Final Regs Issued on Tax Refund Offset Program

 [4830-01]

 ACTION: Final regulations.

 SUMMARY: This document contains final regulations under section 6402(d), which permits the Service to reduce the amount of any overpayment payable to a taxpayer by the amount of a past-due, legally enforceable debt owed to any Federal agency, and under section 6402(e), which limits the review of such reductions. Changes to the applicable law were made by the Deficit Reduction Act of 1984. The regulations affect taxpayers who owe such debts and Federal agencies to which such debts are owed.

 EFFECTIVE DATE: These regulations are effective after April 15, 1992.

 FOR FURTHER INFORMATION CONTACT: Rochelle L. Pickard of the Office of the Assistant Chief Counsel (Income Tax and Accounting), Internal Revenue Service, 1111 Constitution Avenue, N.W., Washington, D.C. 20224 (Attention: CC:CORP:T) (202-566-3637, not a toll-free call).

SUPPLEMENTARY INFORMATION: This document contains final regulations amending the procedure and Administration Regulations (26 CFR part 301), to provide rules under section 6402(d) and (e) of the Internal Revenue Code of 1986 (the "Code"), relating to the authority to make credits or refunds.

 Section 2653 of the Deficit Reduction Act of 1984 (Pub. L. No. 98-369, 98 Stat. 494, 1153) enacted section 3720A of subchapter II of chapter 37 of Title 31, United States Code, relating to the reduction of a tax refund by the amount of a past-due, legally enforceable debt owed to a Federal agency, and amended section 6402(d) and (e), relating to the authority to make credits and refunds, and section 6103, relating to confidentiality and disclosure of returns and information.

 Section 2653 of the Deficit Reduction Act was amended by section 9402 of the Omnibus Budget Reconciliation Act of 1987 (Pub. L. No. 100-203, 101 Stat. 1330-1, 1330-376) (extending effective date); section 701 of the Family Support Act of 1988 (Pub. L. No. 100-485, 102 Stat. 2343, 2425) (further extending effective date); section 5129 of the Omnibus Budget Reconciliation Act of 1990 (Pub. L. No. 101-508, 104 Stat. 1388, 1388-287) (permitting reduction of tax refund to collect OASDI overpayments); and section 401 of the Emergency Unemployment Compensation Act of 1991 (Pub. L. No. 105 Stat. 1049, 1061) (making permanent the provisions for the reduction of tax refunds to collect nontax federal debts).

 On September 30, 1985, the Internal Revenue Service published in the Federal Register a notice of proposed rulemaking (50 FR 39713) by cross reference to temporary regulations published the same day in the Federal Register (50 FR 39661) under Code section 6402(d) and (e). Amendments to the notice of proposed rulemaking and temporary regulations were published in the Federal Register on May 13, 1987, and January 6, 1989, by notices of proposed rulemaking (52 FR 17989 and 54 FR 428) by cross reference to temporary regulations published the same days in the Federal Register (52 FR 17949 and 54 FR 400). The preambles of the temporary regulations contain an explanation of the temporary and proposed rules. After consideration of public comments, the proposed regulations are adopted as revised by this Treasury decision.

EXPLANATION OF STATUTORY PROVISIONS

 Code section 6402(d)(1) provides that the Secretary of the Treasury shall (1) reduce an overpayment due any person by the amount of a past-due, legally enforceable debt owed to any Federal agency upon receiving notice from a Federal agency that such person owes the debt and (2) pay the reduction to the Federal agency. The Service must notify the person making the overpayment that the overpayment has been reduced to satisfy such debt.

 Code section 6402(d)(2) provides the priorities for offset. Section 6402(d)(3) provides special rules for offset to collect OASDI overpayments. OASDI overpayments are overpayments of benefits made to an individual under title II of the Social Security Act.

 Code section 6402(e) provides that no court of the United States shall have jurisdiction to hear any action, whether legal or equitable, brought to restrain or review a reduction of an overpayment authorized under section 6402(d). No reduction of an overpayment under section 6402(d) shall be subject to review by the Secretary of the Treasury in an administrative proceeding. In addition, no action brought against the United States to recover the amount of such reduction shall be considered a suit for refund of tax. Section 6402(e) does not preclude any legal, equitable, or administrative action against any Federal agency to which the amount of such reduction was paid or any such action against the Secretary of Health and Human Services which is otherwise available with respect to recoveries of OASDI overpayments.

