiveness of the project based on increasing
State agency participation, the large dollar volume of collections and
the increased efficiency of FSP claims collection.
In another general comment, the action group asserted that instead
of focusing on collecting overissued food stamp benefits, the
Department should focus on preventing and correcting underissuances.
Through the Quality Control System the Department has an ongoing
program for identifying and correcting certification and benefit
errors. These errors cause both over and underissuance of food stamp
benefits. In this regard, it should be noted that a certain percentage
of the errors causing such incorrect levels of benefits results from
households failing to accurately report their circumstances. In
addition to the Quality Control System's efforts to reduce
certification and benefit errors, on April 1, 1993 FCS awarded grants
to two State agencies for special error reduction initiatives. One
grant focuses on client-caused error, the other on State agency-caused
error.
3. FTROP--Requirements for State agencies
a. General Requirements
s failing to accurately report their circumstances. In
addition to the Quality Control System's efforts to reduce
certification and benefit errors, on April 1, 1993 FCS awarded grants
to two State agencies for special error reduction initiatives. One
grant focuses on client-caused error, the other on State agency-caused
error.
3. FTROP--Requirements for State agencies
a. General Requirements. During the testing of FTROP, all
participating State agencies were required to submit an annual
commitment letter in which they stated they would comply with the
requirements of the August 1991 General Notice. This rule proposes at
section 273.18(g)(5)(i)(A) that State agencies which choose to
implement FTROP must submit a one-time amendment to
their Plan of Operation stating that they will comply with the
requirements for FTROP and salary offset. (Section D of this preamble
explains why State agencies which implement FTROP must also implement
salary offset.) Amendments would be due to FCS regional offices twelve
months before the beginning of a State agency's first offset year.
Amendments for State agencies currently participating would be due 90
days after publication of the final rule on FTROP. (See the last
section of this preamble, ``Effective Date.'')
The August 1991 General Notice required State agencies to attend a
training session on FTROP policy and procedures prior to beginning to
test the program. The Department expects to continue to require new
State agencies to attend such a training session but is not proposing
to include the requirement in regulations.
The IRS specifies what information they need for the various tasks
required to match FSP recipient claims to Federal income tax return
information, to effect offsets, and for reporting and accounting
functions. The IRS also sets schedules for submission of data to them
and for the various reports which they produce and distribute
ut is not proposing
to include the requirement in regulations.
The IRS specifies what information they need for the various tasks
required to match FSP recipient claims to Federal income tax return
information, to effect offsets, and for reporting and accounting
functions. The IRS also sets schedules for submission of data to them
and for the various reports which they produce and distribute. These
instructions and schedules are contained in the annually revised IRS
Revenue Procedure, ``Magnetic Media Reporting for Federal Income Tax
Refund Offset Program (Debtor Master File).'' FCS conducts field edits
to assure that data which State agencies submit conform to IRS formats,
and FCS works with State agencies to correct problems which would
result in data being rejected by the IRS. State agency data and format
problems sometimes require that State agencies resubmit data. For
example, magnetic tapes must be preceded by a specific Job Control
Language (JCL). If the JCL is incorrect, the State agency may have to
produce another tape. On the other hand, FCS is able to correct some
problems without requiring a second submission. For example, if Social
Security Numbers (SSN's) are not correctly justified in the data field,
FCS may be able to shift them to their correct position. The problems
which FCS can correct are limited, however, and State agencies have the
primary responsibility for detecting and correcting data and format
errors prior to submitting recipient claim files to FCS. Since data
submitted to the IRS must be correctly formatted, FCS will not submit
data from a State agency to the IRS until the State agency's data
conforms to IRS format requirements. Consequently, this rule proposes
at section 273.18(g)(5)(i)(B) that State agencies must submit data
according to the record formats specified by FCS and/or the IRS.
This rule also proposes at section 273.18(g)(5)(i)(B) that State
agencies submit data according to schedules provided by FCS
t
data from a State agency to the IRS until the State agency's data
conforms to IRS format requirements. Consequently, this rule proposes
at section 273.18(g)(5)(i)(B) that State agencies must submit data
according to the record formats specified by FCS and/or the IRS.
This rule also proposes at section 273.18(g)(5)(i)(B) that State
agencies submit data according to schedules provided by FCS. State
agencies need to submit files early enough to allow sufficient time for
transmittal to FCS, for FCS to conduct field edits and to consolidate
State agency submissions, and for FCS to mail files to IRS to meet IRS
deadlines. FCS will provide State agencies each year a schedule for
State agency data submissions to FCS. This schedule will also include
other FTROP due dates so that State agencies have one source as a
reference for meeting the various FTROP deadlines.
IRS currently requires that FCS provide data to IRS on magnetic
tape. During the early testing of FTROP, State agencies submitted their
data to FCS on magnetic tape. Managing tape submissions for the number
of State agencies currently participating has proven inefficient.
Consequently, during January 1994 FCS began implementing electronic
data transmission. To provide for this technology and for future
improvements in this area, this rule proposes at section
273.18(g)(5)(i)(B) that State agencies must submit data by means of
magnetic tape, electronic data transmission or other method specified
by FCS.
b. Claims Referable for Offset. The provisions of DEFRA codified at
31 U.S.C. 3720A(b) and IRS regulations at 26 CFR 301.6402-6(c) specify
criteria for debts which can be referred for offset from Federal income
tax refunds. The August 1991 General Notice included those criteria as
well as additional criteria required for the FSP
electronic data transmission or other method specified
by FCS.
b. Claims Referable for Offset. The provisions of DEFRA codified at
31 U.S.C. 3720A(b) and IRS regulations at 26 CFR 301.6402-6(c) specify
criteria for debts which can be referred for offset from Federal income
tax refunds. The August 1991 General Notice included those criteria as
well as additional criteria required for the FSP. This rule proposes at
section 273.18(g)(5)(ii) to include substantially the same criteria,
the most general of which is specified by DEFRA: All claims submitted
for tax offset must be past-due and legally enforceable. The rule then
proposes a number of specific criteria for determining claims past-due
and legally enforceable. Only recipient claims which meet those
criteria may be referred for collection under FTROP.
General Criteria: For purposes of testing FTROP, the Department
chose to limit FTROP to IHE and IPV claims. This rule proposes that
same limitation at section 273.18(g)(5)(ii)(A). The August 1991 General
Notice further specified in paragraph b(1) that these claims had to be
``properly established'' as required by FSP regulations. This rule
expands the statement of that requirement by referencing at section
273.18(g)(5)(ii)(A)(1) current rules on recipient claims and
disqualification hearings for IPV's. The Department also wants to make
clear that State agencies must have documentation that the claims they
submit for collection under FTROP are properly established.
Consequently, this rule proposes at section 273.18(g)(5)(ii)(A)(2) that
State agencies must have such documentation on claims which they refer
under FTROP. Specifically such documentation would include such items
as electronic records and/or paper copies of claim demand letters,
results of fair hearings, advance notices of disqualification hearings,
results of such hearings, and records of payments. In this context an
electronic record would be such items as dates of demand letters and
the formats of such letters
s which they refer
under FTROP. Specifically such documentation would include such items
as electronic records and/or paper copies of claim demand letters,
results of fair hearings, advance notices of disqualification hearings,
results of such hearings, and records of payments. In this context an
electronic record would be such items as dates of demand letters and
the formats of such letters.
The Three-Month Delinquency Period: Temporary IRS regulations at 26
CFR 301.6402-6T(b)(2) provided that referable debts must be delinquent
at least three months at the time the offset is made. The August 1991
General Notice in paragraph b(3) provided that for purposes of FTROP
recipient claims must be delinquent at least three months as of the
date the State agency certified its final files to FCS. That date is
usually in early December. Further in this regard, the August 1991
General Notice specified in paragraphs b(3)(i) and (ii) that a claim
could not be considered delinquent for purposes of FTROP if either: (1)
the State agency was responding to a request for a fair hearing which
was made within the 90 days following the initial demand letter; or (2)
the time allowed for responding to the initial demand letter had not
elapsed. Final IRS regulations at 26 CFR 301.6402-6 do not include an
explicit three-month minimum delinquency nor do those regulations use
the term ``delinquency.'' The preamble to the final IRS rule states
that a three month minimum delinquency is ensured because of the
various notices and actions that must occur prior to referring debts
under FTROP.
During the test of FTROP, State agencies raised questions about the
criteria for ``delinquency'' of claims for FTROP purposes. These
questions were answered with specific discussion of such considerations
as whether payments were being regularly made
t a three month minimum delinquency is ensured because of the
various notices and actions that must occur prior to referring debts
under FTROP.
During the test of FTROP, State agencies raised questions about the
criteria for ``delinquency'' of claims for FTROP purposes. These
questions were answered with specific discussion of such considerations
as whether payments were being regularly made. This rule incorporates
policy developed in response to those questions and does not use the
terms ``delinquent'' or ``delinquency'' with respect to determining
whether a recipient claim may be referred for collection under FTROP.
If a claim meets the criteria for being past due and legally
enforceable as proposed in this rule, the claim would be subject to
FTROP.
