HR 1155 — Recovery of Stolen Checks Act

CHANGES IN EXISTING LAW MADE BY THE BILL, AS
 REPORTED

 A. Changes in Existing Law Proposed by the Bill, as Reported

 Pursuant to clause 3(e) of rule XIII of the Rules of the 
House of Representatives, the text of each section proposed to 
be repealed by the bill is shown below:

 Changes in Existing Law Made by the Bill, as Reported

 In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (new matter is 
printed in italics and existing law in which no change is 
proposed is shown in roman):

 INTERNAL REVENUE CODE OF 1986

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 Subtitle F--Procedure and Administration

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 CHAPTER 65--ABATEMENTS, CREDITS, AND
 REFUNDS

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 Subchapter A--PROCEDURE IN GENERAL

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SEC. 6402. AUTHORITY TO MAKE CREDITS OR REFUNDS.

 (a) General rule.--In the case of any overpayment, the 
Secretary, within the applicable period of limitations, may 
credit the amount of such overpayment, including any interest 
allowed thereon, against any liability in respect of an 
internal revenue tax on the part of the person who made the 
overpayment and shall, subject to subsections (c), (d), (e), 
and (f), refund any balance to such person.
 (b) Credits against estimated tax.--The Secretary is 
authorized to prescribe regulations providing for the crediting 
against the estimated income tax for any taxable year of the 
amount determined by the taxpayer or the Secretary to be an 
overpayment of the income tax for a preceding taxable year.
 (c) Offset of past-due support against overpayments.--The 
amount of any overpayment to be refunded to the person making 
the overpayment shall be reduced by the amount of any past-due 
support (as defined in section 464(c) of the Social Security 
Act) owed by that person of which the Secretary has been 
notified by a State in accordance with section 464 of such Act. 
The Secretary shall remit the amount by which the overpayment 
is so reduced to the State collecting such support and notify 
the person making the overpayment that so much of the 
overpayment as was necessary to satisfy his obligation for 
past-due support has been paid to the State. The Secretary 
shall apply a reduction under this subsection first to an 
amount certified by the State as past due support under section 
464 of the Social Security Act before any other reductions 
allowed by law. This subsection shall be applied to an 
overpayment prior to its being credited to a person's future 
liability for an internal revenue tax. For purposes of this 
subsection, any reference to a State shall include a reference 
to any Indian tribe or tribal organization receiving a grant 
under section 455(f) of the Social Security Act.
 (d) Collection of debts owed to Federal agencies.--
 (1) In general.--Upon receiving notice from any 
 Federal agency that a named person owes a past-due 
 legally enforceable debt (other than past-due support 
 subject to the provisions of subsection (c)) to such 
 agency, the Secretary shall--
 (A) reduce the amount of any overpayment 
 payable to such person by the amount of such 
 debt;
 (B) pay the amount by which such overpayment 
 is reduced under subparagraph (A) to such 
 agency; and
 (C) notify the person making such overpayment 
 that such overpayment has been reduced by an 
 amount necessary to satisfy such debt.
 (2) Priorities for offset.--Any overpayment by a 
 person shall be reduced pursuant to this subsection 
 after such overpayment is reduced pursuant to 
 subsection (c) with respect to past-due support 
 collected pursuant to an assignment under section 
 408(a)(3) of the Social Security Act (42 U.S.C. 
 608(a)(3)) and before such overpayment is reduced 
 pursuant to subsections (e) and (f) and before such 
 overpayment is credited to the future liability for tax 
 of such person pursuant to subsection (b). If the 
 Secretary receives notice from a Federal agency or 
 agencies of more than one debt subject to paragraph (1) 
 that is owed by a person to such agency or agencies, 
 any overpayment by such person shall be applied against 
 such debts in the order in which such debts accrued.
 (3) Treatment of OASDI overpayments.--
 (A) Requirements.--Paragraph (1) shall apply 
 with respect to an OASDI overpayment only if 
 the requirements of paragraphs (1) and (2) of 
 section 3720A(f) of title 31, United States 
 Code, are met with respect to such overpayment.
 (B) Notice; protection of other persons 
 filing joint return.--
 (i) Notice.--In the case of a debt 
 consisting of an OASDI overpayment, if 
 the Secretary determines upon receipt 
 of the notice referred to in paragraph 
 (1) that the refund from which the 
 reduction described in paragraph (1)(A) 
 would be made is based upon a joint 
 return, the Secretary shall--
 (I) notify each taxpayer 
 filing such joint return that 
 the reduction is being made 
 from a refund based upon such 
 return, and
 (II) include in such 
 notification a description of 
 the procedures to be followed, 
 in the case of a joint return, 
 to protect the share of the 
 refund which may be payable to 