 Code section 6103(l)(10) permits the disclosure of certain information to Federal agencies requesting a reduction of an overpayment of tax under section 6402(d).

 Section 3720A(a) of title 31 of the United States Code instructs Federal agencies to notify the Secretary of the Treasury of persons owing past-due, legally enforceable debts to the agencies.

 Section 3720A(b) of title 31 of the United States Code provides certain eligibility requirements that a Federal agency must meet before debts may be referred to the Service for offset. First, the Federal agency must notify the taxpayer that the debt will be referred to the Service for refund offset. Second, the Federal agency must give the taxpayer 60 days to present evidence that the debt is not past-due or not legally enforceable. Third, the Federal agency must consider such evidence and determine that an amount of the debt is past-due and legally enforceable. Fourth, a Federal agency must satisfy certain other conditions prescribed by the Secretary to ensure that the agency's determination is valid and that the agency has made a reasonable effort to collect the debt prior to notifying the Secretary.

 Section 3720A(c) of title 31 of the United States Code provides rules for the Secretary of the Treasury to follow after he or she is notified by a Federal agency that a person owes the agency a past- due, legally enforceable debt. First, the Secretary must determine whether the taxpayer is due a refund. Second, the Secretary must reduce the refund by the amount of the debt and pay the amount of the reduction to the Federal agency. Finally, the Secretary must notify the agency of the taxpayer's home address so that the agency can notify the taxpayer of the intended offset.

 Section 3720A(d) of title 31 of the United States Code provides that the Secretary of the Treasury shall issue regulations prescribing (1) the time and manner in which Federal agencies must notify the Secretary that a person owes a past-due, legally enforceable debt, (2) the minimum amount of debt that may be referred for offset, and (3) fee requirements to reimburse the Department of the Treasury for costs attributable to these procedures.

 Section 3720A(e) of title 31 of the United States Code provides rules to correct erroneous payments made to an agency.

 Section 3720A(f) of title 31 of the United States Code provides special rules for the recovery from individuals of overpayments of OASDI benefits.

RESPONSE TO PUBLIC COMMENTS

 Section 301.6402-6T(a)(2) of the temporary regulations provides that, for purposes of the pilot program to reduce tax refunds to collect nontax debts owed to Federal agencies (the "program"), the Commissioner will identify those Federal agencies eligible to enter the program. Two commentators questioned whether the Commissioner should identify eligible agencies.

 This issue is no longer relevant as a result of the Omnibus Budget Reconciliation Act of 1987. Section 9402(b)(2) of the Omnibus Budget Reconciliation Act of 1987 specifically extends the program to all agencies. Therefore, it is now unnecessary to identify eligible agencies. If a Federal agency meets the requirements of section 301.6402-6(b) of the final regulations, the agency may participate in the program.

 Section 301.6402-6T(b)(2) of the temporary regulations prohibits reduction of a refund for debts that have been delinquent for more than ten years. Two commentators recommended removing this ten-year limitation from the final regulations, reasoning that such a change would resolve the conflict among the Federal circuit courts regarding the meaning of "delinquent."

 The final regulations do not remove the ten-year limitation. The Service and the Treasury believe that tax administration is best served by retention of a definite statute of limitations. However, section 301.6402-6(c)(1) of the final regulations clarifies that the ten-year limitation begins to run when the Federal agency's right of action with regard to the debt accrues.

 The final regulations remove the three-month minimum delinquency period contained in section 301.6402-6T(b)(2) of the temporary regulations. This minimum delinquency period is unnecessary in light of section 301.6402-6(c) of the final regulations, relating to the eligibility of a debt for offset. This section ensures that the debt will be delinquent for at least three months before the debt is referred for offset. First, this section requires that the taxpayer be given at least 60 days to present evidence to the agency that all or part of the debt is not past-due or is not legally enforceable. Second, section 301.6402-6(c)(2), (3), and (5) requires that a Federal agency must attempt to collect the debt by using salary and administrative offset and reporting to a consumer reporting agency before referring the debt to the Service for offset.

