§ 30.21 Army hold-up list. The Secretary may use the Army hold-up list to report indebted contractors to the Department of the Army for inclusion in the list and to check whether a prospective contractor is indebted to another agency. The reported information will be limited to the contractor's name, address and taxpayer identification number if available, and the amount of the debt. The Secretary will promptly report any partial or full satisfaction or waiver of a reported debt and will screen the hold-up list periodically and request removal of any debt of less than $1,000 that has been on the list for over twelve months. Subpart C-Compromise of Claims § 30.22 Compromise rule. The Secretary may attempt to dispose of debts, including accrued interest, charges and penalties, by compromise settlement whenever the Department's ability to collect the full amount is uncertain because of the debtor's financial status or the litigation risks or because enforced collection would not be cost-effective. When the outstanding principal amount of the debt before compromise exceeds $20,000 and the debtor has exhausted all Departmental administrative remedies, the debt may be compromised only with the approval of the Department of Justice. § 30.23 Exceptions. The Secretary may not compromise debts (a) Which arise out of exceptions made by the General Accounting Office in the accounts of accountable officers (only the General Accounting Office has authority to compromise such debts); or (b) Where there is an indication of fraud, the presentation of a false claim or misrepresentation by the debtor or any other party having an interest in the claim, or where the claim is based on conduct in violation of antitrust laws. (Only the Department of Justice has authority to compromise or terminate collection of these claims.) § 30.24 Inability to collect the full amount. (a) The Secretary may compromise a debt if the full amount cannot be collected because the debtor (1) Is unable to pay the full amount within a reasonable time; or (2) Refuses to pay the full amount and the Government is unable to enforce full collection within a reasonable time. (b) Ability to pay. In determining a debtor's ability to pay, the Secretary may consider the age and health of the individual debtor; present and future income and assets; and the possibility of an improper transfer or concealment of assets by the debtor. The (c) Amount of compromise. amount of compromise will reasonably relate to the amount recoverable by enforced action, considering such factors as State or Federal exemptions available to the debtor, and the price that collateral will bring at a forced sale. (d) Installments. Compromises will be paid in one lump sum whenever possible. Payment by installments may be accepted on a case-by-case basis bearing in mind the conditions specified in § 30.20. (e) Credit information. If reasonably up-to-date credit information to evaluate a compromise proposal is not available, the Secretary may obtain credit reports from credit reporting agencies or a statement from the debtor executed under penalty of perjury showing the debtor's assets and liabilities, income and expenses. § 30.25 Litigative probabilities. The Secretary may compromise a debt if the Government's ability to prove its case in court for the full amount claimed is doubtful either because of the legal issues involved or a bona fide dispute as to the facts. The amount accepted in compromise in such cases should fairly reflect the probability of prevailing on the issues and the prospects for full or partial recovery of a judgment, paying due regard to the availability of evidence and witnesses, and related pragmatic considerations. § 30.26 Cost of collecting claim. The Secretary may compromise a debt if the cost or deterrence value of collection do not justify the enforced collection of the full amount. The amount accepted in compromise in such cases may reflect an appropriate discount for the administrative and litigative costs of collection, taking into account the time which it will take to effect collection. Costs of collection may be a substantial factor in the settlement of small debts, but not normally in the settlement of large debts. 8 30.27 Enforcement policy. Statutory penalties, forfeitures, or debts established as an aid to enforcement and to compel compliance may be compromised if not prohibited by law and consistent with the agency's enforcement policy. §30.28 Joint and several liability. When two or more debtors are jointly and severally liable, a compromise with one debtor will not release the remaining debtors. The amount of a compromise with one debtor will not be considered a precedent or binding in determining the amount which will be required from other debtors jointly and severally liable on the debt. § 30.29 Further review of compromise offers. A debtor's firm written offer of compromise for a substantial amount may be referred to the General Accounting Office or to the Department of Justice when the acceptability of the offer is in doubt. (See 30.36). 830.30 Restriction. The Secretary may not accept a percentage of a debtor's profits or stock in a debtor corporation in compromise of a debt. Subpart D-Termination or § 30.31 Termination rule. (a) The Secretary may terminate collection activity and write off a debt, including accrued interest, charges and penalties if the outstanding principal does not exceed $20,000 and: (1) The Government cannot collect or enforce collection of any significant sum from the debtor, having due regard for the judicial remedies available to the Government, the debtor's ability to pay (see § 30.25(b)) and the exemptions available to the debtor under State and Federal law; (2) The debtor cannot be located, there is no security remaining to be liquidated, the applicable statute of limitations has run, and the prospects of collecting by offset are too remote to justify retention of the claim; (3) The cost of further collection action is likely to exceed the recoverable amount; (4) The basis for the claim has proved to be unsupportable; or (5) The evidence necessary to prove the claim cannot be produced or the necessary witnesses are unavailable. (b) As