 another person.
 (ii) Adjustments based on protections 
 given to other taxpayers on joint 
 return.--If the other person filing a 
 joint return with the person owing the 
 OASDI overpayment takes appropriate 
 action to secure his or her proper 
 share of the refund subject to 
 reduction under this subsection, the 
 Secretary shall pay such share to such 
 other person. The Secretary shall 
 deduct the amount of such payment from 
 amounts which are derived from 
 subsequent reductions in refunds under 
 this subsection and are payable to a 
 trust fund referred to in subparagraph 
 (C).
 (C) Deposit of amount of reduction into 
 appropriate trust fund.--In lieu of payment, 
 pursuant to paragraph (1)(B), of the amount of 
 any reduction under this subsection to the 
 Commissioner of Social Security, the Secretary 
 shall deposit such amount in the Federal Old-
 Age and Survivors Insurance Trust Fund or the 
 Federal Disability Insurance Trust Fund, 
 whichever is certified to the Secretary as 
 appropriate by the Commissioner of Social 
 Security.
 (D) OASDI overpayment.--For purposes of this 
 paragraph, the term ``OASDI overpayment'' means 
 any overpayment of benefits made to an 
 individual under title II of the Social 
 Security Act.
 (e) Collection of past-due, legally enforceable State income 
tax obligations.--
 (1) In general.--Upon receiving notice from any State 
 that a named person owes a past-due, legally 
 enforceable State income tax obligation to such State, 
 the Secretary shall, under such conditions as may be 
 prescribed by the Secretary--
 (A) reduce the amount of any overpayment 
 payable to such person by the amount of such 
 State income tax obligation;
 (B) pay the amount by which such overpayment 
 is reduced under subparagraph (A) to such State 
 and notify such State of such person's name, 
 taxpayer identification number, address, and 
 the amount collected; and
 (C) notify the person making such overpayment 
 that the overpayment has been reduced by an 
 amount necessary to satisfy a past-due, legally 
 enforceable State income tax obligation.
 If an offset is made pursuant to a joint return, the 
 notice under subparagraph (B) shall include the names, 
 taxpayer identification numbers, and addresses of each 
 person filing such return.
 (2) Offset permitted only against residents of State 
 seeking offset.--Paragraph (1) shall apply to an 
 overpayment by any person for a taxable year only if 
 the address shown on the Federal return for such 
 taxable year of the overpayment is an address within 
 the State seeking the offset.
 (3) Priorities for offset.--Any overpayment by a 
 person shall be reduced pursuant to this subsection--
 (A) after such overpayment is reduced 
 pursuant to--
 (i) subsection (a) with respect to 
 any liability for any internal revenue 
 tax on the part of the person who made 
 the overpayment;
 (ii) subsection (c) with respect to 
 past-due support; and
 (iii) subsection (d) with respect to 
 any past-due, legally enforceable debt 
 owed to a Federal agency; and
 (B) before such overpayment is credited to 
 the future liability for any Federal internal 
 revenue tax of such person pursuant to 
 subsection (b).
 If the Secretary receives notice from one or more 
 agencies of the State of more than one debt subject to 
 paragraph (1) or subsection (f) that is owed by such 
 person to such an agency, any overpayment by such 
 person shall be applied against such debts in the order 
 in which such debts accrued.
 (4) Notice; consideration of evidence.--No State may 
 take action under this subsection until such State--
 (A) notifies by certified mail with return 
 receipt the person owing the past-due State 
 income tax liability that the State proposes to 
 take action pursuant to this section;
 (B) gives such person at least 60 days to 
 present evidence that all or part of such 
 liability is not past-due or not legally 
 enforceable;
 (C) considers any evidence presented by such 
 person and determines that an amount of such 
 debt is past-due and legally enforceable; and
 (D) satisfies such other conditions as the 
 Secretary may prescribe to ensure that the 
 determination made under subparagraph (C) is 
 valid and that the State has made reasonable 
 efforts to obtain payment of such State income 
 tax obligation.
 (5) Past-due, legally enforceable State income tax 
 obligation.--For purposes of this subsection, the term 
 ``past-due, legally enforceable State income tax 
 obligation'' means a debt--
 (A)(i) which resulted from--
 (I) a judgment rendered by a court of 
 competent jurisdiction which has 
 determined an amount of State income 
 tax to be due; or
 (II) a determination after an 
 administrative hearing which has 
 determined an amount of State income 
 tax to be due; and
 (ii) which is no longer subject to judicial 
 review; or
 (B) which resulted from a State income tax 
 which has been assessed but not collected, the 
 time for redetermination of which has expired, 
 and which has not been delinquent for more than 
 10 years.
 For purposes of this paragraph, the term ``State income 
 tax'' includes any local income tax administered by the 
 chief tax administration agency of the State.