 Three commentators opposed the eligibility requirements contained in section 301.6402-6T(b)(1), (3), (4), and (6) of the temporary regulations. Under these requirements, Federal agencies must attempt to collect the debt using salary and administrative offset and reporting to a consumer reporting agency prior to referring the debt for offset. These requirements have not been deleted. Salary and administrative offset and consumer reporting agency requirements contained in the temporary and final regulations ensure that the agency has made reasonable efforts to obtain payment of a debt prior to referring such debt to the Service for offset.

 As a related issue, it was suggested that the Service grant waivers of these requirements in certain instances. Generally, waiving eligibility requirements is burdensome to administer and may lead to uncertainty. However, the regulations provide for waivers if an agency is specifically prohibited by law from complying with certain regulatory requirements. Section 301.6402-6(b)(2) of the final regulations sets forth procedures under which a Federal agency may request a waiver because of statutory prohibitionS on debt collection practices. To receive a waiver, the final regulations require the Federal agency to notify the Service, in writing, of the statutory prohibition. The Service will then determine, also in writing, whether the agency is prohibited by statute from meeting any of the requirements contained in the regulations.

 One commentator questioned whether the program will include corporate debtors. Section 9402(b)(1) of the Omnibus Reconciliation Act of 1987 specifically states that the program may be applied to corporations or any other category of persons. Therefore, the final regulations are drafted to apply to individuals, corporations, and other taxpayers equally (except provisions relating to OASDI overpayments and joint returns which by their terms apply only to individuals).

 One commentator asked whether the final regulations should specifically require that eligible debts be "federal debts." specific reference to "federal debts" is unnecessary. Section 6402(d) of the Code authorizes tax refund offset for debts owed to Federal agencies. Because the final regulations are published under section 6402(d), the requirement that the debt must be owed to a Federal agency is implicit in the final regulations.

 The flush language of section 301.6402-6T(b) of the temporary regulations requires a Federal agency to send the 60-day notice to the address obtained from the Service pursuant to section 6103(m)(2), (4), or (5) of the Code. Two commentators requested clarification regarding whether the agency may use a more current address than the address provided by the Service. After consideration of this comment, the Service has determined that requiring Federal agencies to use the address obtained from the Service pursuant to section 6103(m) (2), (4), or (5) of the Code is too restrictive.

 Section 301.6402-6(d)(2) of the final regulations requires a Federal agency to use the most recent address obtained from the Service pursuant to section 6103(m)(2), (4), or (5), unless the Federal 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 Service. Clear and concise notification means that the taxpayer has provided the Federal agency with written notification including the taxpayer's name and identifying number (as defined in section 6109), the taxpayer1s new address, and the taxpayer's intent to have notices from the Federal agency sent to the new address.

 As a related issue, these commentators recommended allowing Federal agencies to use an address obtained from the Service within one year of mailing the notice to the taxpayer. The Service and the Treasury are concerned that this rule may not adequately protect taxpayers' interests in receiving notices. Therefore, the final regulations do not adopt this change.

 One commentator recommended that the final regulations allow the Commissioner to suspend, cancel, or renegotiate participation in the program for the following reasons: (1) validity and enforceability of the debts referred by the Federal agency for offset were successfully challenged or conceded as incorrectly determined by the agency; (2) on the basis of proceedings brought to recover offset amounts, a significant number of debts referred to the Service were incorrect in spite of apparently correct agency procedures; or (3) the Federal agency has not observed the restrictions on access to and use of confidential tax information.

 The Memorandum of Understanding between the participating Federal agencies, the Service, and the Federal Management Service currently allows the Commissioner to suspend, cancel, or renegotiate participation in the program in the interest of sound tax administration. Because this agreement is the best vehicle to address these concerns, the final regulations do not contain such a provision.

 Section 301.6402-6T(c) of the temporary regulations provides specific rules for the transmission of information to the Service on magnetic tape in the time and manner prescribed by a revenue procedure each year. In addition, section 301.6402-6T(f) provides that the Service will inform the agency of offsets on a monthly basis. Currently, Federal agencies transmit information both on magnetic tape and via electronic transfer, and the Service provides reports to the agencies weekly.

