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1 1 (April 7, 2023)

handle is hein.crs/govelfj0001 and id is 1 raw text is: Congressional Research S& Infrmring the legislitive debate since 191 Updated April 7, 2023 Overview of the Treasury Department's Federal Payment Levy and Treasury Offset Programs Within the federal government, the U.S. Department of the Treasury, through its Bureau of Fiscal Service (BFS), is primarily responsible for collecting delinquent debt owed to federal, and in some cases, state government agencies. The BFS has two programs for collecting such debt. They differ by the type of debt each program collects. The Federal Payment Levy Program (FPLP) collects delinquent federal tax debt only. Under the program, the BFS collaborates with the Internal Revenue Service (IRS) to collect this debt by placing a continuous levy on eligible federal payments to delinquent taxpayers. The Treasury Offset Program (TOP) collects a variety of state tax and nontax debt and federal nontax debt. Under the TOP, the BFS collaborates with federal and state government agencies to collect delinquent debt (including past-due child support) by offsetting certain federal payments to delinquent individuals. Federal nontax debt consists of direct loans, defaulted guaranteed loans, administrative debt (e.g., salary and benefit overpayments), and unpaid fines and penalties. As Table 1 shows, most of the delinquent debt BFS collects is federal nontax and state tax and nontax debt. From FY2017 to FY2021, FPLP tax collections accounted for 7.5% of total delinquent federal and state debt collections through the TOP. Table I. Amount of Delinquent Federal and State Tax and Nontax Debt Collected Through the Federal Payment Levy Program (FPLP) and the Treasury Offset Program (TOP), FY20 1 7 to FY202 I (Millions of Dollars) TOP: State Tax TOP: and Federal Fiscal Nontax Nontax Year FPLP Debt Debt Total FY2017 $683 $2,850 $3,724 $7,257 FY2018 $679 $2,712 $3,805 $7,196 FY2019 $802 $2,592 $5,949 $9,343 FY2020 $507 $5,861 $4,041 $10,409 FY2021 $262 $3,837 $674 $4,773 Source: U.S. Department of the Treasury, U.S. Government Receivables and Debt Collection Activities of Federal Agencies, Fiscal Year 2021, Report to the Congress, November 2022. Both programs rely on the same BFS database of persons and companies with delinquent state and federal tax and nontax debt. Federal and state creditor agencies provide and update the information stored in the database. Origin and Operation of the FPLP The Federal Payment Levy Program was established by the Taxpayer Relief Act of 1997 (TRA97, P.L. 105-34) as Section 6331(h) of the Internal Revenue Code (IRC). Congress intended the FPLP to improve the collection of delinquent federal taxes in two ways. First, the program allowed the IRS to share with the BFS the taxpayer information needed to set up a continuous levy for specific taxpayer accounts. Second, IRC Section 6331 authorized the IRS to collect delinquent taxes through the offset of certain federal payments to debtors. Before TRA97, the IRS was not permitted to establish such a process. The BFS and IRS have managed the program since it began in July 2000. According to BFS's FY2023 budget request, the 10-year cost of developing and operating the FPLP is $220 million. The IRS reimburses the BFS for these services out of its appropriated funds. The Biden Administration has proposed allowing the BFS to cover its FPLP costs from FPLP collections; it argued that such a change would reduce administrative and overhead costs for the IRS and the BFS. It is unclear if Congress approved this change. The FPLP facilitates the collection of delinquent federal taxes by levying designated federal payments disbursed by BFS to businesses and individuals holding such debt. A levy remains in place until all delinquent taxes are paid in full, including penalties and accrued interest. Current law allows the following payments to be levied under the FPLP up to any specified limit: * up to 15% of federal employee retirement annuities; * 100% of federal payments to federal vendors; * 100% of federal employee travel advances or reimbursements; * up to 15% of Social Security Old Age and Survivor benefits and Railroad Retirement benefits, excluding disability and supplemental security income payments; and * up to 15% of some federal salaries. These limits mean, for example, that for someone who receives a monthly Social Security retirement benefit of

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