 (6) Regulations.--The Secretary shall issue 
 regulations prescribing the time and manner in which 
 States must submit notices of past-due, legally 
 enforceable State income tax obligations and the 
 necessary information that must be contained in or 
 accompany such notices. The regulations shall specify 
 the types of State income taxes and the minimum amount 
 of debt to which the reduction procedure established by 
 paragraph (1) may be applied. The regulations may 
 require States to pay a fee to reimburse the Secretary 
 for the cost of applying such procedure. Any fee paid 
 to the Secretary pursuant to the preceding sentence 
 shall be used to reimburse appropriations which bore 
 all or part of the cost of applying such procedure.
 (7) Erroneous payment to State.--Any State receiving 
 notice from the Secretary that an erroneous payment has 
 been made to such State under paragraph (1) shall pay 
 promptly to the Secretary, in accordance with such 
 regulations as the Secretary may prescribe, an amount 
 equal to the amount of such erroneous payment (without 
 regard to whether any other amounts payable to such 
 State under such paragraph have been paid to such 
 State).
 (f) Collection of unemployment compensation debts.--
 (1) In general.--Upon receiving notice from any State 
 that a named person owes a covered unemployment 
 compensation debt to such State, the Secretary shall, 
 under such conditions as may be prescribed by the 
 Secretary--
 (A) reduce the amount of any overpayment 
 payable to such person by the amount of such 
 covered unemployment compensation debt;
 (B) pay the amount by which such overpayment 
 is reduced under subparagraph (A) to such State 
 and notify such State of such person's name, 
 taxpayer identification number, address, and 
 the amount collected; and
 (C) notify the person making such overpayment 
 that the overpayment has been reduced by an 
 amount necessary to satisfy a covered 
 unemployment compensation debt.
 If an offset is made pursuant to a joint return, the 
 notice under subparagraph (C) shall include information 
 related to the rights of a spouse of a person subject 
 to such an offset.
 (2) Priorities for offset.--Any overpayment by a 
 person shall be reduced pursuant to this subsection--
 (A) after such overpayment is reduced 
 pursuant to--
 (i) subsection (a) with respect to 
 any liability for any internal revenue 
 tax on the part of the person who made 
 the overpayment;
 (ii) subsection (c) with respect to 
 past-due support; and
 (iii) subsection (d) with respect to 
 any past-due, legally enforceable debt 
 owed to a Federal agency; and
 (B) before such overpayment is credited to 
 the future liability for any Federal internal 
 revenue tax of such person pursuant to 
 subsection (b).
 If the Secretary receives notice from a State or States 
 of more than one debt subject to paragraph (1) or 
 subsection (e) that is owed by a person to such State 
 or States, any overpayment by such person shall be 
 applied against such debts in the order in which such 
 debts accrued.
 (3) Notice; consideration of evidence.--No State may 
 take action under this subsection until such State--
 (A) notifies the person owing the covered 
 unemployment compensation debt that the State 
 proposes to take action pursuant to this 
 section;
 (B) provides such person at least 60 days to 
 present evidence that all or part of such 
 liability is not legally enforceable or is not 
 a covered unemployment compensation debt;
 (C) considers any evidence presented by such 
 person and determines that an amount of such 
 debt is legally enforceable and is a covered 
 unemployment compensation debt; and
 (D) satisfies such other conditions as the 
 Secretary may prescribe to ensure that the 
 determination made under subparagraph (C) is 
 valid and that the State has made reasonable 
 efforts to obtain payment of such covered 
 unemployment compensation debt.
 (4) Covered unemployment compensation debt.--For 
 purposes of this subsection, the term ``covered 
 unemployment compensation debt'' means--
 (A) a past-due debt for erroneous payment of 
 unemployment compensation due to fraud or the 
 person's failure to report earnings which has 
 become final under the law of a State certified 
 by the Secretary of Labor pursuant to section 
 3304 and which remains uncollected;
 (B) contributions due to the unemployment 
 fund of a State for which the State has 
 determined the person to be liable and which 
 remain uncollected; and
 (C) any penalties and interest assessed on 
 such debt.
 (5) Regulations.--
 (A) In general.--The Secretary may issue 
 regulations prescribing the time and manner in 
 which States must submit notices of covered 
 unemployment compensation debt and the 
 necessary information that must be contained in 
 or accompany such notices. The regulations may 
 specify the minimum amount of debt to which the 
 reduction procedure established by paragraph 
 (1) may be applied.
 (B) Fee payable to Secretary.--The 
 regulations may require States to pay a fee to 
 the Secretary, which may be deducted from 
 amounts collected, to reimburse the Secretary 
 for the cost of applying such procedure. Any 
 fee paid to the Secretary pursuant to the 
