[Federal Register Volume 63, Number 5 (Thursday, January 8, 1998)]
[Rules and Regulations]
[Pages 1063-1069]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-310]
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FEDERAL EMERGENCY MANAGEMENT AGENCY
44 CFR Part 11
RIN 3067-AC77
Debt Collection
AGENCY: Federal Emergency Management Agency (FEMA).
ACTION: Interim final rule with request for comments.
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SUMMARY: Under this rule FEMA will refer delinquent debts owed to this
Agency to the Department of the Treasury for collection under the
Government-wide Treasury Offset Program (TOP) and for tax refund
offsets at the same time. FEMA amends its administrative offset
regulations to allow administrative offset against delinquent debtor
States and units of general local government. FEMA also amends its
regulations to change the method for calculating interest, penalty and
administrative charges assessed on delinquent debts and to make States
and units of general local government subject to such charges.
DATES: This interim final rule is effective January 1, 1998. We invite
comments on the rule, which should be submitted on or before March 9,
1998.
FOR FURTHER INFORMATION CONTACT: Richard S. Buck, IV, Financial Policy
Division, Office of Financial Management, Federal Emergency Management
Agency, 500 C Street SW., Washington, DC 20472, (202) 646-4091.
ADDRESSES: Please submit any comments to the Rules Docket Clerk, Office
of the General Counsel, Federal Emergency Management Agency, 500 C
Street SW., room 840, Washington, DC 20472. Comments may also be
submitted to the Rules Docket Clerk by facsimile at (202) 646-4536, or
by e:mail addressed to Crane.Miller@fema.gov. Please refer to RIN 3067-
AC61, Debt Collection when submitting your comments.
SUPPLEMENTARY INFORMATION:
I. Background
The Debt Collection Improvement Act of 1996 (DCIA), Pub.L. 104-134,
Sec. 31001, 31 U.S.C. 3720A, provides that the Department of the
Treasury ensure that any Federal Government payment to a delinquent
non-tax Federal debtor is subject to automatic offset against any tax
refunds that may be owed to the debtor. Creditor Federal agencies are
to receive any funds that are offset and are to apply them against
outstanding debts. The DCIA also provides that the Department of the
Treasury manage the tax refund offset program, previously administered
by the Internal Revenue Service (IRS).
To implement these DCIA provisions, the Department of the
Treasury's Financial Management Service (FMS) published an interim
final rule at 62 FR 34175 on June 25, 1997, which added Sec. 285.2 to
31 CFR and covered both TOP and the tax refund offset programs. The FMS
rule requires that all Federal agencies revise their debt collection
regulations so that the agencies refer their delinquent debts to the
Department of the Treasury. This FMS rule also centralizes and
streamlines collection of delinquent non-tax Federal debt by having the
Department of the Treasury (Treasury) manage the tax refund offset
program as part of the Treasury's Government-wide offset program.
The FMS rule also requires Federal agencies to amend their debt
collection regulations on administrative offset and tax refund offset
by the end of 1997 to conform to the FMS rule. FEMA's interim final
rule complies with the FMS requirement.
Under the FMS rule, FEMA will refer delinquent debt to Treasury for
both TOP and tax refund offset. Under FEMA's previous tax refund offset
regulation, 44 CFR Sec. Sec. 11.61-11.65, FEMA referred to the IRS only
those delinquent debts that could not be recovered through
administrative or salary offset and that had been reported as
delinquent to consumer reporting agencies (commonly known as ``credit
bureaus''). The new FMS rule allows agencies to use the three
collection methods concurrently. The FMS rule allows agencies to report
delinquent consumer debt to credit bureaus either before or after
submitting a debt to the Treasury Offset Program, that is, credit
bureau reporting is not a prerequisite to tax refund offset under this
rule.
Under 31 U.S.C. 3701(c) the definition of ``persons'' who are
subject to the administrative offset provisions (31 U.S.C. 3716) of the
Debt Collection Act of 1982 (DCA), makes any individual, organization,
or entity except other Federal agencies subject to such offset,
including States and units of general local government. Under 31 U.S.C.
3717 Federal agencies assess interest, penalty and administrative
charges against unpaid claims of the United States, including debts
owed by States and units of general local government. FEMA's interim
final rule allows FEMA to use administrative offset and to assess
interest, penalty and administrative charges against these governments.
Previously, FEMA charged States and units of general local government
interest under principles of common law. However, principles of common
law did not allow creditors, such as Federal agencies, to assess
penalties or costs of collection against States and units of general
local government. FEMA debt collection regulations had provided for
common law offset against these entities.
FEMA amends Sec. 11.48 on interest, penalty and administrative
charges to change its methods for calculating these charges.