The Department wants to make clear that claims may not be
considered past due and legally enforceable until individuals have been
provided the opportunity to respond to demand letters as required in
current food stamp rules. Current FSP regulations at 7 CFR
273.18(d)(4)(iii) state that if any nonparticipating household does not
respond to the first demand letter for repayment of a recipient claim,
additional demand letters must be sent at reasonable intervals, such as
30 days, until: (1) The household repays the claim or agrees to repay
it; (2) collection action can be suspended; or (3) the State agency
initiates other collection actions (emphasis added). Consequently, at
section 273.18(g)(5)(ii)(A)(1) this rule would refer to that FSP
regulation and the requirement to provide additional demand letters
prior to initiating other collection actions. This criterion would
replace the criteria stated in paragraphs b(3)(i) and (ii) of the 1991
General Notice.
The action group several times expressed concern that FTROP
procedures specified in the August 1991 General Notice did not require
that State agencies establish that all other collection had stopped
before acting on a claim under FTROP
ers
prior to initiating other collection actions. This criterion would
replace the criteria stated in paragraphs b(3)(i) and (ii) of the 1991
General Notice.
The action group several times expressed concern that FTROP
procedures specified in the August 1991 General Notice did not require
that State agencies establish that all other collection had stopped
before acting on a claim under FTROP. In the following paragraphs this
preamble discusses the criteria for determining whether or not a claim
is referable under FTROP and in later sections discusses the content of
the 60-day notice. The Department believes that these discussions and
the corresponding parts of this proposed rule should make clear both to
State agencies and to individuals receiving those 60-day notices that
claims are not referable under FTROP if they are being regularly
repaid. The Department also addresses this concern by proposing
policies on verifying that no liable individual is currently
participating in the FSP in the State and on apportioning claims among
individuals who are jointly and severally liable for the claims.
Section 13(a)(2) of the Act and FSP regulations at 7 CFR 273.18(a)
specify that all adult members of the household are jointly and
severally liable for any overissuance of benefits to the household. In
addition, the regulations require that State agencies establish claims
against any household which contains an adult member who was an adult
member of another household which received an overissuance. The
Department wants State agencies to take steps to collect FSP recipient
claims from households to the maximum extent. On the other hand, as
already discussed, both IHE and IPV claims must be recouped from
monthly allotments of participating households with members who are
liable for recipient claims
adult member who was an adult
member of another household which received an overissuance. The
Department wants State agencies to take steps to collect FSP recipient
claims from households to the maximum extent. On the other hand, as
already discussed, both IHE and IPV claims must be recouped from
monthly allotments of participating households with members who are
liable for recipient claims. Consequently, this rule proposes at
section 273.18(g)(5)(ii)(B) that claims are referable for collection
through FTROP for which the State agency has verified that no
individual participating in the FSP in the State is jointly and
severally liable as specified in section 273.18(a).
The IRS regulations at 26 CFR 301.6402-6(c)(7) set a $25 minimum
for claims which can be referred for tax offset. The August 1991
General Notice applied the $25 minimum during the test of FTROP, and
this rule would apply the same minimum. To avoid the need to change FSP
regulations should the IRS change the minimum dollar amount for claims
which can be referred under FTROP, this rule proposes at section
273.18(g)(5)(ii)(C) that State agencies may submit only claims in
dollar amounts which are at least the minimum dollar amount set by the
IRS. FCS will advise State agencies if that amount changes from $25.
The 10-Year Limit: Temporary IRS regulations at 26 CFR 301.6402-
6T(b)(2) provided, in part, that debts could only be referred if they
were not delinquent for more than 10 years at the time the offset was
made except for judgment debts, which were not subject to this 10-year
limitation. The August 1991 General Notice in paragraph b(3) provided,
in part, that except for claims reduced to final court judgments,
recipient claims could be delinquent for no more than nine years, 11
months as of the date State agencies certified their final file of
claims to FCS
10 years at the time the offset was
made except for judgment debts, which were not subject to this 10-year
limitation. The August 1991 General Notice in paragraph b(3) provided,
in part, that except for claims reduced to final court judgments,
recipient claims could be delinquent for no more than nine years, 11
months as of the date State agencies certified their final file of
claims to FCS. Final IRS regulations at 26 CFR 301.6402-6(c)(1) specify
that except for judgment debts or debts specifically exempt from the
requirement (such as certain debts referred by the Department of
Education), claims may be referred under FTROP if they are referred
within 10 years after the (Federal) agency's right of action accrues
(emphasis added).
In the preamble to their final regulation on FTROP, the IRS states
that only the Federal agency referring the debt for offset is in a
position to determine when its right of action to collect a particular
debt accrues. The Department considers that its right of action to
collect a recipient claim under FTROP accrues on the date of the
initial demand letter. The IRS accepts certified FTROP files no later
than about January 4 of each offset year. This date is the date claims
are considered referred to the IRS and the date from which the 10-year
period is measured in order to determine if the right of action on a
particular recipient claim accrued within that period. To assure that
recipient claims referred for tax offset fall within the IRS 10-year
time frame and to provide State agencies a date which remains unchanged
year to year, this rule proposes at section 273.18(g)(5)(ii)(D) that,
except for claims reduced to final court judgments ordering individuals
to pay the debt, FSP recipient claims may be submitted for tax offset
only if the date of the initial demand letter is within 10 years of
January 31 of the applicable offset year
r
time frame and to provide State agencies a date which remains unchanged
year to year, this rule proposes at section 273.18(g)(5)(ii)(D) that,
except for claims reduced to final court judgments ordering individuals
to pay the debt, FSP recipient claims may be submitted for tax offset
only if the date of the initial demand letter is within 10 years of
January 31 of the applicable offset year.
The August 1991 General Notice provided in paragraph b(3)(iii) that
a claim was not delinquent if the household was making payments
pursuant to an agreed upon schedule of payments as provided in 7 CFR
273.18(g)(2). This rule proposes at section 273.18(g)(5)(ii)(A)(5) that
claims are past due and legally enforceable if the State agency is
neither receiving voluntary payments pursuant to an agreed upon
schedule of payments as provided in current FSP regulations at 7 CFR
273.18(g)(2) nor is receiving scheduled, involuntary payments such as
wage garnishment. The Department proposes to add the second criterion
because, as in the case of voluntary payment under an agreement with
the State agency, the claim is being repaid regularly. Consequently,
the claim should not be referred for collection under FTROP. The rule
further proposes to specify that claims for which the State agency has
received such payments are considered past-due and legally enforceable
under FTROP 30 days after the due date for a regular payment which is
not received.
Bankruptcy: As a condition of participating in FTROP, the IRS
requires that Federal agencies annually sign a Memorandum of
Understanding (MOU) which specifies the respective rights and
responsibilities of the Department and the IRS. The MOU specifies that
the (Federal) agency must certify to the IRS that collection on claims
referred under FTROP is not limited by a bankruptcy filing. The August
1991 General Notice in paragraph b(5) applied this provision to State
agencies. This rule proposes the same provision at section
273.18(g)(5)(ii)(A)(6)
ies the respective rights and
responsibilities of the Department and the IRS. The MOU specifies that
the (Federal) agency must certify to the IRS that collection on claims
referred under FTROP is not limited by a bankruptcy filing. The August
1991 General Notice in paragraph b(5) applied this provision to State
agencies. This rule proposes the same provision at section
273.18(g)(5)(ii)(A)(6). This subject matter is discussed in greater
detail later in this preamble.
Notifications: The August 1991 General Notice specified in
paragraph b(6), that State agencies could refer only those claims for
which they had complied with all of the required FSP notification and
review rights explained therein. This rule proposes the same
requirement at section 273.18(g)(5)(ii)(A)(7).
In addition to these criteria, other criteria must be applied to
determine if other recipient claims are past due and legally
enforceable.
Other Collection Efforts: Many State agencies collect FSP recipient
claims from refunds due individuals from overpayments of State income
tax and other sources. The Department is concerned about over
collections of claims referred for collection from State tax refunds
for the same period they are subject to offset under FTROP. To avoid
such over collections, the consequent temporary loss of funds to
individuals and the need for State agencies to make refunds, this rule
proposes at section 273.18(g)(5)(ii)(B)(1) that claims referred under
FTROP must be reduced by any amounts referred for collection from State
income tax refunds or from other sources which may result in
collections during the offset year.
Combined Claims: During the test of FTROP, State agencies were
allowed to combine two or more claims against an individual and to
submit them as one claim. This rule at section (g)(5)(ii)(B)(2) would
require that the date of the initial demand letter for each of the
claims so combined be within the 10-year period specified in section
273.18(g)(5)(ii)(A)(4)
collections during the offset year.
Combined Claims: During the test of FTROP, State agencies were
allowed to combine two or more claims against an individual and to
submit them as one claim. This rule at section (g)(5)(ii)(B)(2) would
require that the date of the initial demand letter for each of the
claims so combined be within the 10-year period specified in section
273.18(g)(5)(ii)(A)(4). The IRS requires that debts reduced to judgment
be identified when they are submitted for offset. Consequently,
judgment debts cannot be combined with claims which are not reduced to
judgment. Accordingly, this rule would prohibit such combinations.