 preceding sentence shall be used to reimburse 
 appropriations which bore all or part of the 
 cost of applying such procedure.
 (C) Submission of notices through Secretary 
 of Labor.--The regulations may include a 
 requirement that States submit notices of 
 covered unemployment compensation debt to the 
 Secretary via the Secretary of Labor in 
 accordance with procedures established by the 
 Secretary of Labor. Such procedures may require 
 States to pay a fee to the Secretary of Labor 
 to reimburse the Secretary of Labor for the 
 costs of applying this subsection. Any such fee 
 shall be established in consultation with the 
 Secretary of the Treasury. Any fee paid to the 
 Secretary of Labor may be deducted from amounts 
 collected and shall be used to reimburse the 
 appropriation account which bore all or part of 
 the cost of applying this subsection.
 (6) Erroneous payment to State.--Any State receiving 
 notice from the Secretary that an erroneous payment has 
 been made to such State under paragraph (1) shall pay 
 promptly to the Secretary, in accordance with such 
 regulations as the Secretary may prescribe, an amount 
 equal to the amount of such erroneous payment (without 
 regard to whether any other amounts payable to such 
 State under such paragraph have been paid to such 
 State).
 (g) Review of reductions.--No court of the United States 
shall have jurisdiction to hear any action, whether legal or 
equitable, brought to restrain or review a reduction authorized 
by subsection (c), (d), (e), or (f). No such reduction shall be 
subject to review by the Secretary in an administrative 
proceeding. No action brought against the United States to 
recover the amount of any such reduction shall be considered to 
be a suit for refund of tax. This subsection does not preclude 
any legal, equitable, or administrative action against the 
Federal agency or State to which the amount of such reduction 
was paid or any such action against the Commissioner of Social 
Security which is otherwise available with respect to 
recoveries of overpayments of benefits under section 204 of the 
Social Security Act.
 (h) Federal agency.--For purposes of this section, the term 
``Federal agency'' means a department, agency, or 
instrumentality of the United States, and includes a Government 
corporation (as such term is defined in section 103 of title 5, 
United States Code).
 (i) Treatment of payments to States.--The Secretary may 
provide that, for purposes of determining interest, the payment 
of any amount withheld under subsection (c), (e), or (f) to a 
State shall be treated as a payment to the person or persons 
making the overpayment.
 (j) Cross reference.--For procedures relating to agency 
notification of the Secretary, see section 3721 of title 31, 
United States Code.
 (k) Refunds to certain fiduciaries of insolvent members of 
affiliated groups.--Notwithstanding any other provision of law, 
in the case of an insolvent corporation which is a member of an 
affiliated group of corporations filing a consolidated return 
for any taxable year and which is subject to a statutory or 
court-appointed fiduciary, the Secretary may by regulation 
provide that any refund for such taxable year may be paid on 
behalf of such insolvent corporation to such fiduciary to the 
extent that the Secretary determines that the refund is 
attributable to losses or credits of such insolvent 
corporation.
 (l) Explanation of reason for refund disallowance.--In the 
case of a disallowance of a claim for refund, the Secretary 
shall provide the taxpayer with an explanation for such 
disallowance.
 (m) Earliest date for certain refunds.--No credit or refund 
of an overpayment for a taxable year shall be made to a 
taxpayer before the 15th day of the second month following the 
close of such taxable year if a credit is allowed to such 
taxpayer under section 24 (by reason of subsection (d) thereof) 
or 32 for such taxable year.
 (n) Misdirected direct deposit refund.--Not later than the 
date which is 6 months after the date of the enactment of the 
Taxpayer First Act, the Secretary shall prescribe regulations 
to establish procedures to allow for--
 (1) taxpayers to report instances in which a refund 
 made by the Secretary by electronic funds transfer was 
 not transferred to the account of the taxpayer;
 (2) coordination with financial institutions for the 
 purpose of--
 (A) identifying the accounts to which 
 transfers described in paragraph (1) were made; 
 and
 (B) recovery of the amounts so transferred; 
 and
 (3) the refund to be delivered to the correct account 
 of the taxpayer.
 (o) Election to Receive Certain Replacement Refunds by Direct 
Deposit.--Not later than the date which is 6 months after the 
date of the enactment of this subsection, the Secretary shall 
prescribe regulations to establish procedures to allow for 
taxpayers, which are otherwise eligible to receive an amount by 
paper check in replacement of a lost or stolen paper check 
which was previously sent by the Secretary as a refund of an 
overpayment of tax, to elect to receive such amount by direct 
deposit in lieu of receiving such replacement paper check.

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