II. Section-by-Section Analysis of the Regulations
Section 11.43, Administrative Offset, is changed to allow FEMA to:
1. Take administrative offsets against States and units of general
local government;
2. Collect, through the use of administrative offset and tax refund
offset, debts owed by individuals and other private sector delinquent
debtors to States and local governments, which arise under programs
administered by FEMA. FEMA will take such action under the provisions
of 31 U.S.C. 3716(h)(1) and reciprocal agreements entered into by the
Secretary of the Treasury and the States concerned. For instance, FEMA
administers the Individual & Family Grant (IFG) program, which is
funded 75% by the FEMA and 25% by the States. If a debtor owed a debt
under the IFG Program, then FEMA could use administrative and tax
refund offsets to recover the State's 25% share;
3. Refer specifically delinquent debt to the Department of the
Treasury for TOP in addition to conducting Agency administrative
offset. Previously, the FEMA regulation (Sec. 11.43(a)) only allowed
FEMA to use administrative offset against any monies due to the debtor
from the United States;
[[Page 1064]]
4. Change the period in which the debtor could request an
administrative review from 15 days after receipt of the administrative
offset notice to 60 days after FEMA mails such notice to the debtor.
Since the period is calculated from the date of mailing rather than
from date of receipt of notice, FEMA no longer has to use expensive
certified mail, return receipt requested, for mailing such notices. See
Sec. 11.43(c). Administrative review means that FEMA considers evidence
and arguments submitted by the debtor and takes a fresh look as to
whether FEMA should continue collection efforts for the full amount of
the debt. 31 U.S.C. 3716(a)(3) provides that agencies must afford
debtors a right to a ``review within the agency'' before taking
administrative offset;
5. Stay offset action where the debtor made a request for
administrative review within the 60-day request period until FEMA has
rendered a decision on the debtor's request;
6. Continue offset action where the debtor has made a late request
(after the 60-day period) for administrative review. Under such
circumstances, FEMA will review the debtor's evidence and arguments. If
the FEMA Administrative Review Official (ARO) finds that the debtor
owes less than amounts already offset at the time of the decision, then
FEMA will refund the difference to the debtor;
7. Use offset under principles of common law in addition to FEMA's
having the ability to collect by administrative offset. This implements
DCIA Sec. 31001 (d)(2), 31 U.S.C. 3716(d);
8. Determine that the debtor's failure to receive FEMA's notice of
administrative offset, where this Agency had mailed the notice to
debtors' last known address, will not affect the validity of the
administrative offset action;
9. Make debtors liable for all costs incurred by the Federal
Government administrative offsets. For instance, delinquent debtors
will have to pay the charges, now (in 1997) $7.02 per offset, that the
Department of the Treasury incurs in making a TOP offset.
Administrative offset costs are ``administrative costs'' provided for
in Sec. 11.48(d).
Section 11.44, Collection of debts from Federal agencies or States
or units of general local government by common law offset has been
removed and the section reserved. The DCIA now allows Federal agencies
to use DCA administrative offset against States and units of general
local government, and excepts Federal departments and agencies from
administrative offset. Before the enactment of the DCIA, FEMA provided
procedures by which FEMA would exercise common law offsets against
these entities.
Section 11.48, Interest, Penalty and Administrative Charges
The DCIA, by changing the definition of ``persons'' subject to
interest, penalty and administrative costs of collection under 31
U.S.C. 3717, now allows Federal agencies to assess such charges against
States and units of general local government. Previously, FEMA had
assessed interest against these entities only under principles of
common law. At common law, any creditor could charge interest against
debtors who were tardy in making payments of debts. In United States v.
Texas, 507 U.S. 529 (1993), the Supreme Court approved a Federal
department's charging a State interest on a past-due debt. However,
principles of common law did not permit creditors, or Federal agencies,
to assess penalties and administrative costs of collection against
delinquent debtors. FEMA's prior rule, Sec. 11.48(c), excluded States
and units of local government from penalty or administrative charge
assessments. Sections 11.48(b), 11.48(d) and 11.48(e) now allow FEMA to
assess interest, penalties and administrative charges against these
entities under the provisions of 31 U.S.C. 3717.
Section 11.48(a) contains a definition of ``delinquent debt'' to be
used in all FEMA's debt collection regulations (Sec. 11.30-11.65). A
debt becomes delinquent when it is not paid for by the due date or if a
debtor has entered into a payment plan and fails to make a payment when
due under the plan.
Waiver of Interest and Penalties
Section 11.48(f)(5) now provides that the FEMA Agency Collections
Officer (ACO) or the ACO's designee may waive assessment of interest
where such assessment would be against equity and good conscience and
not in the best interests of the United States. The section gives two
situations where such waiver may be granted. Under Sec. 11.34(a)(1)
FEMA's Chief Financial Officer also serves as FEMA's Agency Collections
Officer.
Penalty Charges
FEMA is changing its method of calculating penalty charges in
Sec. 11.48(d). Previously, FEMA deemed a debt to be delinquent if the
debtor did not pay the debt in full within 30 days after FEMA first
notified the debtor that the debt was due. Since the Debt Collection
Act of 1982, 31 U.S.C. 3717(e)(2), assesses penalty charges where a
debt is 90 days past due, FEMA did not begin charging penalty charges
until the 120th day after notification with accrual starting with the
31st day after notification.
Under revised Sec. 11.48(d), debtors will not be liable for penalty
charges so long as they pay their debts in full within 90 days after
the date that FEMA first sent notice that this Agency would assess
penalty. See 31 U.S.C. 3717(e)(2). The penalty accrual period will
start with the date of notification rather than 30 days after the date
of the notification letter. Penalty will accrue also on unpaid interest
as it accumulates and on administrative charges from the date that the
Federal Government incurred them.