Split Claims: As discussed above, 7 CFR 273.18(a) provides that all
adult household members are jointly and severally liable for recipient
claims. In addition, 7 CFR 273.18(f), explicitly authorizes State
agencies to attempt to collect claims from any household which contains
an adult member of a household which received an overissuance. The 1991
General Notice in paragraph b(4) provided that claims could be
submitted under FTROP for only one individual or in cases where more
than one individual was jointly and severally liable for the claim
pursuant to 7 CFR 273.18(a) and (f), the full amount of the claim could
be apportioned between two or more liable individuals as long as the
sum of the amounts submitted for all liable individuals did not exceed
the total amount of the claim. The Department believes that it is
unnecessary to state in the regulation that a claim for one individual
is referable under FTROP. Consequently, this rule provides at section
273.18(g)(5)(ii)(B)(3) that claims may be referred under FTROP which
are apportioned between two or more individuals who are jointly and
severally liable for the claim pursuant to section 273.18(a) and
section 273.18(f) on the condition that the total of the amounts
submitted under FTROP for a particular claim do not exceed the amount
of the claim
Consequently, this rule provides at section
273.18(g)(5)(ii)(B)(3) that claims may be referred under FTROP which
are apportioned between two or more individuals who are jointly and
severally liable for the claim pursuant to section 273.18(a) and
section 273.18(f) on the condition that the total of the amounts
submitted under FTROP for a particular claim do not exceed the amount
of the claim.
Credit Bureau Reporting: Finally with regard to the criteria for
determining claims referable under FTROP, the IRS at 26 CFR 301.6402-
6(c)(6) specifies that, with certain exceptions, debts may not be
referred unless they have been disclosed to a consumer reporting
agency. In a letter to FCS dated March 25, 1991 the IRS waived this
requirement for the FSP on the basis of the disclosure limitations in
Section 11(e)(8) of the Act (7 U.S.C. 2020(e)(8)). Consequently, food
stamp recipient claims are not referred to consumer reporting agencies
as part of FTROP.
c. 60-Day Notice to Individuals. As codified at 31 U.S.C. 3720A(b),
DEFRA requires that prior to referring a debt to the IRS for collection
from Federal income tax refunds, a Federal agency must notify the
person incurring such debt that the agency proposes to take such action
and give the person at least 60 days to present evidence that all or
part of the debt is not past-due or not legally enforceable. The August
1991 General Notice in paragraph c(1) required State agencies to
provide this notice and required that it contain the information
specified in paragraph d. of the General Notice. Accordingly, this rule
proposes at section 273.18(g)(5)(iii)(A) that, prior to referring
claims for collection under FTROP, the State agency provide individuals
from whom it seeks to collect such claims with a notice, called a 60-
day notice
ragraph c(1) required State agencies to
provide this notice and required that it contain the information
specified in paragraph d. of the General Notice. Accordingly, this rule
proposes at section 273.18(g)(5)(iii)(A) that, prior to referring
claims for collection under FTROP, the State agency provide individuals
from whom it seeks to collect such claims with a notice, called a 60-
day notice.
Required Information: Because of the importance of complying with
the due process provisions of DEFRA, this rule proposes at section
273.18(g)(5)(iii)(B) that, with the exception of such State-specific
information as names and positions and information required for
contacts, a State agency's 60-day notice shall contain only the
information specified in paragraph 273.18(g)(5)(iv) for the 60-day
notice. Furthermore, the rule proposes that in the certification
letters which must be submitted with final files of claims as stated in
paragraph 273.18(g)(5)(vii), State agencies must include a statement
that their 60-day notices conform to this requirement. State agencies
which need to deviate from the required content of the 60-day notice
would need to obtain FCS approval for a waiver to allow the deviation.
FCS will provide State agencies with a format for the 60-day notice.
The Department believes that this is consistent with Section 11(d) of
the Act which prohibits the Secretary, as part of the approval process
for a plan of operation, from requiring a State agency to submit for
prior approval by the Secretary forms it will use to carry out the FSP.
The action group commented that the 60-day notice is likely to be
confusing because several provisions are in technical language which
many food stamp households may not possess sufficient reading skills to
comprehend
ry, as part of the approval process
for a plan of operation, from requiring a State agency to submit for
prior approval by the Secretary forms it will use to carry out the FSP.
The action group commented that the 60-day notice is likely to be
confusing because several provisions are in technical language which
many food stamp households may not possess sufficient reading skills to
comprehend. The Department is aware that regulatory language can be
technical, and this awareness was, in large part, why the August 1991
General Notice required State agencies to follow the format for the 60-
day letter which FCS provided and why this rule proposes a similar
requirement. In this regard, the action group also expressed concern
about automated forms or forms printed in small type. The Department
has received no complaints about such matters during the test but will
monitor 60-day notices for legibility and will request State agency
corrective action as necessary.
The August 1991 General Notice required in paragraph c(3) that
State agencies mail 60-day notices no later than the date specified in
operational guidelines issued by FCS for the particular offset year.
October 1 was the specified deadline for mailing 60-day notices during
the test of FTROP. This rule proposes at Sec. 273.18(g)(5)(iii)(C)
that, unless otherwise notified by FCS, the State agency must mail 60-
day notices for claims to be referred for collection through FTROP no
later than October 1 preceding the offset year during which the claims
would be offset.
Addresses for 60-Day Notices: IRS regulations at 26 CFR 301.6402-
6(c)(4) require that agencies participating in FTROP provide the
debtor, or make a reasonable effort to provide the debtor with the
required notice. IRS regulations at 26 CFR 301.6402-6(d)(1) state that
use of the most recent address for the debtor provided by the IRS
constitutes a reasonable effort to notify the individual about the
intended referral for offset
egulations at 26 CFR 301.6402-
6(c)(4) require that agencies participating in FTROP provide the
debtor, or make a reasonable effort to provide the debtor with the
required notice. IRS regulations at 26 CFR 301.6402-6(d)(1) state that
use of the most recent address for the debtor provided by the IRS
constitutes a reasonable effort to notify the individual about the
intended referral for offset. The IRS provides such address information
to State agencies during the annual pre-offset cycle. The last cited
provision of the IRS regulations also states that the IRS-provided
address must be used unless the State agency receives clear and concise
notification from the taxpayer that notices from the agency are to be
sent to an address different from the address obtained from the IRS.
The IRS regulation provides that such clear and concise notification
means that the taxpayer has provided the [State] agency
with written notification including the taxpayer's name and identifying
number (which is generally an SSN), the taxpayer's new address, and the
taxpayer's intent to have agency notices sent to the new address. This
rule proposes at section 273.18(g)(5)(iii)(D) to include requirements
on addresses for 60-day notices which are consistent with these IRS
regulations.
During the test of FTROP several State agencies asked whether
claims for which 60-day notices were returned as undeliverable for such
reasons as ``forwarding address unknown,'' could be referred for
collection. To clarify this matter, this rule proposes at
Sec. 273.18(g)(5)(iii)(D) that claims for which 60-day notices
addressed as required in that paragraph are returned as undeliverable
should be referred for collection.
Finally in regard to addresses for 60-day notices, the August 1991
General Notice provided in paragraph c(4) that the 60-day notice could
also be mailed to addresses from State agency files if the State agency
believed that such addresses in its files were better than ones
provided by the IRS
essed as required in that paragraph are returned as undeliverable
should be referred for collection.
Finally in regard to addresses for 60-day notices, the August 1991
General Notice provided in paragraph c(4) that the 60-day notice could
also be mailed to addresses from State agency files if the State agency
believed that such addresses in its files were better than ones
provided by the IRS. This policy caused confusion during the test. Some
State agencies thought that if the 60-day notice sent to the IRS-
provided address was returned, the claim could not be submitted under
FTROP unless a second 60-day notice was sent. In view of this problem
and the fact that the final IRS regulation requires the use of the IRS
address unless the debtor has specifically requested that another
address be used, this provision is not included in this proposed rule.
d. Contents of the 60-Day Notice. This rule proposes several
changes in the content of the 60-day notice from that used during the
test of FTROP. Among other things, these changes would provide
individuals with more information about their liability for the claim,
clarify the scope of individuals' right to have the intended collection
action reviewed, and advise individuals about documents for showing
that a claim is not past-due or legally enforceable.
Facts of the Claim; Authority for FTROP: The August 1991 General
Notice required in paragraph d(1) that the 60-day notice first inform
individuals that State agency records document that the individual,
identified with his or her SSN, is liable for a specified, unpaid
balance of a claim for overissued food stamp benefits, that the State
agency previously notified the individual about the claim, made the
required collection efforts, and that the claim is past-due and legally
enforceable. To make clear that the claim was properly established, the
August 1991 Notice also required that the 60-day notice state that
State agency records documented the claim
aid
balance of a claim for overissued food stamp benefits, that the State
agency previously notified the individual about the claim, made the
required collection efforts, and that the claim is past-due and legally
enforceable. To make clear that the claim was properly established, the
August 1991 Notice also required that the 60-day notice state that
State agency records documented the claim. The individual's SSN was
required to help assure that the 60-day notice was sent to the correct
individual. The information on the amount of the claim was required to
comply with the IRS requirement at 26 CFR 301.6402-6T(b)(5) that the
60-day notice inform the debtor of the amount of the debt and that it
was determined past-due and legally enforceable. The statement about
previous notification and collection efforts was required to comply
with the DEFRA requirement at 31 U.S.C. 3720A(b)(4) that agencies
participating in FTROP satisfy the Secretary of the Treasury that they
have made reasonable efforts to obtain payment of the debt (prior to
referring it for collection through tax offset).
The August 1991 General Notice required in paragraph d(2) that the
60-day notice inform the individual that DEFRA authorizes the IRS to
deduct debts (such as claims for overissued food stamp benefits) from
tax refunds and that the State agency intends to refer the claim for
such deduction unless the individual pays the claim within 60 days or
makes other repayment arrangements acceptable to the State agency. As
noted in the preceding section of this preamble, DEFRA contains these
requirements at 31 U.S.C. 3720A(b).