 One commentator suggested that the final regulations conform with these current practices. However, such an approach would require amending the final regulations each time an informal procedural practice develops. Technology for transferring information is constantly improving and changing. If the final regulations specify the method of transferring information and the time in which such information is to be transferred, the final regulations will become obsolete each time program technology is improved. Therefore, procedural time and manner requirements are eliminated from the final regulations.

 In addition, procedures relating solely to matters of internal management are not published; however, statements of internal practices and procedures that affect the rights and duties of taxpayers are published. Mere time and manner requirements (such as computer coding and dates for submission of computer tapes) for Federal agencies to transfer information to the Service are not practices and procedures that affect the rights and duties of taxpayers. Therefore, the final regulations eliminate the requirement that such time and manner requirements be published yearly in a revenue procedure.

 Under section 301.6402-6T(b)(8) of the temporary regulations, a debt must be at least $25 to be eligible for offset, and under section 301.6402-6T(b)(6) a debt is not required to be reported to a consumer reporting agency if it does not exceed $100. One commentator asked whether the threshold for referring a debt for offset should be the same as the threshold for referring a debt to a consumer reporting agency. The final regulations do not change these threshold amounts. There is no need to use the same threshold for these different purposes.

 One commentator asked whether the final regulations should require a pre-deprivation notice and opportunity to present evidence. These requirements are already included in section 301.6402-6T(b) of the temporary regulations, which requires the Federal agency to allow the taxpayer at least 60 days to present evidence that the debt is not past-due or is not legally enforceable. This section also requires that the agency consider the evidence presented by the taxpayer.

 Section 301.6402-6(c) of the final regulations also requires a pre-deprivation notice and opportunity to present evidence. In addition, section 301.6402-6(d) clarifies the requirements for adequate notice and includes special protections for tax refund offset to collect overpayments of OASDI benefits from individuals.

 One commentator asked whether all participating Federal agencies should be listed in the regulation. The list of participating agencies is constantly expanding. If such a list of participating agencies were included in the final regulations, the regulations would have to be amended each time a new agency joined the program. Therefore, the final regulations do not include a list of all participating agencies.

 Section 301.6402-6T(b) of the temporary regulations provides that, among other things, a debt will be eligible for offset if it is legally enforceable. "Legally enforceable" was not defined in the temporary regulations. One commentator asked that the term "legally enforceable" be defined in the final regulations.

 Section 301.6402-6(c) of the final regulations provides that a Federal agency may only refer a debt for refund offset if, among other things, the debt is legally enforceable. Section 301.6402-6(c)(4) and (d)(1) requires that the agency consider evidence that the debt is not past-due or legally enforceable. Section 6402(e) of the Code provides that any legal, equitable, or administrative action challenging the reduction of the overpayment must be brought against the Federal agency to which the reduction was paid. Therefore, prior to referring the debt to the Service for refund offset, a Federal agency must determine whether the debt is "legally enforceable." The taxpayer may challenge a Federal agency's determination that the debt is legally enforceable either in an administrative proceeding provided by the Federal agency referring the debt to the Service for refund offset or in a legal or equitable action against the Federal agency.

 The time at which a debt becomes legally enforceable is generally the time at which a right of action to collect the debt "accrues." The time at which a right of action to collect the debt accrues is a matter of Federal, state, and local law. The Service is unable to determine when the right of action for a particular debt accrues and, therefore, when the debt becomes legally enforceable. Only the Federal agency referring the debt for refund offset is in a position to determine when its right of action to collect a particular debt accrues. Therefore, the final regulations do not define when a debt becomes legally enforceable.

SPECIAL ANALYSES

 It has been determined that these regulations are not major rules as defined in Executive Order 12291. Therefore, a Regulatory Impact Analysis is not required. It has also been determined that section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) and the Regulatory Flexibility Act (5 U.S.C. chapter 6) do not apply to these regulations, and, therefore, a final Regulatory Flexibility Analysis is not required. Pursuant to section 7805(f) of the Internal Revenue Code, notice of proposed rulemaking for the regulation that was issued January 6, 1989, was submitted to the Administrator of the Small Business Administration for comment on their impact on small business.