Under the new Sec. 11.48(f)(5), if FEMA were to delay unduly in
rendering an administrative review decision, then the ACO may waive
assessment of penalty during the period of unreasonable delay.
Revised Sec. 11.48(f)(1)(iv) grants FEMA authority to waive
impositions of interest in accordance with standards set out in the
Federal Claims Collection Standards (FCCS) at 4 CFR 102.13(c) and
FEMA's debt collection regulations relating waiver, termination and
suspension of debts at Secs. 11.50 and 11.51. FEMA is eliminating as
grounds for waiver of interest and penalty the debtor's having a valid
dispute with FEMA on issues involved in the debt.
In the non-applicability of interest, penalty and administrative
charges subsection (Sec. 11.48(g)), FEMA provides that only Federal
agencies are exempt from these charges. As previously mentioned, with
the passage of the DCIA, States and units of general local government
no longer are exempt from assessment of such charges under the Debt
Collection Act of 1982 (31 U.S.C. 3717).
Where a debtor owes FEMA more than one debt and the debtor makes an
involuntary partial payment the FMS states that the payment should be
applied to the oldest debt first. FEMA has revised Sec. 11.48(h) to
require that such partial payments will be applied to the oldest debt
first. However, where the debtor makes a voluntary payment the debtor
may choose to which debt the payment may be credited. This latter rule
follows principles of common law.
FEMA has revised its rule, Sec. 11.48(i)(1), relating to waiver of
interest, penalty and administrative charge waivers as applied to
States and local governments. If such governments can demonstrate to
the satisfaction of the ACO or a designated deputy that the
government's revenues are insufficient to enable the government to
provide essential public services, then FEMA
[[Page 1065]]
may waive these charges. However, FEMA may demand that the requesting
government provide accounting, economic, and demographic data to enable
the ACO or the deputy to reach an informed conclusion as to whether to
grant the waiver.
Under revised Sec. 11.48(i) States and local governments that
request review of proposed offsets will be charged interest, penalty or
administrative charges on the amounts found to be due and owing after
the completion of the administrative review process, just as any other
debtor would be. Where a statute or regulation provides for a mandatory
review, FEMA must waive interest and penalty charges (see the Federal
Claims Collection Standards, 4 CFR 102.13(h)). Under Sec. 11.48(j),
interest and penalty will continue to accrue on debts until debtors'
payments actually are received at the place of payment designated by
FEMA.
Sections 11.61 Through 11.65, Covering Tax Refund Offsets
Since the Department of the Treasury has assumed management of the
entire tax refund offset program in lieu of the IRS, FEMA has revised
Sec. Sec. 11.61-11.65 to substitute ``Department of the Treasury''
wherever ``Internal Revenue Service'' or ``IRS'' previously appeared.
These sections have been changed so that the procedures may be applied
against any tax refund, whether the refund is for customs, alcohol,
tobacco and firearms, or any other tax collected under the aegis of the
Department of the Treasury. FEMA's prior regulation only covered
``income tax refunds'' even though the Debt Collection Act of 1982 (31
U.S.C. 3720A) covered tax refunds generally.
The Debt Collection Act (31 U.S.C. 3720A(b)(2) requires agencies to
grant the debtor at least 60 days to present evidence that their debt
was not past-due or legally enforceable. FEMA's prior tax refund offset
regulations granted debtors 65 days from the mailing of notice that
FEMA was intending to use tax refund offset to collect delinquent debt.
The additional five days was to allow time for the mails. However, to
make times uniform for debtors to file requests for administrative
review and reviews within the agency throughout FEMA's debt collection
regulations, Sec. Sec. 11.30-11.65 set the time in which debtors may
make a timely request for such reviews at 60 days from the mailing of
the notice.
Section 11.61, Referral of Debt for Tax Refund Offset
Based on former IRS regulations, the previous Sec. 11.61(a) limited
referral of delinquent debts for tax refunds to those debts:
1. that had already been reported to consumer reporting agencies
(``credit bureaus'');
2. that were not collectable through Federal salary, uniformed
services pay, or Federal Government service retirements; or
3. that were not collectable by using administrative offsets under
31 U.S.C. 3716.
In this interim final rule FEMA no longer eliminates certain
debtors from the tax refund offset process. FEMA will continue
aggressive use of credit bureau reporting of delinquent debtors, of
collection by offsets against Federal employees, members of the
uniformed services, and Federal retirees, and of administrative
offsets, such as TOP.
Section 11.63, Notice to Debtor Before Tax Refund Offset
Aside from the amendments made to all FEMA's tax refund offset
regulations described above, this section has been amended to refer to
``tax refund offsets'' generically, rather than ``income tax refund
offsets'' as previously.
Under Sec. Sec. 11.63(a)(2)(iv) through 11.63(b) the FEMA Office of
General Counsel (OGC) will decide debtors' requests for review within
the Agency. Previously, the ACO rendered such decisions. This is to
transfer this quasi-adjudicatory function from the ACO to OGC, which
bears responsibility for legal interpretations of FEMA regulations.