This rule at Secs. sections 273.18(g)(5)(iv) (A) and (B) would
reorganize these statements and make some minor modifications in
language, in particular to accommodate the proposed requirement that
60-day notices conform to the language specified in this rule
table to the State agency. As
noted in the preceding section of this preamble, DEFRA contains these
requirements at 31 U.S.C. 3720A(b).
This rule at Secs. sections 273.18(g)(5)(iv) (A) and (B) would
reorganize these statements and make some minor modifications in
language, in particular to accommodate the proposed requirement that
60-day notices conform to the language specified in this rule. As did
the 60-day notice used during the test of FTROP, the 60-day notice
proposed here would first state that the State agency has records
documenting that the individual, identified by name and SSN, is liable
for the unpaid balance of the recipient claim(s) resulting from
overissued food stamp benefits the State agency intends to refer for
offset.
The 60-day notice would then state that the State agency has
previously mailed or otherwise delivered demand letters notifying the
individual about the claim, including the right to a fair hearing on
the claim, and has made any other required collection efforts. The
clause ``previously mailed or otherwise delivered'' would be used in
the 60-day notice in order to be consistent with the recent revision of
7 CFR 273.18(d)(4) cited at the end of section B(1) of this preamble.
The reference to the notice of the right to a fair hearing on the claim
would serve as a reminder to the individual that the opportunity for a
fair hearing has already been provided. The Department wants to include
that reminder to help individuals understand why, as discussed below,
the 60-day notice offers an opportunity for a review of whether the
claim is referable, not an opportunity for a fair hearing.
This proposed rule would require at section 273.18(g)(5)(iv)(B)
that the 60-day notice state that the Deficit Reduction Act of 1984, as
amended by the Emergency Unemployment Compensation Act of 1991,
authorizes the IRS to deduct such debts from tax refunds if they are
past due and legally enforceable
unity for a review of whether the
claim is referable, not an opportunity for a fair hearing.
This proposed rule would require at section 273.18(g)(5)(iv)(B)
that the 60-day notice state that the Deficit Reduction Act of 1984, as
amended by the Emergency Unemployment Compensation Act of 1991,
authorizes the IRS to deduct such debts from tax refunds if they are
past due and legally enforceable. The 60-day notice would then state
that: (1) The State agency has determined that the debt is past due and
legally enforceable according to the criteria specified by the Deficit
Reduction Act of 1984, the IRS regulations and the Food Stamp Program
(FSP) regulations; and (2) the State agency intends to refer the claim
for deduction from the individual's Federal income tax refund unless
the individual pays the claim within 60 days of the date of the notice
or makes other repayment arrangements acceptable to the State agency.
Offset Fee: During the test of FTROP, the Department of the
Treasury (Treasury) charged Federal agencies participating in FTROP a
fee for each offset to cover Treasury's administrative costs for FTROP
operations. For example, the fee for offset year 1995 is $8.79.
Treasury plans to continue this practice. Treasury assesses the offset
fee whether the offset satisfies all or only part of the debt. During
the test of FTROP (including 1995), these fees were treated as
allowable costs for the State agency. This has meant that State
agencies and FCS each paid for half of each fee. For example, assuming
a $100 claim and an $8 fee, if the IRS offset $100 from a tax return
either because that was the amount of the recipient claim referred or
because that was all the refund available for offset, the IRS would
keep $8 and send FCS $92. FCS would report a $100 offset to the State
agency which would credit that amount against the balance of the
recipient claim
f of each fee. For example, assuming
a $100 claim and an $8 fee, if the IRS offset $100 from a tax return
either because that was the amount of the recipient claim referred or
because that was all the refund available for offset, the IRS would
keep $8 and send FCS $92. FCS would report a $100 offset to the State
agency which would credit that amount against the balance of the
recipient claim. FCS would also report the $8 offset fee to the State
agency which would claim 50 percent of that fee, or $4, as a
reimbursable cost from FCS. The fees are costs which can be avoided if
individuals pay their claims voluntarily in response to 60-day notices.
Consequently, at Sec. 273.18(g)(5)(iv)(C) this rule proposes that the
60-day notice state that if a claim is referred to the
IRS, a charge for the administrative cost of collection will be added
to the amount of the claim and any amount deducted from the tax refund
will first be applied to pay the charge, with the balance applied to
the claim, as explained further.
Under this proposal, in the case of a $100 claim and an $8 offset
fee, a debt of $108 would be referred to the IRS. If that amount were
available for offset, the IRS would keep $8 and send $100 to FCS who
would transfer $100 to the State agency for credit against the claim.
On the other hand, if only $50 were available for offset, the IRS would
keep $8 and $42 would be credited against the claim. A balance of $58
would remain.
The 60-day notice would not cite the exact amount of the charge
because during the test the IRS notified FCS of the amount of the
offset fee during November, too late for the exact amount to be
provided State agencies prior to the October 1 mailing of the 60-day
notices. FCS plans to add the exact amount of the fee to each recipient
claim submitted by State agencies in their certified files in early
December
would not cite the exact amount of the charge
because during the test the IRS notified FCS of the amount of the
offset fee during November, too late for the exact amount to be
provided State agencies prior to the October 1 mailing of the 60-day
notices. FCS plans to add the exact amount of the fee to each recipient
claim submitted by State agencies in their certified files in early
December. FCS would advise State agencies of the amount of the fee, but
the fee must not be added to the amount of the claim as maintained in
State agency food stamp case records. The State agency would ultimately
advise the individual of the amount offset, including how much of the
offset was applied to the fee and how much to the claim itself.
Joint and Several Liability: During the test of FTROP it was clear
that the household composition of many individuals liable for claims
subject to FTROP had changed and that some individuals did not
understand that they were liable for the overissuances. Consequently,
this rule proposes to require at Sec. 273.18(g)(5)(iv)(D) that the 60-
day notice advise individuals that all adults who are household members
when excess food stamp benefits are issued to the household are jointly
and severally liable for the value of those benefits, and that
collection of claims for such benefits may be pursued against those
individuals.
Action Group Comments: The action group made two comments which
pertain to these initial statements in the 60-day notice. First, the
group commented that the appeal process is defective because the
individual is not given an opportunity to acknowledge that, while a
debt is owed, it should not be collected through FTROP. The group cited
the example of an individual who has entered into a repayment agreement
with a State agency to repay a debt which the State agency in error
refers under FTROP. The August 1991 Notice stated in paragraph
b(3)(iii) that claims being repaid are not delinquent and so are not
referable
opportunity to acknowledge that, while a
debt is owed, it should not be collected through FTROP. The group cited
the example of an individual who has entered into a repayment agreement
with a State agency to repay a debt which the State agency in error
refers under FTROP. The August 1991 Notice stated in paragraph
b(3)(iii) that claims being repaid are not delinquent and so are not
referable. This rule proposes that same information be given to
individuals in the 60-day notice in two places. First, the rule would
require at Sec. 273.18(g)(5)(iv)(D) that the 60-day notice advise
households that State agency records do not show that the debt is being
repaid according to either a voluntary agreement with the State agency
or through scheduled, involuntary payments. Second, as discussed below,
the 60-day notice would state that evidence that a claim is being
repaid is one type of evidence showing that a claim is not past due.
The action group also commented that the individual is never informed
that collection efforts concurrent with FTROP are not permissible and
are grounds for appeal. The Department believes that the just discussed
revisions to the language in the 60-day notice should make that point
clear.
Also with regard to the initial statements in the 60-day notice,
the action group commented that the 60-day notice as tested does not
provide an opportunity for a hearing before the refund is seized
because the notice does not state a definite intent to seize the
refund. The action group went on to assert that this deficiency means
that the FTROP procedures do not comply with due-process mandates and
that the FTROP procedures should be withdrawn
y notice,
the action group commented that the 60-day notice as tested does not
provide an opportunity for a hearing before the refund is seized
because the notice does not state a definite intent to seize the
refund. The action group went on to assert that this deficiency means
that the FTROP procedures do not comply with due-process mandates and
that the FTROP procedures should be withdrawn. The 60-day notice does
state an intent to offset the debt against income tax refunds, and the
notice fully complies with the requirements of DEFRA which provides, in
part, that debts may not be referred to the Secretary of the Treasury
for collection from income tax refunds until the Federal agency owed
the debts notifies the debtors that the agency proposes to make such
referral and provides the debtors 60 days to present evidence that all
or part of the debt is not past-due or not legally enforceable
(emphasis added). Of course, as the action group states, at the time of
the 60-day notice it is not known whether or not there will be a tax
refund available for collection. Based on experience during the test of
FTROP, there is no confusion on the part of individuals about this
matter. Immediately after 60-day notices are mailed, State agencies
begin receiving telephone calls about the claims and the intended
referral for offset, and individuals do file appeals.
State Agency Contact: The August 1991 General Notice required in
paragraph d(3) that the 60-day notice include instructions about how to
pay the claim, including the name, address and telephone number of a
State agency contact able to discuss the claim and the intended offset
with the individual. Such information is needed so that individuals
will know how to contact the State agency and where to send payments.
During the test of FTROP several State agencies raised concerns about
personal safety because of the requirement to provide a name of an
individual and/or the street address in the 60-day notice
ency contact able to discuss the claim and the intended offset
with the individual. Such information is needed so that individuals
will know how to contact the State agency and where to send payments.