required by section 61(a)(2) of the Internal Revenue Code, income arising from the discharge in whole or in part of a debt is to be included in the debtor's gross income for the year in which the debt is discharged. The Secretary will report to the Internal Revenue Service, using Form 1099G, any amount over $600 which becomes uncollectible because the applicable statute of limitations expires or because the Government agrees with the debtor to forgive or compromise a debt. An amount which is in dispute, which is discharged under Title 11 of the Bankruptcy Act or which arises out of an overpayment which was already taxed, will not be reported. See IRS Instructions for Form 1096 and Revenue Procedure 83-48 for further instructions. § 30.32 Exceptions. (a) The Secretary may suspend, rather than terminate collection of a debt that arises out of its activities if the outstanding principal does not exceed $20,000 and the Government cannot collect or enforce collection of any significant sum from the debtor (e.g., the debtor cannot be located or is financially unable to pay), but the prospects of future collection are promising enough to justify periodic review of the debt, and there is no statute of limitations problem. Interest will accrue under § 30.13(a). (b) Where a significant enforcement policy is involved, the Secretary will, instead of terminating or suspending collection, refer debts to the Department of Justice for litigation. Subpart E-Referrals to the Department of Justice or GAO § 30.33 Litigation. (a) Debts over $600 that cannot be collected or otherwise disposed of by the Secretary or its agents will be referred to the appropriate United States Attorney (if the amount does not exceed $100,000) or the Civil Division of the Department of Justice (if the amount exceeds $100,000) for litigation. Each referral will include all pertinent information, as required by the Claims Collection Litigation Report, including: (1) The most current address of the debtor or the name and address of the agent for a corporation upon whom service may be made; (2) Reasonably current credit data in the form of a credit report or a financial statement showing reasonable prospects of enforcing collection from the debtor, having due regard for the exemptions available to the debtor under State and Federal law and the judicial remedies available to the Government; and (3) A summary of prior collection efforts. Credit data may be omitted if a surety bond, insurance, or the sale of collateral will satisfy the claim in full; or the debtor is in bankruptcy or receivership, or is a unit of State or local government. (b) Debts of $600 or less, exclusive of interest and charges, may be referred for litigation if a significant enforcement policy is involved or the debtor is clearly able to pay and the Government can effectively enforce payment. § 30.34 Claims over $20,000. The Secretary may compromise or suspend or terminate collection of debts where the outstanding principal exceeds $20,000 only with the approval of, or referral to, the appropriate United States Attorney (if the debt does not exceed $100,000) or the De partment of Justice (if the debt exceeds $100,000). § 30.35 GAO exceptions. The Secretary will refer to the General Accounting Office (GAO) debts arising from GAO audit exceptions. PART 31-REFERRAL OF DEBT TO IRS FOR TAX REFUND OFFSET Sec. 31.1 Scope. 31.2 Notice of requirements before offset. 31.3 Review within the Department of a determination that an amount is past due and legally enforceable. 31.4 Determination of the hearing officer. 31.5 Review of departmental records related to the debt. 31.6 Stay of offset. 31.7 Application of offset funds: Single debt. 31.8 Application of offset funds: Multiple debts. 31.9 Application of offset funds: Tax refund insufficient to cover amount of debt. 31.10 Time limitation for notifying the IRS to request offset of tax refunds due. 31.11 Correspondence with the Depart ment. AUTHORITY: 31 U.S.C. 3711, 3716, 3718; Section 2653 of the Deficit Reduction Act (31 U.S.C. 3720A); 26 CFR 301.6402-6T; and 45 CFR Part 30. SOURCE: 53 FR 25593, July 8, 1988, unless otherwise noted. § 31.1 Scope. (a) The standards set forth in §§ 31.1 through 31.11 are the Department's procedures for requesting the Internal Revenue Service (IRS) to offset tax refunds due taxpayers who have a past due debt obligation to the Department. These procedures are authorized by the Deficit Reduction Act of 1984 (31 U.S.C. 3720A), as implemented by regulation at 26 CFR 301.64026T, and apply to the collection of debts as authorized by common law, by 31 U.S.C. 3716, or under other statutory authority. (b) The Secretary will use the IRS tax refund offset to collect claims which are liquidated or certain in amount, past due and legally enforceable, and which are eligible for tax refund offset under regulations issued by the Secretary of the Treasury. (c) Except as provided in paragraph (d) of this section, the Secretary will not report debts to the IRS except for the purpose of using the offset procedures described in §§ 31.1 through 31.11. Debts of less than $25.00, exclusive of interest and other charges, will not be reported. (d) If not legally enforceable because of the lapse of the statute of limitations but otherwise valid, a debt amounting to over $600 will be reported to the IRS as a discharged debt on Form 1099G. (Form 1099G is an information return which government agencies file with the IRS to report discharged debt, and the discharged amount is considered as income to the taxpayer.) [See § 31.9; 45 30.31(b).] § 31.2 Notice of requirements offset. CFR before A request for reduction of an IRS tax refund will be made only after the Secretary makes a determination that an amount is owed and past due and provides the debtor with 60 calendar days written notice. The Department's Notice of Intent to Collect by IRS Tax Refund Offset (Notice of Intent) will state: (a) The nature and amount of the debt; (b) That unless the debt is repaid within 60 calendar days from the date of the Department's Notice of Intent, the Secretary intends to collect the debt by requesting the IRS to reduce any amounts payable to the debtor as refunds of Federal