Section 11.64, Review Within Federal Emergency Management Agency
Section 11.64 changes to 60 days after mailing of the notice the
time in which the debtor may make a timely request for a review within
FEMA. However, Sec. 11.64(c) allows FEMA to consider requests for
review filed after the 60-day period. If the request is filed late,
FEMA will consider the debtor's arguments and evidence but the Federal
Government will not stay offset while preparing a decision. If the
decision results in the debtor owing less (possibly zero) than amounts
previously offset, then FEMA will refund the difference to the debtor.
We amend 11.64 to substitute the OGC for the ACO as the office to
render decisions where debtors request administrative reviews. This
rule transfers an adjudicative function from the ACO, whose staff is
charged with collecting debts, to OGC where the staff is concerned with
legal interpretations and determining equities of situations.
Procedures for conducting reviews within the Agency will be the same as
those for administrative reviews under Sec. 11.43(d).
Section 11.65, Stay of Offset
This section is changed only to substitute ``Department of the
Treasury'' where IRS had previously been used.
Administrative Procedure Act Determination
FEMA is publishing this interim final rule without opportunity for
prior public comment under the Administrative Procedure Act, 5 U.S.C.
553. FEMA has determined that a comment period would be unnecessary,
impractical, and contrary to the public interest. This interim final
rule does not contain any significant, substantive changes from the
Internal Revenue Service regulations and does not change how the tax
refund offset program affects the taxpayer who owes delinquent nontax
debt. This interim rule reflects changes to internal procedures under
which FEMA as a creditor agency will submit delinquent debt information
to the Department of the Treasury in compliance with requirements of
the Debt Collection Improvement Act.
Procedures affecting debtors remain substantially unchanged. The
procedural changes do not affect the rights of the debtor to dispute
the nature or the amount of the debt or method of collection; they
reflect changes required by merger of the tax refund offset with the
Treasury Offset Program, or by enactment of the Debt Collection
Improvement Act. Further, the procedural changes in this interim final
rule primarily affect how FEMA will participate in the offset program.
In order to implement the offset programs for tax refund payments made
after January 1, 1998, FEMA needs to modify and publish its offset
regulations. FEMA determines that good cause exists and that it is in
the public interest to issue this interim final rule without
opportunity for prior public comment. We invite public comments on the
interim final rule, which comments will be taken into account when the
final rule is published.
Regulatory Flexibility Act
The Director certifies that this interim final rule is exempt from
the requirements of the Regulatory Flexibility Act because it makes
minor and technical amendments mandated by statute, 31 U.S.C. 3720A and
by Department of the Treasury Interim Rule. This interim final rule
does not contain any significant substantive changes from FEMA's
present debt collection regulations and does not
[[Page 1066]]
substantially change how FEMA collects debts owed the United States
that arise under FEMA programs. The Regulatory Flexibility Act does not
apply to this interim final rule; no regulatory analysis has been
prepared.
Paperwork Reduction Act
The information collection requirements contained in this interim
final rule have been approved by the Office of Management & Budget
(OMB) under the provisions of the Paperwork Reduction Act of 1980 (44
U.S.C. 3501 et seq.) and have been assigned OMB control number 3067-
0122.
Executive Order 12866, Regulatory Planning and Review
Promulgation of this interim final rule is required by statute, 31
U.S.C. 3716 and 3720A, and is not a significant regulatory action
within the definition of E.O. 12866. To the extent possible under the
statutory requirements of 31 U.S.C. 3720A this interim final rule
adheres to the principles of regulation set forth in Executive Order
12866. This interim final rule was not reviewed by the Office of
Management and Budget under Executive Order 12866.
Congressional Review of Agency Rulemaking
FEMA has submitted this interim final rule to the Congress and to
the General Accounting Office under the Congressional Review of Agency
Rulemaking Act, Pub. L. 104-121. This interim final rule is not a
``major rule'' within the meaning of that Act. It does not result in
nor is it likely to result in an annual effect on the economy of
$100,000,000 or more; it will not result in a major increase in costs
or prices for consumers, individual industries, Federal, State, or
local government agencies, or geographic regions; and it will not have
``significant adverse effects'' on competition, employment, investment,
productivity, innovation, or on the ability of United States-based
enterprises to compete with foreign-based enterprises.
This interim final rule is exempt (1) from the requirements of the
Regulatory Flexibility Act, as certified previously, and (2) from the
Paperwork Reduction Act.
This interim final rule is not an unfunded Federal mandate within
the meaning of the Unfunded Mandates Reform Act of 1995, Pub. L. 104-4.
It does not meet the $100,000,000 threshold of that Act.
List of Subjects in 44 CFR Part 11
Administrative practices and procedures, Claims, Debts, Offsets,
Taxes, Refunds.
Accordingly, Secs. 11.43, 11.44, 11.48, and 11.61 through 11.65 of
44 CFR are amended as follows:
1. The authority citation for Part 11 is revised to read as
follows:
Authority: 31 U.S.C. 3701 et seq.
2. Section 11.43 is revised to read as follows:
Sec. 11.43 Collection by administrative offset.