During the test of FTROP several State agencies raised concerns about
personal safety because of the requirement to provide a name of an
individual and/or the street address in the 60-day notice. In view of
this concern, this rule proposes to require at Sec. 273.18(g)(5)(iv)(E)
that the 60-day notice provide the name of an office, administrative
unit and/or individual, street address or post office box, and
telephone number for the contact. The 1991 General Notice did not
specify that the telephone number for the State agency contact must be
toll-free or collect. In its publication ``Guidelines for the Federal
Tax Refunds Offset Program'' (August 1992), Treasury requires such a
telephone number on the 60-day notice. Accordingly, this rule would
specify that requirement (at Sec. 273.18(g)(5)(iv)(E)).
Requests for Review: The August 1991 General Notice required in
paragraph d(4) that the 60-day notice inform the individual of six
factors about appealing the intended collection action. Most of these
factors are based on the requirements of DEFRA. This rule proposes to
require that the 60-day notice address the same factors, modifying them
based on experience during the test of FTROP.
The first such modification is the replacement of the term
``appeal'' with the phrase ``request a review'' or ``review request.''
The rule proposes this change for two reasons. First, State agencies
observed that the use of the word ``appeal'' in the 60-day notice gave
individuals the impression that they were being offered the right to a
full-fledged review of all aspects of the claim
TROP.
The first such modification is the replacement of the term
``appeal'' with the phrase ``request a review'' or ``review request.''
The rule proposes this change for two reasons. First, State agencies
observed that the use of the word ``appeal'' in the 60-day notice gave
individuals the impression that they were being offered the right to a
full-fledged review of all aspects of the claim. Second, during the
test of FTROP, several State agencies requested approval of 60-day
notices which would offer debtors an opportunity for a fair hearing on
the claim itself even though such an opportunity was provided with the
initial demand letter. A second opportunity for a fair hearing may be
appropriate in certain circumstances, but the Department does not
believe that collection of a recipient claim through FTROP is such a
circumstance. FTROP is one of several types of ``other means of
collection'' for which 7 CFR 273.18(d)(4)(iv) provides authority, and
State agencies do not offer a second fair hearing opportunity before
initiating other collection actions such as small claims court
proceedings or referral to a collection agency. The proposed
rephrasing should help clarify that an individual's
``appeal'' right is limited. For additional clarity, the rule proposes
using the word ``collection'' instead of ``offset.'' Accordingly,
Sec. 273.18(g)(5)(iv)(F) would require that the 60-day notice advise
individuals that they have a right to request a review of the intended
collection action.
The August 1991 General Notice required in paragraphs d(4)(iii) and
clarify that an individual's
``appeal'' right is limited. For additional clarity, the rule proposes
using the word ``collection'' instead of ``offset.'' Accordingly,
Sec. 273.18(g)(5)(iv)(F) would require that the 60-day notice advise
individuals that they have a right to request a review of the intended
collection action.
The August 1991 General Notice required in paragraphs d(4)(iii) and
(iv) that the 60-day notice state that claims that have been appealed
(for which timely reviews have been requested) will not be referred for
offset while under review, and that individuals must provide their
SSN's with their appeals (review requests). The rule would make these
same requirements at Sec. 273.18(g)(5)(iv)(F). At that same place the
rule would require that the review request be written because during
the test of FTROP State agencies asked whether they had to review
claims based on telephone inquiries. The Department wants to make clear
to debtors and State agencies that an oral request, such as an inquiry
made over the telephone, does not constitute a review request.
In this regard, the action group commented that the opportunity to
appeal provided by the 60-day notice was not meaningful because,
whereas recipients are accustomed to working with food stamp offices,
the opposing party in this instance is the IRS. Requests for review are
made to State agencies and FCS, not the IRS. Only requests to protect
the tax refund of a non- liable spouse should be directed to the IRS,
as discussed in detail below. During the test there were few reports
from the IRS that individuals were contacting IRS offices instead of
State agencies about appealing the intended collection from tax
refunds. Nonetheless, to help make clear that appeals are directed to
the State agency, this rule proposes at Sec. 273.18(g)(5)(iv)(F) that
the 60-day notice specify that requests for review be submitted to the
State agency address provided in the notice
eports
from the IRS that individuals were contacting IRS offices instead of
State agencies about appealing the intended collection from tax
refunds. Nonetheless, to help make clear that appeals are directed to
the State agency, this rule proposes at Sec. 273.18(g)(5)(iv)(F) that
the 60-day notice specify that requests for review be submitted to the
State agency address provided in the notice. Requests for review will
generally be submitted by mail, but the rule does not propose to
require this. Individuals could provide the written requests in person.
DEFRA provides that individuals must be given 60 days to show a
debt is not subject to FTROP. The August 1991 General Notice required
in paragraph d(4)(ii) that the 60-day notice state that the State
agency will not review appeals which it receives later than 60 days
after the date of the 60-day notice. The provision was intended: (1) To
make as clear as possible to individuals that the 60-day appeal period
would be strictly adhered to; and (2) to relieve State agencies of the
responsibility for reviewing appeals received after that period
expires. This rule proposes at Sec. 273.18(g)(5)(iv)(F) that the 60-day
notice advise individuals that their request for review must be
received with 60 days of the date of the 60-day notice. During the test
of FTROP, after the 60-day period State agencies sometimes received
documentation, for example, that the claim was paid. In such
circumstances, as required by current food stamp regulations when an
over collection is discovered, the State agencies were required to
refund the over collection. Consistent with current food stamp
regulations on refunding over collections of recipient claims, if after
the 60-day notice an individual documents or otherwise demonstrates
that the claim is not past due or legally enforceable, and the claim
has already been collected from the individual's tax refund, the amount
collected on the claim will be refunded
equired to
refund the over collection. Consistent with current food stamp
regulations on refunding over collections of recipient claims, if after
the 60-day notice an individual documents or otherwise demonstrates
that the claim is not past due or legally enforceable, and the claim
has already been collected from the individual's tax refund, the amount
collected on the claim will be refunded.
Bankruptcy: The August 1991 General Notice required in paragraph
d(5) that the 60-day notice advise individuals that they should inform
the State agency if they believed that a bankruptcy prevents collection
of the claim. During the test of FTROP several State agencies asked
what documentation of bankruptcy was required. Bankruptcy law forbids
requiring documentation of bankruptcy. This rule proposes at
Sec. 273.18(g)(5)(iv)(G) to restate the requirement that a claim is not
legally enforceable if the individual indicates that a bankruptcy
prevents collection of the claim.
Tax Refunds of Non-liable Spouses: The August 1991 General Notice
required in paragraph d(6) that 60-day notices state that married
individuals may want to contact the IRS in order to protect the refund
in cases where spouses are not liable for the claim. This rule proposes
this same requirement at Sec. 273.18(g)(5)(iv)(H). That section would
also inform the individual that his or her own liability for this
claim, including any charge for administrative costs, may be collected
from his or her share of a joint refund. The Department wants to make
clear that the protection for a non-liable spouse's share of a tax
refund against collection by tax refund offset does not extend to the
liable spouse's share of the tax refund
tion would
also inform the individual that his or her own liability for this
claim, including any charge for administrative costs, may be collected
from his or her share of a joint refund. The Department wants to make
clear that the protection for a non-liable spouse's share of a tax
refund against collection by tax refund offset does not extend to the
liable spouse's share of the tax refund.
Documenting a Claim is ``Not Referable'': The August 1991 General
Notice stated in paragraph d(4)(iv) that an appeal must provide
evidence or documentation why the individual believes that the claim is
not past-due or is not legally enforceable, and in paragraph d(4)(v)
that an appeal is not considered received until the State agency
receives such evidence or documentation. During the test of FTROP,
State agencies asked whether they were required to review requests
which did not contain any pertinent documentation. The Department
believes that all timely, written review requests warrant consideration
and a written response, as discussed later in connection with State
agency action on review requests. The Department also wants to make
clear to individuals that certain documentation is necessary to show
that a claim is not subject to FTROP. Accordingly, this rule proposes
at Sec. 273.18(g)(5)(iv)(I) that 60-day notices inform individuals that
if they request a review of the intent to collect the claim from their
income tax refund, they should provide documentation showing at least
one reason why the claim is not subject to FTROP and that if they
cannot, for example, provide a cancelled check, they should explain in
detail why they believe that the claim is not collectible under FTROP.
This should allow individuals wide latitude to explain the particular
circumstances of the claim and still require that they show some basis
for why the claim is not past due and legally enforceable. The 60-day
notice would be required at Secs
if they
cannot, for example, provide a cancelled check, they should explain in
detail why they believe that the claim is not collectible under FTROP.
This should allow individuals wide latitude to explain the particular
circumstances of the claim and still require that they show some basis
for why the claim is not past due and legally enforceable. The 60-day
notice would be required at Secs. 273.18(g)(5)(iv)(J) and (K) to list
the reasons the claim is subject to collection under FTROP.
In the first two weeks after mailing out 60-day notices, State
agencies typically receive a large number of telephone calls from
individuals asking questions about the recipient claims and the
intended collection action described in the notices. Many of these
callers assert that they are not liable for the claim. The Department
believes that providing individuals information in the 60-day notice
about why their claims are subject to collection under FTROP will allow
informal inquiries to be handled quickly and may reduce the number of
such inquiries. This information should also help individuals decide
what information they need to provide in order to substantiate that,
for example, they have paid the claim or that the claim has been
discharged in bankruptcy.