DRAFTING INFORMATION

 The principal author of these final regulations is Rochelle L. Pickard of the Office of the Assistant Chief Counsel (Income Tax and Accounting), Internal Revenue Service. Personnel from other offices of the Internal Revenue Service and the Treasury Department participated in developing the regulations on matters of both substance and style.

LIST OF SUBJECTS

26 CFR Part 301

 Administrative practice and procedure, Alimony, Bankruptcy, Child support, Continental shelf, Courts, Crime, Employment taxes, Estate taxes, Excise taxes, Gift taxes, Income taxes, Investigations, Law enforcement, Oil pollution, Penalties, Pensions, Reporting and recordkeeping requirements, Statistics, Taxes.

Treasury Decision 8413

ADOPTION OF AMENDMENTS

Accordingly, 26 CFR part 301 is amended as follows:

Part 301 -- PROCEDURE AND ADMINISTRATION

Paragraph 1. The authority citation for part 301 continues to read in part:

Authority: 68A Stat. 917; 26 U.S.C. 7805 * * *

Par. 2. Section 301.6402-6 is added to read as follows:

SECTION 301.6402-6 OFFSET OF PAST-DUE, LEGALLY ENFORCEABLE DEBT AGAINST OVERPAYMENT.

(a) GENERAL RULE. (1) A Federal agency (as defined in section 6402(f)) that has entered into an agreement with the Internal Revenue Service with regard to its participation in the tax refund offset program and that is owed a past-due, legally enforceable debt may refer the past-due, legally enforceable debt to the Internal Revenue Service to be collected by Federal tax refund offset. The Service shall, after making appropriate credits as provided by section 301.6402-3(a)(6)(i) and (ii), reduce the amount of any overpayment payable to a taxpayer by the amount of any past-due, legally enforceable debt owed to the agency and properly referred to the Service. This section does not apply to any debt subject to section 464 of the Social Security Act (past-due support).

(2)(i) This section applies to OASDI overpayments provided the requirements of 31 U.S.C. 3720A(f)(1) and (2) are met with respect to such overpayments.

(ii) For purposes of this section, "OASDI overpayment" means any overpayment of benefits made to an individual under title II of the Social Security Act.

(b) ELIGIBLE FEDERAL AGENCIES. (1) A Federal agency is eligible to participate in the tax refund offset program if the agency --

(i) Has promulgated temporary or final regulations under 31 U.S.C. 3720A, governing the operation of the Federal tax refund offset program in the agency;

(ii) Has promulgated temporary or final regulations under 31 U.S.C. 3716, governing the operation of the administrative offset program in the agency; and

(iii) Has promulgated temporary or final regulations under 5 U.S.C. 5514(a), governing the operation of the salary offset program in the agency (unless the agency has certified that, relying on the most current information reasonably available, it will not refer to the Service any names of present or former Federal employees or other persons whose debts are subject to offset under the provisions of 5 U.S.C. 5514(a)(1)).

(2) An agency prohibited by Federal law from meeting any of the requirements of paragraph (b)(1) or (c) of this section shall notify the Service in writing of the specific legal impediment to meeting these requirements. This notification shall be made prior to entering into an agreement with the Service to participate in the tax refund offset program. The Service will determine in writing whether the agency is prohibited by Federal law from meeting any of the requirements of paragraph (b)(1) or (c) of this section. The Service will waive in writing any requirement that it determines the agency is prohibited by Federal law from meeting.