(a) General. The Agency Collections Officer (ACO) or the ACO's
designee may collect debts owed to the United States by means of
offsets against monies due from the United States under provisions of
31 U.S.C. 3716 and the procedures set forth below. Under provisions of
31 U.S.C. 3716(h)(1) and reciprocal agreements entered into by the
Secretary of the Treasury and the States concerned, the ACO or the
ACO's designee may institute administrative offsets covered in this
section to collect debts that are owed to States and which arise under
programs administered by FEMA. The procedures prescribed by this
section shall not be used if the debtor has executed a written
agreement satisfactory to the ACO or the ACO's designee for the payment
of the debt so long as the debtor adheres to the provisions of the
agreement. Before using the procedures of this section, the ACO or the
ACO's designee shall examine the debt to determine whether the
likelihood of collecting such a debt and the best interests of the
United States justify the use of administrative offset. If the debt is
over 6 years old but is not 10 years old, the ACO or the ACO's designee
shall examine the debt and decide whether using these procedures is
cost effective. Further, FEMA shall not use administrative offset
procedures on debts existing for more than 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 have been known by the officials of the Government who
were charged with responsibility to discover and collect the debt. FEMA
may refer debts to the Department of the Treasury for Government-wide
administrative offset under the provisions of 31 U.S.C. 3716(c) and for
offsets against Federal tax refunds under provisions of 31 U.S.C.
3720A.
(b) Written notice. After the ACO or the ACO's designee has
examined the debt under procedures set forth in paragraph (a) of this
section, FEMA shall hand deliver or send by mail a notice to the debtor
advising the debtor of:
(1) Nature and amount of the debt determined by the Agency to be
due, and of intention to collect by administrative offset;
(2) Rights available under this section;
(3) Opportunity to inspect and copy the records relating to the
debt;
(4) Opportunity for review within the Agency with respect to the
debt; and
(5) Opportunity to enter into an agreement with the ACO with
respect to the debt. Such agreement may include voluntary but
nonrevocable withholding of monies due from the United States to the
debtor.
(c) Review within the Federal Emergency Management Agency. The
debtor may request, within sixty calendar days after mailing or hand-
delivery of the written notice specified in paragraph (b) of this
section, review within the Agency as to the existence or amount of the
debt or terms of repayment. An attorney in the Office of General
Counsel, acting as an Administrative Review Official (ARO), shall
conduct the review. The ARO may determine that no debt is due, that the
amount of the debts should be reduced, that terms of repayment should
be set, or that the demanded amount should be paid in full.
(1) If the debtor has made a timely request for a review within the
Agency, then FEMA shall stay any offsets until the ARO has rendered a
decision. However, interest, penalties and administrative charges, as
specified in Sec. 11.48, shall continue to accrue during the pendency
of the review within the Agency. If the debtor files a request for a
review within the Agency after the 60 days specified above, then FEMA
shall continue with the offset action. However, if the ARO finds that
the debtor owes less than the amount offset, then FEMA will refund the
amount over-withheld. For purposes of determining whether the debtor
has filed a timely request for administrative review, the date of
FEMA's receipt of the debtor's request establishes the time of filing.
(2) The ARO shall transmit the decision on the debtor's request for
review within the Agency. The ARO may contact the debtor directly to
request additional information and data in order to allow the ARO to
reach a knowledgeable decision. The ARO's decision shall be final
insofar as FEMA's administrative processing of the debt is concerned.
(3) FEMA shall use procedures in this section to decide debtors'
requests for
[[Page 1067]]
review within FEMA under the provisions of Sec. 11.64(d).
(d) If the debtor does not execute a written agreement, if the
debtor does not request review within the Agency, or if the review
within the Agency determines that a debt is due, then FEMA shall use
administrative offset against monies payable by the United States in
accordance with this section and appropriate regulations. However, if a
statute or FEMA agreement either prohibits or explicitly provides for
collection through administrative offset for the debt or the type of
debt involved then the provisions of that statute or FEMA agreement
rather than the provisions of this section shall be used for such
offset.
(e) If the debtor has a judgment against the United States, then
notice shall be provided to the General Accounting Office for offset in
accordance with 31 U.S.C. 3728.
(f) In addition to administrative offset remedies described above,
FEMA may use its rights to collect debts by offsets conducted under
principles of common law.
(g) The debtor's failure to receive notice, described in paragraph
(b) of this section, mailed by FEMA to the debtor's last-known address,
shall not impair the validity of offsets taken under this section.
(h) If FEMA or any other Federal department or agency incurs costs
in taking offsets to collect delinquent debts, then the debtor shall be
liable for such costs as administrative costs in accordance with
section 11.48(d).
Sec. 11.44 [Removed and reserved]
3. Section 11.44 is removed and reserved.
4. Section 11.48 is revised read as follows:
Sec. 11.48 Interest, penalties, and administrative charges.
(a) Definition. In Sec. Sec. 11.30 through 11.65 of this part, a
debt is deemed to be delinquent if the debtor has not paid the debt by
the collection due date and if the debtor has not entered into a
repayment agreement satisfactory to FEMA. A debt is also deemed
delinquent if the debtor has not made payment by the date specified in
the applicable agreement.