The action group made several comments concerning the requirements
for documenting that a claim is not past due or is not legally
enforceable. The group stated that the 10-year time limit for
delinquent claims to be referable for tax offset results in an undue
burden for documentation on low-income households and recommended that
the Department shorten that period. On this matter the action group
also commented that some households may have difficulty
documenting that no debt is owed. To the same effect, the action group
commented that recipients may not have evidence to rebut the intended
collection action or the claim itself
results in an undue
burden for documentation on low-income households and recommended that
the Department shorten that period. On this matter the action group
also commented that some households may have difficulty
documenting that no debt is owed. To the same effect, the action group
commented that recipients may not have evidence to rebut the intended
collection action or the claim itself. They cited the example of a
household member alleged to have had unreported earnings (which would
have resulted in an overissuance) who is unavailable when the 60-day
notice is received. The Department recognizes that recordkeeping for
low-income households may be relatively difficult, especially perhaps,
as the action group remarks, because low-income households may move
relatively often and may have relatively limited resources to devote to
household recordkeeping. The Department does not believe that
shortening the 10-year period would address this difficulty. The
Department believes that it must require a minimum level of
documentation that a claim is not past due or is not legally
enforceable and that the proposed rule states that minimum level. With
respect to rebutting the claim itself, since only IHE and IPV claims
which are properly established are subject to FTROP, the household has
already been offered an opportunity to rebut the claim itself in fair
hearings or administrative disqualification hearings.
The action group also commented that in other contexts households
present evidence and the State agency has the burden of defending its
actions. The Department understands that by ``other contexts'' the
action group is referring to fair hearing and disqualification hearing
procedures. As just discussed, those procedures are part of the process
of establishing a claim. Once a claim is established, due process
requires permitting the individual an opportunity to establish that the
claim is not past due or legally enforceable (is not subject to
collection under FTROP)
by ``other contexts'' the
action group is referring to fair hearing and disqualification hearing
procedures. As just discussed, those procedures are part of the process
of establishing a claim. Once a claim is established, due process
requires permitting the individual an opportunity to establish that the
claim is not past due or legally enforceable (is not subject to
collection under FTROP). Due process does not require permitting a
second opportunity to challenge the substantive basis for the claim.
e. State Agency Action on Requests for Review. DEFRA requires at 31
U.S.C. 3720A(b)(3) that any evidence presented by debtors must be
considered and a determination made whether the debt is past-due and
legally enforceable. The IRS requires at 26 CFR 301.6402-6(d)(2) that
the participating agency notify the debtor of its decision. The August
1991 General Notice required in paragraph e(1) that when a State agency
examines documents or evidence submitted with a review request, it
determine whether the claim is past due and legally enforceable and
notify the individual of its decision in writing. Consistent with the
requirements concerning State agency action on review requests already
discussed, this rule proposes at Sec. 273.18(g)(5)(v)(A) that State
agencies act on all written requests for reviews received within the
60-day period for timely review requests, determine whether or not such
claims are past due and legally enforceable, and notify individuals in
writing of the result of such determinations.
Section 273.18(g)(5)(v)(B) of this rule proposes that the State
agency determine whether or not claims are past-due and legally
enforceable based on a review of its records and of documentation, and
evidence or other information the individual may submit. The provision
in the August 1991 General Notice at paragraph e(2) which contained
examples of types of documentation or evidence has been eliminated as
unnecessary
) of this rule proposes that the State
agency determine whether or not claims are past-due and legally
enforceable based on a review of its records and of documentation, and
evidence or other information the individual may submit. The provision
in the August 1991 General Notice at paragraph e(2) which contained
examples of types of documentation or evidence has been eliminated as
unnecessary.
During the test of FTROP State agencies indicated confusion about
whether they were required to respond to review requests which
contained inadequate or no documentation. To address this concern, this
rule proposes to add at Sec. 273.18(g)(5)(v)(C)(1) the requirement that
the decision letter advise the individual of the reason for the State
agency's decision, including the failure to provide adequate evidence
or documentation that the claim was not past due and legally
enforceable.
The August 1991 General Notice required in paragraph (e)(3)(i) that
if the State agency decides a claim is past-due and legally
enforceable, the State agency must inform the individual in its written
decision that it intends to refer the claim for offset. This rule would
make the same requirement at Sec. 273.18(g)(5)(v)(C)(2).
Information About FCS Reviews of State Agency Decisions: The IRS
regulations at 7 CFR 301.6402-6(d)(2) provide that if the review is
conducted by an agent of the Federal agency, in this case the State
agency, the individual must be accorded at least 30 days from the
agent's determination to request a review by the Federal agency. The
August 1991 General Notice required in paragraph e(3)(ii) that the
State agency's notice of decision inform the individual that he or she
is entitled to ask FCS to review the State agency's decision but that
FCS would not review such decisions if it received a request to do so
later than 30 days after the date of the State agency decision notice.
Consistent with the August 1991 General Notice, this rule proposes
to require at Sec
paragraph e(3)(ii) that the
State agency's notice of decision inform the individual that he or she
is entitled to ask FCS to review the State agency's decision but that
FCS would not review such decisions if it received a request to do so
later than 30 days after the date of the State agency decision notice.
Consistent with the August 1991 General Notice, this rule proposes
to require at Sec. 273.18(g)(5)(v)(C)(3) that the State agency decision
advise that the individual has 30 days from the date of the State
agency decision to request that FCS review the State agency's decision.
If FCS review is timely requested, FCS will provide the individual a
written response stating its decision and the reasons for its decision.
Consistent with the IRS regulation cited just above, this rule also
proposes at Sec. 273.18(g)(5)(v)(C)(3) that individuals be advised that
the claim will not be referred for offset pending FCS review of the
State agency's decision.
The 1991 General Notice required in paragraph e(iii) that the State
agency decision: (1) advise the individual that a request for an FCS
review must include his or her SSN; (2) be sent to an FCS regional
office; and (3) provide the address of that office including a line
reading ``Tax Offset Review.'' The purpose of this requirement was to
help FCS obtain the correct records from the State agency, to provide
individuals the address to which to send their requests for FCS reviews
and to identify those requests to regional offices so that action could
be taken promptly. This rule would make that same requirement at
Sec. 273.18(g)(5)(v)(C)(4)
e including a line
reading ``Tax Offset Review.'' The purpose of this requirement was to
help FCS obtain the correct records from the State agency, to provide
individuals the address to which to send their requests for FCS reviews
and to identify those requests to regional offices so that action could
be taken promptly. This rule would make that same requirement at
Sec. 273.18(g)(5)(v)(C)(4).
The August 1991 General Notice specified in paragraph e(4) that if
the State agency determines that the claim is not past-due or is not
legally enforceable, in addition to notifying the individual that the
claim will not be referred for offset, the State agency must take any
actions required by food stamp regulations with respect to establishing
claims and/or holding appropriate hearings, or other required recipient
claim actions. The purpose of this requirement was to make sure that
State agencies: (1) Corrected any errors in their processing of claims
in question; and (2) took actions to properly establish claims and to
initiate collection action. Aside from some editorial changes, this
rule proposes the same requirement at Sec. 273.18(g)(5)(v)(D).
The August 1991 General Notice specified in paragraph e(5) three
groupings for timely appealed claims which could not be referred for
offset. Guidance on treatment of the first group, claims which a State
agency determines are not past-due or are not legally enforceable, has
just been discussed. The third group is claims which FCS either
determines are not past due or not legally enforceable, or for which
FCS does not complete its review before State agency final files were
due. State agency action on these claims is discussed later in this
preamble in connection with the certification letter to FCS
determines are not past-due or are not legally enforceable, has
just been discussed. The third group is claims which FCS either
determines are not past due or not legally enforceable, or for which
FCS does not complete its review before State agency final files were
due. State agency action on these claims is discussed later in this
preamble in connection with the certification letter to FCS.
State Agency Reviews not Complete by October 31: The second of the
three groups is those claims for which the State agency does not
complete its review and notification to the individual
at least 30 days prior to the deadline for the State agency to certify
its final file of claims for offset to FCS. The deadline for this final
file is in early December. During the test State agencies indicated
that they did not understand that if, for example, a review request was
received in mid-November, even if the State agency review determined
that the claim was past due and legally enforceable, it could not be
referred. These claims are not referable because there is not a 30-day
opportunity for the individual to appeal to FCS before the deadline for
the State agency to refer its final files to FCS. As explained above,
IRS regulations at 26 CFR 301.6402-6(d)(2) state that if the review is
conducted by an agent of the Federal agency (in this case, the State
agency), the individual must be accorded at least 30 days from the
agent's determination to request a review by the Federal agency.
To accommodate the schedule for State agency final files and the
30-day opportunity which must be provided individuals to request a
Federal-level review, this rule proposes at Sec. 273.18(g)(5)(v)(E)
that State agencies cannot refer for offset any claim for which a
review request is received unless, by October 31 preceding the offset
year, the State agency has completed its review of the claim,
determined that the claim is past due and legally enforceable, and
provided the individual with its decision
iduals to request a
Federal-level review, this rule proposes at Sec. 273.18(g)(5)(v)(E)
that State agencies cannot refer for offset any claim for which a
review request is received unless, by October 31 preceding the offset
year, the State agency has completed its review of the claim,
determined that the claim is past due and legally enforceable, and
provided the individual with its decision. The Department believes that
this proposal will not have a major impact on the number of claims
referred for FTROP. During the test of FTROP most review requests were
received relatively early in the 60-day period provided for those
requests.