(c) PAST-DUE, LEGALLY ENFORCEABLE DEBT ELIGIBLE FOR REFUND OFFSET. For purposes of this section, a Federal agency may refer a past-due, legally enforceable debt to the Service for offset if --

(1) Except in the case of a judgment debt or any debts specifically exempt from this requirement (for example, debts referred by the Department of Education that were pending on or after April 9, 1991, and referred to the Service for offset before November 15, 1992), the debt is referred for offset within ten years after the agency's right of action accrues;

(2) The debt cannot be currently collected pursuant to the salary offset provisions of 5 U.S.C. 5514(a)(1);

(3) The debt is ineligible for administrative offset under 31 U.S.C. 3716(a) by reason of 31 U.S.C. 3716(c)(2), or cannot be currently collected by administrative offset under 31 U.S.C. 3716(a) by the referring agency against amounts payable to the taxpayer by the referring agency;

(4) The agency has notified, or has made a reasonable attempt to notify, the taxpayer that the debt is past-due, and unless repaid within 60 days thereafter, will be referred to the Service for offset against an overpayment of tax;

(5) The agency has given the taxpayer at least 60 days to present evidence that all or part of the debt is not past-due or legally enforceable, has considered any evidence presented by the taxpayer, and has determined that the debt is past-due and legally enforceable;

(6) The debt has been disclosed by the agency to a consumer reporting agency as authorized by 31 U.S.C. 3711(f), unless the consumer reporting agency would be prohibited from reporting information concerning the debt by reason of 15 U.S.C. 1681c, or unless the amount of the debt does not exceed $100;

(7) The debt is at least $25; and

(8) In the case of an OASDI overpayment --

(i) The individual is not currently entitled to monthly insurance benefits under title II of the Social Security Act;

(ii) The notice describes conditions under which the Department of Health and Human Services is required to waive recovery of the overpayment, as provided under section 204(b) of the Social Security Act; and

(iii) If the taxpayer files for a waiver under section 204(b) of the Social Security Act within the 60-day notice period, the agency has considered the taxpayer's request.

(d) PRE-OFFSET NOTICE AND CONSIDERATION OF EVIDENCE. (1) For purposes of paragraph (c)(4) of this section, an agency has made a reasonable attempt to notify the taxpayer if the agency uses the most recent address information obtained from the Service pursuant to section 6103(m)(2), (4), or (5) of the Code, unless the 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 Service. Clear and concise notification means that the taxpayer has provided the agency with written notification including the taxpayer's name and identifying number (as defined in section 6109), the taxpayer's new address, and the taxpayer's intent to have agency notices sent to the new address.

(2) For purposes of paragraph (c)(5) of this section, if the evidence presented by the taxpayer is considered by an agent of the agency, or other entities or persons acting on the agency's behalf, the taxpayer must be accorded at least 30 days from the date the agent or other entity or person determines that all or part of the debt is past-due and legally enforceable to request review by an officer or employee of the agency of any unresolved dispute. The agency must then notify the taxpayer of its decision.

(e) REFERRAL OF PAST-DUE, LEGALLY ENFORCEABLE DEBT. A Federal agency must refer a past-due, legally enforceable debt to the Service in the time and manner prescribed by the Service. The referral must contain --

(1) The name and identifying number (as defined in section 6109) of the taxpayer who is responsible for the debt;

(2) The amount of such past-due and legally enforceable debt;

(3) The date on which the debt became past-due;

(4) The designation of the Federal agency or subagency referring the debt; and

(5) In the case of an OASDI overpayment, a certification by the Secretary of Health and Human Services designating whether the amount payable to the agency is to be deposited in either the Federal Old- Age and Survivors Insurance Trust Fund or the Federal Disability Insurance Trust Fund, but not both.

(f) CORRECTION OF REFERRAL. If, after referring a past-due, legally enforceable debt to the Service as provided by paragraph (e) of this section, an agency determines that an error has been made with respect to the information transmitted to the Service, or if an agency receives a payment or credits a payment to the account of a taxpayer referred to the Service for offset, the agency shall promptly notify the Service. The Service shall make the appropriate correction of its records. However, this paragraph (f) does not permit an agency to increase the amount of a past-due, legally enforceable debt or refer additional debtors to the Service for offset after an agency makes its original referral of debts for tax refund offset. The agency may refer additional debts to the Service for refund offset in subsequent tax refund offset years.