(b) Interest. FEMA's delinquent debtors shall be charged interest
on the outstanding principal balance due on debts owed the United
States at the rate published by the Secretary of the Treasury under
provisions of 31 U.S.C. 3717(a). The interest rate in effect at the
time that FEMA first mailed or hand delivered to the debtor written
notice, stating that the debt was due and that interest would be
assessed on the debt, shall be the rate applied throughout the duration
of the debt until the debt is paid in full.
(1) However, if the debtor defaults on a debt repayment agreement
made with the ACO or the ACO's designee, then interest shall accrue at
the rate published by the Secretary of the Treasury under the
provisions of 31 U.S.C. 3717(a)(1) that was in effect when the debtor
defaulted on the repayment agreement. Interest shall accrue either from
the date that FEMA first informed the debtor that the Agency would
assess interest on the debt or some subsequent date specified in the
written notice given by FEMA to the debtor stating that interest would
be assessed.
(2) However, where FEMA first sent the notice of indebtedness prior
to October 25, 1982, interest shall run from the date on or after that
date when FEMA first sent the debtor a letter notifying the debtor that
the Agency would assess interest.
(c) Exceptions to interest charges. However, no interest, described
in paragraph (a) of this section, shall be charged if:
(1) The amount due is paid in full within 30 days of the mailing of
the demand. However, the ACO or the ACO's designee, as documented by a
memorandum in the debt collection file, may extend this 30-day period
on a case-by-case basis for good cause shown in accordance with the
Federal Claims Collection Standards (4 CFR 102.13(g)), or
(2) The applicable statute, regulation required by statute, loan
agreement or contract either prohibits the charging of interest or
explicitly fixes interest or charges, which apply to the debt involved.
(d) Penalty charges. Except in the situation described in paragraph
(c) of this section, the debtor shall be liable for a penalty of 6%
annually on the unpaid principal, interest, and administrative charges
if the debtor fails to pay the debt in full within 90 days of the date
after the first written notice by FEMA that FEMA would assess penalty
charges. However, if the debtor enters into a repayment agreement,
satisfactory to the ACO or the ACO's designee within the 90-day period,
then FEMA will not assess penalty so long as the debtor adheres to the
provisions of the agreement. Penalty shall accrue starting on and
including the day of FEMA's first written notice where FEMA mentioned
that it would assess penalty charges on the debt. Penalty will not be
assessed against Federal agencies. Penalty charges shall accrue on
administrative charges, starting on the day that FEMA incurred the
administrative charge. However, if the debtor pays the debt in full
within 90 days of FEMA's first notice that the Agency would assess
penalty charges or if the debtor enters into a repayment agreement
satisfactory to the ACO or the ACO's designee within that time, then
FEMA will not assess penalty on accrued administrative charges.
(e) Administrative costs for processing delinquent debts. Debtors
shall pay the United States for costs incurred by the Government in
collecting the debt in accordance with 31 U.S.C. 3717(e)(1).
Administrative cost calculations will be based upon actual costs
incurred by FEMA or upon analyses establishing an average of actual
costs incurred by FEMA in processing debts in similar stages of
delinquency.
(f) Standards for waiver of interest, penalties, and administrative
charges.
(1) The ACO or the ACO's designee may waive interest, penalties and
administrative charges, either in whole or in part, if the ACO or the
ACO's designee finds that:
(i) The debtor is financially unable to pay;
(ii) The Agency's enforcement policy will be adequately served if
there is a waiver in whole or in part;
(iii) The debtor has shown good cause, satisfactory to the ACO,
that the claim was not timely paid. If waiver is granted, the
administrative claims file shall be adequately documented; or
(iv) The ACO or the ACO's designee may waive imposition of interest
in accordance with standards set forth in 4 CFR 102.13 and
Sec. Sec. 11.50 and 11.51 of this subpart.
(2) The ACO, with the concurrence of the General Counsel, may waive
interest, penalties and administrative costs based on criteria set
forth in paragraphs (f)(3) through (f)(5) of this section. When such
charges are waived, the Agency Collections Officer or the ACO's
designee shall prepare a memorandum for the debt collection file
stating the reasons for not collecting such charges.
(3) If the costs of collection exceed the projected recovery then
interest, penalties and administrative costs may be waived.
(4) If FEMA determines that the debtor is unable to pay, as shown
by complete and sworn statements as to his or her assets and projected
income, then the ACO or the ACO's designee may waive interest,
penalties and administrative charges in whole or in part. If the
principal outstanding amount of the debt exceeds $5,000, the
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determination shall be made by the ACO. If the principal outstanding
amount of the debt is $5,000 or less, the determination may be made by
the DCO, the ACO, or a person designated by the ACO.
(5) The ACO or the ACO's designee may waive assessing interest,
penalty, and administrative charges if such assessment would be against
equity and good conscience or not in the best interests of the United
States. Examples include, but are not limited to:
(i) FEMA's undue delay in rendering a decision where the debtor had
requested an administrative review or review within the Agency. Under
these circumstances, interest and penalty would be waived during the
period of undue delay.
(ii) The amount of interest is so large, in relation to the
debtor's ability to pay that assessment of interest would leave the
debtor perpetually indebted to the United States.
(g) Nonapplicability. The provisions of this section do not apply
to debts owed by Federal agencies.