Some review requests will be received too late for the October 31
deadline but within the 60 days provided for timely review requests. As
during the test, such claims are not referable for offset in the
immediately upcoming offset year. In such situations State agencies
should review the request and provide individuals their decisions on
whether the claim is past due and legally enforceable and subject to
collection by tax refund offset. Such claims could then be included in
the processing cycles for the succeeding offset year.
f. FCS action on Appeals of State Agency Reviews. The August 1991
General Notice provided in paragraph f(1) that FCS would not review
State agency decisions on review requests when it received such
requests later than 30 days after the date of the State agency decision
on the original review. This rule proposes at Sec. 273.18(g)(5)(vi)(A)
that FCS act on all timely requests for FCS review of State agency
review decisions, and that such a request is timely if it is received
by FCS within 30 days of the date of the State agency review decision
ions on review requests when it received such
requests later than 30 days after the date of the State agency decision
on the original review. This rule proposes at Sec. 273.18(g)(5)(vi)(A)
that FCS act on all timely requests for FCS review of State agency
review decisions, and that such a request is timely if it is received
by FCS within 30 days of the date of the State agency review decision.
The August 1991 General Notice stated in paragraph f(2) that when
FCS received timely requests for reviews of State agency decisions, FCS
would either: (1) Complete the requested review and notify the State
agency and individual of its determination; or (2) notify the State
agency that FCS had not completed its review and that the State agency
must delete the claim from its final files certified to FCS for
referral for offset. This rule proposes the same actions at
Sec. 273.18(g)(5)(vi)(B). In addition, this rule proposes at
Sec. 273.18(g)(5)(vi)(B) that FCS provide funds to refund the charge
for the offset fee if FCS is late in notifying the State agency to
delete a claim, where FCS finds that the claim is not referable and the
claim is offset because of the late notification. For timely requests
for review received by FCS, where the State agency's decision is dated
after October 31 prior to the offset year, FCS will complete its review
and notification of the results of its review, but the claim shall not
be referred for offset in the immediately upcoming offset year, as
specified above. This proposal is found at Sec. 273.18(g)(5)(v)(E) and
Sec. 273.18(g)(5)(vi)(C).
The August 1991 General Notice stated in paragraph f(3) the
components of FCS reviews of State agency decisions on review requests.
Those components were: (1) Requesting documentation from the State
agency about the appeal; (2) determining the correctness of the State
agency decision; and (3) notifying the individual and State agency of
this determination
v)(E) and
Sec. 273.18(g)(5)(vi)(C).
The August 1991 General Notice stated in paragraph f(3) the
components of FCS reviews of State agency decisions on review requests.
Those components were: (1) Requesting documentation from the State
agency about the appeal; (2) determining the correctness of the State
agency decision; and (3) notifying the individual and State agency of
this determination. The August 1991 General Notice stated in paragraph
f(3)(iii)(A) that if FCS determined that the State agency was correct
(the claim was past due and legally enforceable), FCS would also notify
the individual that any further appeals must be made through the
courts. The August 1991 General Notice stated in paragraph f(3)(iii)(B)
that if FCS determined that the State agency determination that the
claim was past due and legally enforceable was incorrect, FCS would
request that the State agency take appropriate corrective action. This
rule would include these provisions, slightly modified, at
Sec. 273.18(g)(5)(vi)(D), (E) and (F). The rule proposes to specify the
types of documentation FCS would request from State agencies. These
items are consistent with the documentation State agencies would be
required to have in order for a claim to be considered referable for
collection through FTROP. The types of documentation are: printouts of
electronic records and/or copies of claim demand letters, results of
fair hearings, advance notices of disqualification hearings, results of
such hearings, records of payments, 60-day notices, the review requests
and documentation, decision letters, and pertinent records of such
things as telephone conversations.
g. Referral of Claims for Offset. The August 1991 General Notice
required in paragraph g(1) that State agencies comply with FCS
operating guidelines when submitting certified files of claims for tax
offset
s, results of
such hearings, records of payments, 60-day notices, the review requests
and documentation, decision letters, and pertinent records of such
things as telephone conversations.
g. Referral of Claims for Offset. The August 1991 General Notice
required in paragraph g(1) that State agencies comply with FCS
operating guidelines when submitting certified files of claims for tax
offset. As discussed earlier in this preamble, this rule proposes
replacing the requirement for compliance with operating guidelines with
the requirement that State agencies submit data in the format and
schedules provided by FCS. Accordingly, this rule at
Sec. 273.18(g)(5)(vii)(A) would require that State agencies submit
certified files by the date specified by FCS. The August 1991 General
Notice required in paragraph g(2) that, by the date specified in the
FCS guidelines, State agencies certify in writing to FCS that all
claims in the final files of claims meet the requirements for referral
under FTROP, including the issuance of all due-process notifications to
individuals. This rule proposes at Sec. 273.18(g)(5)(vii)(A) to require
this certification letter and statement. The letter and statement are
necessary because the IRS requires that Federal agencies provide the
IRS such letters and statements with their certified files. In
addition, this rule proposes at Sec. 273.18(g)(5)(vii)(A) to require
that the certification letter also state that the State agency has not
included in the certified file of claims any claim which, as provided
in paragraph (g)(5)(vi) of this section, FCS notified the State agency
is not past due or is not legally enforceable, or any claim for which
FCS notified the State agency that it has not completed its review.
As discussed earlier, the rule proposes to require that State
agencies state in the certification letter that their 60-day notice
complies with IRS and FCS requirements
ich, as provided
in paragraph (g)(5)(vi) of this section, FCS notified the State agency
is not past due or is not legally enforceable, or any claim for which
FCS notified the State agency that it has not completed its review.
As discussed earlier, the rule proposes to require that State
agencies state in the certification letter that their 60-day notice
complies with IRS and FCS requirements. State agencies must provide FCS
copies of the formats for these letters as required by current food
stamp regulations requiring submittal to FCS of State agency operating
guidelines and forms. (See 7 CFR 272.3(b)(2).)
The August 1991 General Notice required in paragraph g(3) that
State agencies provide the name, address and telephone number of State
agency contacts to be included in the notices of offset which IRS sends
taxpayers whose refunds have been offset, and also
required that State agencies update that information if and when it
changed. This information is the ``Agency Address File.'' The IRS is
especially concerned that this information be accurate and requires
Federal agencies to specify how they determined that the information
provided for contacts is accurate. This rule proposes at section
273.18(g)(5)(vii)(B) that State agencies provide the contact
information, state in the certification letter how they determined that
the contact information was accurate and update the information as
necessary. The IRS also wants the contact telephone number to be toll-
free or collect, and the rule would make this a requirement.
h. State Agency Actions on Offsets Made. The August 1991 General
Notice required in paragraph h(1) that promptly after receiving notices
of offset from the IRS, State agencies were required to notify
individuals about offsets made and the resulting status of the claim.
The Department required this so that individuals would know the status
of the claim against them
ld make this a requirement.
h. State Agency Actions on Offsets Made. The August 1991 General
Notice required in paragraph h(1) that promptly after receiving notices
of offset from the IRS, State agencies were required to notify
individuals about offsets made and the resulting status of the claim.
The Department required this so that individuals would know the status
of the claim against them. State agencies were also required to
promptly refund any erroneous offsets made and to do so as close in
time as possible to the notice of offset. This rule proposes these same
requirements at Sec. 273.18(g)(5)(viii). In addition, that section
would require that State agencies inform individuals of the amount of
the offset collected to pay the offset fee.
The action group complained that the Department has not offered
procedures to compel a State agency to return funds that have been
wrongfully offset by the IRS. This is incorrect. Current food stamp
regulations at 7 CFR 273.18(i)(4) require that State agencies return
overpayments of claims as soon as possible after such overpayments
become known. To help clarify that the refund procedure for claim
overpayments under FTROP is the same as for other overpayments, the
proposed rule would cite that provision at Sec. 273.18(g)(5)(vii)(B).
In this regard, the action group cited the example of a debtor who has
successfully appealed the referral of a claim which is then erroneously
referred and offset. Should this happen, since the debtor would have
been notified about both the State agency decision and the offset, a
telephone call should be sufficient to bring the error to the State
agency's attention and to obtain a refund of the over collection.
Responsibility for Offset Fees for Erroneous Offsets: In the case
discussed in the preceding paragraph, the claim was referred and offset
because of a State agency error
the debtor would have
been notified about both the State agency decision and the offset, a
telephone call should be sufficient to bring the error to the State
agency's attention and to obtain a refund of the over collection.
Responsibility for Offset Fees for Erroneous Offsets: In the case
discussed in the preceding paragraph, the claim was referred and offset
because of a State agency error. In such cases, the Department believes
that the offset fee should be refunded to the individual and that the
cost of the fee should be considered an allowable administrative
expense of the State agency. Accordingly, this rule proposes at
Sec. 273.18(g)(5)(viii)(C) that if an over collection from an
individual's Federal income tax refund is due to the State agency
including in the certified file of claims required by
Sec. 273.18(g)(5)(vii)(A) a claim which does not meet the criteria
specified in Sec. 273.18(g)(5)(ii), such refund shall include any
amounts collected to pay for the offset fee charged by the IRS. The
section would further specify that the State agency may claim any such
amount as an allowable administrative cost under Part 277 of this
chapter. As a consequence of this provision, State agencies and FCS
would each pay fifty percent of the cost of these offset fees.