(g) PRIORITIES FOR OFFSET. (1) An overpayment shall be reduced first by the amount of an outstanding liability for any tax under section 6402(a); second, by the amount of any past-due support assigned to a State under section 402(a)(26) or section 471(a)(17) of the Social Security Act which is to be offset under section 6402(c) and the regulations thereunder; third, by the amount of any past-due, legally enforceable debt owed to a Federal agency under section 6402(d) and this section; and fourth, by the amount of any qualifying past-due support not assigned to a State which is to be offset under section 6402(c) and the regulations thereunder.

(2) If a taxpayer owes more than one past-due, legally enforceable debt to a Federal agency or agencies, the overpayment shall be credited against the debts in the order in which the debts accrued. A debt shall be considered to have accrued at the time at which the agency determines that the debt became past due.

(3) Reduction of the overpayment pursuant to section 6402(a), (c), and (d) shall occur prior to crediting the overpayment to any future liability for an internal revenue tax. Any amount remaining after offset under section 6402(a), (c), and (d) shall be refunded to the taxpayer, or applied to estimated tax, if elected by the taxpayer.

(h) POST-OFFSET NOTICE TO THE TAXPAYER AND THE AGENCY. (1) The Service shall notify the taxpayer in writing of the amount and date of the offset for a past-due, legally enforceable debt and of the Federal agency to which this amount has been paid or credited. For joint returns, see paragraph (i) of this section.

(2) The Service shall advise each agency of the names, mailing addresses, and identifying numbers of the taxpayers from whom amounts of past-due, legally enforceable debt were collected and of the amounts collected from each taxpayer. If the refund from which an amount of past-due, legally enforceable debt is to be withheld is based upon a joint return, the Service shall notify the agency and furnish the names and addresses of each taxpayer filing the joint return.

(i) OFFSET MADE WITH REGARD TO REFUND BASED UPON JOINT RETURN. (1) In the case of an offset from a refund based on a joint return, the Service shall issue a notice in writing to any person who may have filed a joint return with the taxpayer, including the amount and date of any offset and the steps which the non-debtor spouse may take in order to secure his or her proper share of the refund (unless the non-debtor spouse has already taken these steps prior to offset).

(2) If the person filing the joint return with the taxpayer owing the past-due, legally enforceable debt takes appropriate action to secure his or her proper share of a refund from which an offset was made, the Service shall pay the person his or her share of the refund and shall deduct that amount from amounts payable to the agency.

(j) DISPOSITION OF AMOUNTS COLLECTED. Amounts collected under this section shall be transferred to a special account maintained by the Financial Management Service (FMS) for each Federal agency. If an erroneous payment is made to any agency, the Service shall deduct the amount of such payment from amounts payable to the agency.

(k) FEES. The agency shall enter into a separate agreement with the Service and FMS to reimburse the Service and FMS for the full cost of administering the tax refund offset program. The fees shall be deducted from amounts collected prior to disposition. The fees shall be deposited in the United States Treasury and credited to the appropriation accounts which bore all or part of the costs involved in administering the refund offset procedures.

(l) REVIEW OF OFFSET OF REFUNDS. Any reduction of a taxpayer's refund made pursuant to section 6402(c) or (d) shall not be subject to review by any court of the United States or by the Service in an administrative proceeding. No action brought against the United States to recover the amount of this reduction shall be considered to be a suit for refund of tax. Any legal, equitable, or administrative action by any person seeking to recover the amount of the reduction of the overpayment must be taken against the Federal agency to which the amount of the reduction was paid. Any action which is otherwise available with respect to recoveries of overpayments of benefits under section 204 of the Social Security Act must be taken against the Secretary of Health and Human Services.

(m) ACCESS TO AND USE OF CONFIDENTIAL TAX INFORMATION. Access to and use of confidential tax information in connection with the tax refund offset program are restricted by section 6103 of the Code. However, section 6103(l)(10) permits Federal officers and employees of agencies participating in the tax refund offset program to have access to and use of confidential tax information. Agencies receiving such information are subject to the safeguard, recordkeeping, and reporting requirements of section 6103(p)(4) and the regulations thereunder. The agency shall inform its officers and employees who access or use confidential tax information of the restrictions and penalties under the Internal Revenue Code for misuse of confidential tax information.

(n) EFFECTIVE DATE. This section applies to refunds payable under section 6402 of the Internal Revenue Code after April 15, 1992.