(h) Installment collections or partial payments. When a debtor pays
a debt either partially or in installments, the payments shall first be
applied to administrative costs, second to penalty charges, third to
accrued interest, and finally to principal. Partial payments shall be
deemed to be made when received at the FEMA office designated to
receive the payments. If the debtor owes more than one debt, then the
ACO or the ACO's designee will apply the partial payment to the oldest
debt first unless the debtor is making a voluntary installment payment.
Under voluntary circumstances, the debtor may designate to which debt
the payment is to be applied.
(i) Collection of interest, penalties, and administrative charges
while an appeal is pending. If the debtor requests administrative
review of the existence or the amount of the debt, interest, penalties,
and administrative charges may be waived or suspended by the ACO or the
ACO's designee under the following circumstances:
(1) If a State or local government requests review within the
Agency of a proposed referral to the Treasury Offset Program or an
administrative review of a proposed administrative offset, then the ACO
or the ACO's designee may waive interest, penalty or administrative
charges if the State or local government shows to the satisfaction of
the ACO or the ACO's designee that its taxes and other revenues would
be insufficient to allow the State or local government to provide
essential public services if FEMA were to collect interest, penalty,
administrative charges, or any two or more, either in whole or in part.
The ACO or the ACO's designee may require that the State or local
government provide FEMA with such economic, accounting, financial or
demographic data as the ACO or the ACO's designee may deem necessary to
reach an informed decision as to waiver.
(2) If a debtor notes an appeal or requests an administrative
review that is mandated by law, then FEMA shall not assess interest and
penalties while the appeal is pending from the time that the debtor
requests an administrative review or an appeal until the Agency has
taken final action on the administrative review or the appeal.
(3) When a debtor notes an appeal or requests an administrative
review that is permissive under statute or regulation, then interest,
penalties and administrative charges may be waived if:
(i) There is no fault or lack of good faith on the part of the
debtor and if the amount of interest, penalties and administrative
charges is so high in relation to affordable installment repayments
that the debt would never be repaid. In determining whether interest
and penalties should be waived, the ACO, the ACO's designee, or the DCO
may demand that the debtor provide such financial data as he or she may
determine is necessary to reach an informed decision.
(ii) FEMA unreasonably delays in rendering a decision on a debtor's
request for an administrative review or review within the Agency, then
the ACO or the ACO's designee may waive assessment of interest,
penalty, and administrative charge during the period of the
unreasonable delay.
(iii) The ACO or the ACO's designee may waive or suspend the
collection of interest, penalty and administrative charges, for good
cause shown and if such waiver or suspension would serve FEMA's
interests. The FEMA official making such a waiver shall prepare a
memorandum describing the circumstances and stating the reasons for the
grant of a waiver or suspension.
(j) Accrual of interest and penalty. Interest and penalty will
accrue on delinquent FEMA debts until FEMA receives payment at the
address designated by the ACO or the ACO's designee.
5. Sections 11.61 through 11.65 are revised to read as follows:
Sec. 11.61 Referral of delinquent debts to Department of the Treasury
for offsets against tax refunds.
(a) FEMA may refer delinquent debts to the Department of the
Treasury for offset against tax refunds in accordance with 31 U.S.C.
3720A and that Department's implementing regulations.
(b) FEMA will provide information to the Department of the Treasury
within time limits prescribed by the Secretary of the Treasury or his
or her designee and in accordance with agreements entered into between
FEMA and the Department of the Treasury and its constituent agencies.
(1) Information submitted to the Department of the Treasury shall
include a description of:
(i) The size and age of FEMA's inventory of delinquent debts; and
(ii) The prior collection efforts that the inventory reflects; and
(2) In accordance with time limits and record transmission
requirements established by the Department of the Treasury or its
constituent agencies, FEMA may submit magnetic media containing
information on debtors being referred to that Department for tax refund
offset. FEMA may use the electronic data transmissions facilities of
other federal agencies in transmitting data on debtors or for referral
of debts to the Department of the Treasury.
(c) FEMA shall establish a collect-call or toll-free telephone
number that the Department of the Treasury or its constituent agencies
will furnish to debtors whose refunds have been offset to obtain
information from FEMA concerning the offsets taken.
(d) Tax refund offset procedures described in Secs. 11.61 through
11.64 shall apply to debts owed to the United States that are past-due
and legally enforceable, and
(1) Except in the case of a judgment debt, the debt has been
delinquent for at least three months but has not been delinquent for
more than ten years at the time the offset is made; and
(2) Where FEMA has given the debtor at least 60 days from the date
of mailing of the notification (described in Sec. 11.63 of this part)
to request a review within FEMA and to present evidence that all or
part of the debt is not past-due or legally enforceable. If the debtor
has requested a review and presented evidence, then FEMA has considered
the debtor's evidence and reasons and has determined that all or a part
of the debt is past-due and legally enforceable; and
(3) With respect to which FEMA has notified or has made a
reasonable attempt to notify the debtor that the debt is past-due and,
unless repaid within 60 days of the mailing of the notification the
debt will be referred to the Department of the Treasury for offset
against any overpayment of tax; and
(4) Is at least $25.00; and
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(5) Meets all other requirements of 31 U.S.C. 3720A and the
Department of the Treasury regulations relating to the eligibility of a
debt for tax refund offset have been satisfied.
