§ 1177.11 - Collection by administrative offset.

§ 1177.11 Collection by administrative offset.

(a) Scope.

(1) The term “administrative offset” has the meaning provided in 31 U.S.C. 3701(a)(1).

(2) This section does not apply to:

(i) Debts arising under the Social Security Act, except as provided in 42 U.S.C. 404;

(ii) Payments made under the Social Security Act, except as provided for in 31 U.S.C. 3716(c) (see 31 CFR 285.4, Federal Benefit Offset);

(iii) Debts arising under, or payments made under, the Internal Revenue Code (see 31 CFR 285.2, Tax Refund Offset) or the tariff laws of the United States;

(iv) Offsets against Federal salaries to the extent these standards are inconsistent with regulations published to implement such offsets under 5 U.S.C. 5514 and 31 U.S.C. 3716 (see 5 CFR part 550, subpart K, and 31 CFR 285.7, Federal Salary Offset);

(v) Offsets under 31 U.S.C. 3728 against a judgment that a debtor obtained against the United States;

(vi) Offsets or recoupments under common law, State law, or Federal statutes specifically prohibiting offsets or recoupments of particular types of debts; or

(vii) Offsets in the course of judicial proceedings, including bankruptcy.

(3) Unless otherwise provided for by contract or law, NEH may collect debts or payments that are not subject to administrative offset under 31 U.S.C. 3716 by administrative offset under the common law or other applicable statutory authority.

(4) Unless otherwise provided by law, NEH will not collect a debt by administrative offset under the authority of 31 U.S.C. 3716 more than ten (10) years after the Government's right to collect the debt first accrued, unless facts material to the Government's right to collect the debt were not known and could not reasonably have been known by the Government official or officials who were charged with the responsibility to discover and collect such debts. This limitation does not apply to debts reduced to a judgment.

(5) In bankruptcy cases, NEH will seek legal advice from its Office of the General Counsel concerning the impact of the Bankruptcy Code, particularly 11 U.S.C. 106, 362, and 553, on pending or contemplated collections by offset.

(b) Mandatory centralized administrative offset.

(1) NEH is required to refer past due, legally enforceable nontax debts which are over 180 days delinquent to the Secretary for collection by centralized administrative offset. NEH may also refer debts which are less than 180 days delinquent to the Secretary for this purpose. See paragraph (b)(5) of this section for debt certification requirements.

(2) The names and taxpayer identifying numbers (TINs) of debtors who owe debts which NEH referred to the Secretary as described in paragraph (b)(1) of this section will be compared to the names and TINs on payments to be made by Federal disbursing officials. Federal disbursing officials include disbursing officials of Treasury, the Department of Defense, the United States Postal Service, other Government corporations, and United States disbursing officials designated by the Secretary. When a debtor's name and TIN match a payee's name and TIN and all other requirements for offset have been met, the payment will be offset to satisfy the debt.

(3) Federal disbursing officials will notify the debtor/payee in writing that an offset has occurred to satisfy, in part or in full, a past due, legally enforceable delinquent debt. The notice will include a description of the type and amount of the payment from which the offset was taken, the amount of offset that was taken, the identity of the creditor agency requesting the offset, and a contact point within the creditor agency who will respond to questions regarding the offset.

(4) NEH will initiate offsets only after:

(i) Sending the debtor written notice of the type and amount of the debt, NEH's intention to use administrative offset to collect the debt, and an explanation of the debtor's rights under 31 U.S.C. 3716; and

(ii) Giving the debtor the opportunity:

(A) To inspect and copy NEH records related to the debt;

(B) For a review within NEH of its determination of indebtedness; and

(C) To make a written agreement to repay the debt.

(5) NEH may omit the procedures set forth in paragraph (b)(4) of this section when:

(i) The offset is in the nature of a recoupment;

(ii) The debt arises under a contract as set forth in Cecile Industries, Inc. v. Cheney, 995 F.2d 1052 (Fed. Cir. 1993) (notice and other procedural protections set forth in 31 U.S.C. 3716(a) do not supplant or restrict established procedures for contractual offsets accommodated by the Contracts Disputes Act); or

(iii) In the case of non-centralized administrative offsets conducted under paragraph (c) of this section, NEH first learns of the amount owed by the debtor when there is insufficient time before payment would be made to the debtor/payee to allow for prior notice and an opportunity for review. When NEH omits prior notice and an opportunity for review, it will give the debtor such notice and an opportunity for review as soon as practicable, and it will promptly refund any money which it ultimately finds the debtor did not owe to the Government.

(6) When an agency has previously given a debtor any of the required notice and review opportunities with respect to a particular debt (see e.g., § 1177.10), NEH need not duplicate such notice and review opportunities before initiating administrative offset.