taxes paid by an amount equal to the amount of the debt and all accumulated interest and other charges; (c) That the debtor has a right to obtain review, within the Department, of the Secretary's initial determination that the debt is past due and legally enforceable (See § 31.3); and (d) That the debtor has a right to inspect and copy departmental records related to the debt as determined by the Secretary and will be informed as to where and when the inspection and copying can be done after the Department receives notice from the debtor that inspection and copying are requested (See § 31.5). § 31.3 Review within the Department of a determination that an amount is past due and legally enforceable. (a) Notification by debtor. A debtor who receives a Notice of Intent has the right to present evidence that all or part of the debt is not past due or not legally enforceable. To exercise this right, the debtor shall send a letter notifying the applicable delegatee of the HHS Departmental Claims Officer specified in § 31.11 that the debtor intends to present evidence to a designated hearing officer. The letter must be received by such designated claims officer within 60 calendar days from the date of the Department's Notice of Intent. (b) Submission of evidence. The debtor may submit evidence showing that all or part of the debt is not past due or not legally enforceable along with the notification required by paragraph (a) of this section. Failure to submit the notification and evidence within 60 calendar days will result in an automatic referral of the debt to the IRS without further action. Evidence submitted by a debtor who has requested prior review of a claim under 45 CFR part 30 will not be reconsidered unless such evidence raises a new defense not considered in connection with such prior review. (c) Review of the record. After a timely submission of evidence by the debtor, the claims officer will submit such evidence to a designated hearing officer, who will review all material related to the debt which is in possession of the Department. The hearing officer shall make a determination based upon a review of the written record, except that the hearing officer may order an oral hearing if the officer finds that: (1) An applicable statute authorizes or requires the Secretary to consider waiver of the indebtedness and the waiver determination turns on credibility or veracity; or (2) The question of indebtedness cannot be resolved by review of the documentary evidence. § 31.4 Determination of the hearing offi cer. (a) Following the hearing or the review of the record, the hearing officer shall issue a written decision which includes the supporting rationale for the decision. The decision of the hearing officer concerning whether a debt or part of a debt is past due and legally enforceable is the final agency decision with respect to the past due status and enforceability of the debt. (b) Copies of the hearing officer's decision will be distributed to the designated claims officer, the Department's Office of the Assistant Secretary for Management and Budget, the debtor, and the debtor's attorney or other representative, if any. (c) If the hearing officer's decision affirms that all or part of the debt is past due and legally enforceable, the Secretary will notify the IRS after the hearing officer's determination has been issued under paragraph (a) of this section and a copy of the determination is received by the Department's Office of the Assistant Secretary for Management and Budget. No referral will be made to the IRS if review of the debt by the hearing officer reverses the initial decision that the debt is past due and legally enforceable. § 31.5 Review of departmental records related to the debt. (a) Notification by debtor. A debtor who intends to inspect or copy departmental records related to the debt as determined by the Secretary must send a letter to the designated claims officer stating the debtor's intention. The letter must be received by the designated claims officer within 60 calendar days from the date of the Department's Notice of Intent. (b) Department's response. In response to timely notification by the debtor as described in paragraph (a) of this section, the designated claims officer will notify the debtor of the location and time when the debtor may inspect or copy departmental records related to the debt. At his or her discretion, the designated claims officer may also mail copies of the debt-related records to the debtor. § 31.6 Stay of offset. If the debtor timely notifies the Secretary that the debtor is exercising a right described in § 31.3(a) and timely submits evidence pursuant to § 31.3(b), any notice to the IRS will be stayed until the issuance of a written decision by the hearing officer which determines that a debt or part of a debt is past due and legally enforceable. § 31.7 Application of offset funds: Single debt. If the debtor does not timely notify the Secretary that the debtor is exercising a right described in § 31.3, the Secretary will notify the IRS of the debt 60 calendar days from the date of the Department's Notice of Intent, and will request that the amount of the debt be offset against any amount payable by the IRS as refund of Federal taxes paid. Normally, recovered funds will be applied first to any special charges provided for in HHS regulations or contracts, then to interest, and finally, to the principal owed by the debtor. § 31.8 Application of offset funds: Multiple debts. The Secretary will use the procedures set out in § 31.7 for the offset of multiple debts. However, when collecting on multiple debts the Secretary will apply the recovered amounts against the debts in order in which the debts accrued. § 31.9 Application of offset funds: Tax refund insufficient to cover amount of debt. If a tax refund is insufficient to satisfy a debt in a given tax year, the Secretary will recertify to the IRS on the following year to collect further on the debt. If, in the following year, the debt has become legally unenforceable because of the lapse of the statute of limitations, the debt will be reported to the IRS as a discharged debt in accordance with § 31.1(d) and 45 CFR 30.31(b). |