Sec. 11.62 Administrative charges incurred in referrals for tax refund
offset.
In accordance with Sec. 11.48(e), all administrative costs incurred
in connection with the referral of the debts to the Department of the
Treasury for collection by tax refund offset shall be added to the
amount owed by the debtor. Such costs will include, but not be limited
to, a pro-rata share of total costs of taking offsets incurred by the
Department of the Treasury in accordance with agreements executed by
FEMA, the Department of the Treasury and the Department's constituent
agencies.
Sec. 11.63 Notice to debtor before tax refund offset.
(a) FEMA will refer a debt to the Department of the Treasury for
tax refund offset only after FEMA:
(1) Makes a determination that the debt is owed to the United
States;
(2) Sends the debtor a notice of FEMA's intent to use Department of
the Treasury tax refund offset that provides the debtor with items of
information described in paragraphs (a)(2) (i) through (vii) as
follows:
(i) Debtor owes FEMA an amount due; and
(ii) The debt is past due; and
(iii) Unless the debt is repaid within 60 days of the date of
FEMA's mailing the notice of intent described above, FEMA intends to
collect the debt by requesting the Department of the Treasury to take
offset to reduce the debtor's federal tax refund by the amount of the
principal amount of the debt and all accumulated interest, penalty, and
other charges; and
(iv) Debtor has an opportunity to present arguments and evidence
within 60 days of mailing of the notice of intent that all or a part of
the debt is not due. A debtor requesting a review within the Agency
shall send these arguments to the FEMA office that sent the notice of
intent under Sec. 11.63(a)(2); and
(v) Debtor has had an opportunity to arrange to inspect and copy
records relating to the debt by mailing a request to the FEMA office
sending the notice of intent under Sec. 11.63(a)(2); and
(vi) If no reply is received from the debtor within 60 days of
mailing of the notice, FEMA may refer the debt to the U.S. Department
of the Treasury after reviewing the file and determining that the debt
is due; and
(vii) Debtor may negotiate a repayment agreement, satisfactory to
FEMA, for the repayment of the debt.
(b) If the debtor has presented evidence and arguments as described
in subsection (a)(2)(iv) FEMA will refer the debt to the Department of
the Treasury only after the FEMA Office of General Counsel has rendered
a decision under provisions of Secs. 11.64 and 11.65 of this subpart
concerning the debtor's arguments and evidence, if any, and has
determined that the debt is due either in whole or in part. If the
debtor has submitted evidence in accordance with paragraph
(a)(2)(iv)(g) of this section, the FEMA Office of General Counsel shall
notify the debtor of the Agency's final determination.
(c) If the debtor has questions concerning the debt or procedures
being used, the debtor may contact FEMA at an address and telephone
number provided in the notice of intent under Sec. 11.63(a)(2).
Sec. 11.64 Review within Federal Emergency Management Agency.
(a) Notification by debtor. A debtor receiving notice of intent
under Sec. 11.63(a)(2) has the right to present evidence and arguments
within 60 days of mailing of the notice of intent that all of the debt
is not past-due or not legally enforceable. To exercise this right, the
debtor must:
(1) Send a written request for review of evidence to the FEMA
office sending the notice of intent; and
(2) State in the request the amount disputed and the reasons why
the debtor believes that the debt is not past-due or is not legally
enforceable; and
(3) Include in the request any documents that the debtor wishes to
be considered, or state that additional information will be submitted
within the remainder of the 60-day period. FEMA is not obligated to
consider any of debtor's evidence received after the 60-day period,
except as specified in paragraph (c) of this section.
(b) Submission of evidence. The debtor may submit evidence that all
or part of the debt is not past due or legally enforceable along with
the notification required by paragraph (a) of this section. Debtor's
failure to submit the notification and evidence within the 60-day
period may result in FEMA's referral of the debt to the Department of
the Treasury with only a review by the ACO or the ACO's designee that
FEMA's records show that the debt is actually due FEMA.
(c) Late filed requests for review within FEMA. If the debtor
submits a request for review after the 60-day time limit in paragraph
(a) of this section, FEMA shall render a decision as described in
paragraph (d) of this section, but FEMA shall not stay offset action as
described in Sec. 11.65. However, if FEMA, after the review of the
debtor's evidence and arguments, determines that the debtor owes less
than the amounts that FEMA has taken through offset, then FEMA shall
refund any difference between any amounts offset and amounts that the
review within the Agency determines is actually owed.
(d) Review of the evidence. FEMA will review the debtor's arguments
and evidence in accordance with procedures set forth in Sec. 11.43(c).
Sec. 11.65 Stay of tax refund offset action.
If the debtor notifies FEMA that the debtor is exercising rights
described in Sec. 11.64 and submits evidence within time limits
specified in Sec. 11.64, any notice to the Department of the Treasury
concerning tax refund offset will be stayed until the issuance of a
written decision that sustains, amends, or ends collection action
resulting from FEMA's original debt collection decision.
Dated: December 31, 1997.
James L. Witt,
Director.
[FR Doc. 98-310 Filed 1-7-98; 8:45 am]
BILLING CODE 6718-01-P