(7) When referring delinquent debts to the Secretary, NEH will certify, in a form acceptable to the Secretary, that:

(i) The debt(s) is (are) past due and legally enforceable; and

(ii) NEH has complied with all due process requirements under 31 U.S.C. 3716(a) and paragraphs (b)(4), (b)(5), and (b)(6) of this section.

(8) Payments that are prohibited by law from being offset are exempt from centralized administrative offset. The Secretary will exempt payments under means-tested programs from centralized administrative offset when the head of the payment certifying or authorizing agency requests in writing that the Secretary do so. Also, the Secretary may exempt other classes of payments from centralized offset upon the head of the payment certifying or authorizing agency's written request.

(9) NEH may offset benefit payments made under the Social Security Act (42 U.S.C. 301, et seq.), part B of the Black Lung Benefits Act (30 U.S.C. 921, et seq.), and any law administered by the Railroad Retirement Board (other than tier two (2) benefits), only in accordance with Treasury regulations, issued in consultation with the Social Security Administration, the Railroad Retirement Board, and the Office of Management and Budget. See 31 CFR 285.4.

(10) In accordance with 31 U.S.C. 3716(f), the Secretary may waive the Computer Matching and Privacy Protection Act of 1988's provisions concerning matching agreements and post-match notification and verification (5 U.S.C. 552a(o) and (p)) for centralized administrative offset upon receipt of a certification from NEH, as the creditor agency, that it has met the due process requirements enumerated in 31 U.S.C. 3716(a). NEH's certification in accordance with paragraph (b)(7) of this section will satisfy this requirement. If the Secretary grants such a waiver, only Treasury's Data Integrity Board is required to oversee any matching activities, in accordance with 31 U.S.C. 3716(g). This waiver authority does not apply to offsets conducted under paragraphs (c) and (d) of this section.

(c) Non-centralized administrative offset.

(1) Generally, NEH will conduct non-centralized administrative offsets at its discretion on an ad hoc case-by-case basis, internally or in cooperation with the agency certifying or authorizing payments to the debtor. Unless otherwise prohibited by law, when centralized administrative offset is not available or appropriate, NEH may collect past due, legally enforceable non-tax delinquent debts through non-centralized administrative offset. In these cases, a creditor agency may make a request directly to a payment authorizing agency to offset a payment due a debtor in order to collect a delinquent debt. For example, it may be appropriate for a creditor agency to request that the Office of Personnel Management (OPM) offset a Federal employee's lump sum payment upon leaving Government service in order to satisfy an unpaid advance.

(2) Before requesting that a payment authorizing agency conduct a non-centralized administrative offset, NEH will provide:

(i) The debtor with due process as set forth in paragraphs (b)(4) through (6) of this section; and

(ii) The payment authorizing agency with written certification that the debtor owes past due, legally enforceable delinquent debt in the amount stated, and that NEH has fully complied with its regulations concerning administrative offset.

(3) Payment authorizing agencies will comply with offset requests by creditor agencies to collect debts owed to the United States, unless the offset would not be in the best interests of the United States with respect to the authorizing agency's program, or would otherwise be contrary to law. NEH will make appropriate use of other agencies' cooperative efforts in effecting collection by administrative offset.

(4) When collecting multiple debts by non-centralized administrative offset, NEH will apply the recovered amounts to those debts in accordance with the best interests of the United States, as determined by the facts and circumstances of the specific case, particularly the applicable statute of limitations.

(d) Requests to OPM to offset a debtor's anticipated or future benefit payments under the Civil Service Retirement and Disability Fund. Upon providing OPM written certification that a debtor has been afforded the procedures provided in paragraphs (b)(4) through (6) of this section, NEH may request that OPM offset a debtor's anticipated or future benefit payments under the Civil Service Retirement and Disability Fund (Fund) in accordance with regulations codified at 5 CFR 831.1801-831.1808. Upon receipt of such a request, OPM will identify and “flag” a debtor's account in anticipation of the time when the debtor requests, or becomes eligible to receive, payments from the Fund. This will satisfy any requirement that NEH initiate offset prior to the expiration of the time limitations referenced in paragraph (a)(4) of this section.

(e) Review Requirements.

(1) For purposes of this section, whenever NEH is required to afford a debtor a review, it will provide the debtor with a reasonable opportunity for an oral hearing when the debtor requests reconsideration of the debt and NEH determines that the question of indebtedness cannot be resolved by reviewing the documentary evidence; for example, when the validity of the debt turns on an issue of credibility or veracity.

(2) Unless otherwise required by law, an oral hearing under this section is not required to be a formal evidentiary hearing, although NEH will carefully document all significant matters discussed at the hearing.

(3) This section does not require an oral hearing with respect to debt collection systems in which a determination of indebtedness rarely involves issues of credibility or veracity and NEH has determined that the review of the written record is ordinarily an adequate means to correct prior mistakes.

(4) In those cases when an oral hearing is not required by this section, NEH will accord the debtor a “paper hearing;” that is, a determination of the request for reconsideration based upon a review of the written record.