Further in regard to refunds of offset fees, under this proposed
rule the 60-day notice would advise individuals that spouses who are
not liable for recipient claims can prevent offsets against their share
of a tax refund by filing the appropriate form with the IRS when they
file their tax return. If they do so and the entire tax refund is
theirs, no offset will occur, and no administrative charge will be
incurred. If the appropriate IRS form is submitted after the tax return
is filed, an offset may occur. If it does, the IRS will refund the
collection to the non-liable spouse, including the administrative
charge. The IRS may refund offsets, including offset fees, to taxpayers
for reasons other than a non-liable spouse
fund is
theirs, no offset will occur, and no administrative charge will be
incurred. If the appropriate IRS form is submitted after the tax return
is filed, an offset may occur. If it does, the IRS will refund the
collection to the non-liable spouse, including the administrative
charge. The IRS may refund offsets, including offset fees, to taxpayers
for reasons other than a non-liable spouse. In all cases of such IRS
refunds, the Department will pay the administrative charge, and the
amount of the claim will be charged to the State agency. Consequently,
this rule also proposes at Sec. 273.18(g)(5)(viii)(C) that State
agencies will not be responsible for refunding the charges for offset
fees incurred for IRS reversals of offsets when, for example, the IRS
refunds amounts offset, including offset fees, to taxpayers who
properly notified the IRS that they are not liable for claims which
were collected in whole or part from their share of a joint Federal
income tax refund. In cases where part of the tax refund due on a joint
tax return is attributable to an individual who is liable for the food
stamp claim, the liable individual's portion would be subject to offset
and the offset fee could be collected from the individual.
i. Monitoring and Reporting Offset Activities. The August 1991
General Notice required in paragraph i. that State agencies monitor
offset activities to accomplish the various requirements of the tax
offset program. Particular emphasis was given to the need for State
agencies to update IRS files by reducing the amounts of claims and
deleting claims to reflect voluntary payments and other events so that
IRS records would reflect the current status of the claim. This rule
proposes to make this a requirement at Sec. 273.18(g)(5)(ix)(A). This
rule also proposes at Sec. 273.18(g)(5)(ix)(B) that State agencies
monitor FTROP activities to assure that refunds of over collections are
made promptly
ucing the amounts of claims and
deleting claims to reflect voluntary payments and other events so that
IRS records would reflect the current status of the claim. This rule
proposes to make this a requirement at Sec. 273.18(g)(5)(ix)(A). This
rule also proposes at Sec. 273.18(g)(5)(ix)(B) that State agencies
monitor FTROP activities to assure that refunds of over collections are
made promptly.
During the test of FTROP State agencies were required to submit a
``management report'' with their certified files. The report provided
data to FCS on such things as numbers of 60-day notices sent and the
volume of informal inquiries. This rule proposes at
Sec. 273.18(g)(5)(ix)(C) to eliminate this report and instead require
that by the tenth of October of the year prior to the offset year State
agencies report in writing to the FCS regional office the number of 60-
day notices mailed and the total dollar value of associated claims. The
Department wants this information as a basis for measuring collections
through both voluntary repayments and offsets.
The rule proposes at Sec. 273.18(g)(5)(ix)(D) that State agencies
report on two matters as required by the IRS. State agencies
participating in the test of FTROP were required to make these reports,
and the information collection burdens associated with both were
included in the burden estimate discussed earlier in this preamble. One
reporting requirement relates to data security as required by the IRS
in its publication Tax Information Security Guidelines for Federal,
State and Local Agencies. Currently two reports are required. One is
the Safeguard Procedures Report, which State agencies are required to
submit in the initial year of their participation. The second is the
Safeguard Activity Report, which all State agencies are required to
submit annually. FCS provides State agencies copies of the IRS
publication just cited and guidance on annual due dates and related
matters. The IRS also requires quarterly reports of voluntary
collections
cedures Report, which State agencies are required to
submit in the initial year of their participation. The second is the
Safeguard Activity Report, which all State agencies are required to
submit annually. FCS provides State agencies copies of the IRS
publication just cited and guidance on annual due dates and related
matters. The IRS also requires quarterly reports of voluntary
collections. The rule would require that State agencies provide that
information as required by FCS. FCS provides State agencies the format
for this report.
During the test State agencies were required to report collections
under FTROP, both voluntary and by actual offset from tax refunds, on
the appropriate Form FCS-209, Status of Claims Against Households. This
rule would include that requirement at Sec. 273.18(g)(5)(ix)(E).

C. Federal Salary Offset

1. Authorities for Salary Offset
The Debt Collection Act of 1982 (Public Law 97-365), amended 5
U.S.C. 5514 to authorize Federal agencies to offset the salaries of
Federal employees who are delinquent on debts owed to the Federal
government. The Office of Personnel Management (OPM) implemented 5
U.S.C. 5514 by promulgating regulations at 5 CFR 550.1101-1108
(Collection by Offset from Indebted Government Employees). Pursuant to
5 U.S.C. 5514(b)(1), the Department promulgated regulations at 7 CFR
3.51 through 3.68 implementing salary offset. Departmental regulations
at 7 CFR 3.68 delegate to individual USDA agencies the authority to act
for the Secretary under those regulations and to issue regulations or
policies not inconsistent with the Departmental regulations and with
the OPM regulations. Section 13941 of the Omnibus Budget Reconciliation
Act of 1993 (Public Law 103-66, signed August 10, 1993) authorizes
disclosure of food stamp casefile information to Federal agencies for
purposes of collecting recipient claims (except those caused by State
agency errors) from Federal salaries
ations or
policies not inconsistent with the Departmental regulations and with
the OPM regulations. Section 13941 of the Omnibus Budget Reconciliation
Act of 1993 (Public Law 103-66, signed August 10, 1993) authorizes
disclosure of food stamp casefile information to Federal agencies for
purposes of collecting recipient claims (except those caused by State
agency errors) from Federal salaries.
A test of salary offset is currently being conducted under a
General Notice published August 29, 1994 at 59 FR 44400. Section
17(b)(1) of the Act (7 U.S.C. 2026(b)(1)) authorizes the Secretary to
conduct such projects to test program changes that might increase the
efficiency of the FSP. The provisions of this proposed rule relative to
salary offset are substantially the same as the provisions of the
August 1994 General Notice on salary offset. The Department intends to
use experience from the test of salary offset as well as comments on
this proposed rule in developing the final salary offset regulations.
Pursuant to Section 13 of the Act (7 U.S.C. 2022), and subject to
the standards of FSP regulations at 7 CFR 273.18, the authority to
settle claims against households has been delegated to State agencies
at 7 CFR 271.4(b). Food stamp coupons issued pursuant to the Act are
deemed to be obligations of the United States (7 U.S.C. 2024(d)). Under
these statutes and regulations, State agencies establish FSP recipient
claims, and collect and maintain records of those claims. State
agencies return amounts collected to the Federal government, less a
statutory ``retention amount'' established to encourage collection of
recipient claims (7 U.S.C. 2025(a)).
This rule proposes to incorporate the requirements of Departmental
regulations on salary offset (7 U.S.C. 3.51 et seq.), and to supplement
and modify these procedures to the extent necessary to accommodate the
position of State agencies as primarily responsible for establishing,
collecting and maintaining records on recipient claims
ncourage collection of
recipient claims (7 U.S.C. 2025(a)).
This rule proposes to incorporate the requirements of Departmental
regulations on salary offset (7 U.S.C. 3.51 et seq.), and to supplement
and modify these procedures to the extent necessary to accommodate the
position of State agencies as primarily responsible for establishing,
collecting and maintaining records on recipient claims. These additions
and modifications are consistent with OPM regulations on salary offset.
2. Overview of Salary Offset Procedures for the FSP
Under this proposed rule, salary offset would have three phases and
be operated on an annual cycle. In the first phase, FSP recipient
claims would be matched against records of all active Federal civilian
and military employees, including United States Postal Service (USPS)
employees. The recipient claims so matched would be compiled from lists
of recipient claims provided by State agencies as part of FTROP
procedures. The Federal employee records are maintained by the
Department of Defense (DoD) and the USPS. The match would identify
Federal employees and their employing agencies, and would provide
employee and employing agency addresses to FCS. This match would be
conducted in accordance with the Privacy Act of 1974, as amended (5
U.S.C. 552a). As required by that statute, the public has been advised
of this matching program by the publication of three General Notices. A
General Notice was published September 17, 1993 at 58 FR 48633 advising
the public of the systems of records involved. A second General Notice
was published March 1, 1994 at 59 FR 9733 advising the public of the
match with DoD. A third General Notice was published August 17, 1994 at
59 FR 42205 advising the public about the match with the USPS.
Recipient claims which these matches identify as obligations of Federal
employees will not be referred to the IRS for collection through FTROP
ems of records involved. A second General Notice
was published March 1, 1994 at 59 FR 9733 advising the public of the
match with DoD. A third General Notice was published August 17, 1994 at
59 FR 42205 advising the public about the match with the USPS.
Recipient claims which these matches identify as obligations of Federal
employees will not be referred to the IRS for collection through FTROP.
During the

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Source: Frix Law Library, https://www.frixlaw.com/law-library/statutes/FR_PRORULE_95-15887. Check the current official text before relying on it. Not legal advice.