Tax debt offsets going to ancient balances due?

On Friday, the Washington Post ran an article describing the U.S. government’s offset of an individual’s state (Maryland) and federal income tax refunds, as a means to collect on a debt the government believes they owed.  The debt offset tool is nothing new, but what makes these offsets newsworthy is a) they were used to pay a debt that is over 35 years old, and b) they were incurred by a relative of the target of the refund offset:

A few weeks ago, with no notice, the U.S. government intercepted Mary Grice’s tax refunds from both the IRS and the state of Maryland. Grice had no idea that Uncle Sam had seized her money until some days later, when she got a letter saying that her refund had gone to satisfy an old debt to the government — a very old debt.

When Grice was 4, back in 1960, her father died, leaving her mother with five children to raise. Until the kids turned 18, Sadie Grice got survivor benefits from Social Security to help feed and clothe them.

Now, Social Security claims it overpaid someone in the Grice family — it’s not sure who — in 1977. After 37 years of silence, four years after Sadie Grice died, the government is coming after her daughter. Why the feds chose to take Mary’s money, rather than her surviving siblings’, is a mystery.

Across the nation, hundreds of thousands of taxpayers who are expecting refunds this month are instead getting letters like the one Grice got, informing them that because of a debt they never knew about — often a debt incurred by their parents — the government has confiscated their check.

The Post article provided a helpful link to the legislation that made this change, the Food, Conservation, and Energy Act of 2008, also known as that year’s version of the “farm bill”.  Given the theatrics of how the bill as a whole was treated, the inclusion of this provision is a rather mundane afterthought.

The legislating on this bill began in the summer of 2007, when House Resolution 2419 was scheduled for some votes on amendments.  As part of that process, the information and text of the amendments to be voted on were put together in House Report 110-261.  Amendment 1 was introduced by Representative Ron Kind of Wisconsin.  Although Kind’s name is on the amendment, the size of the amendment would indicate a group effort on it.  One of the provisions of Amendment 1 was this section to change Title 31, Section 3716 of the United States Code:


(a) Elimination.–Section 3716(e) of title 31, United States
Code, is amended to read as follows:
“(e)(1) Notwithstanding any other provision of law,
regulation, or administrative limitation, no limitation on the
period within which an offset may be initiated or taken
pursuant to this section shall be effective.
“(2) This section does not apply when a statute explicitly
prohibits using administrative offset or setoff to collect the
claim or type of claim involved.”.
(b) Application of Amendment.–The amendment made by
subsection (a) shall apply to any debt outstanding on or after
the date of the enactment of this Act.

This section would replace the version of 31 U.S.C. Section 3716(e) that placed a 10-year limit on a debt subject to the Administrative Offset.  When Rep. Kind introduced the amendment for a separate vote, it was rejected.  Other separate amendments were offered on July 26 and 27, most of them rejected or withdrawn.  Then the House, acting as the Committee of the Whole, offered a substitute version of the bill (link here, date and time stamp 1:19pm on 7/27/07).  Shortly thereafter, the substitute bill was voted on, and it passed 231-191, largely on partisan lines.  The full version of the substitute bill was published in the Congressional Record a few days later, which includes the change to the statute of limitations cited above.

Those who cover Congressional politics will probably have a more expert analysis on how and why the 2008 farm bill went the way it did.  It passed the Senate, was vetoed by President Bush, and then the House and Senate both overrode the veto.  This became Public Law 110-234, but it was discovered that the House had failed to enact one of the parts of the bill (Title III) when it got passed. (The provision we’re looking at is not in this title.)  To remedy this, another bill (H.R. 6124) was passed with the missing title included, and it was passed by the House and Senate in May and June of 2008, and again overriding President Bush’s veto, and this legislation became Public Law 110-246.

There’s not much in the president’s veto message to hint at this; the only possible indication is in this portion of President Bush’s veto message on June 18, 2008:

The bill also contains a wide range of other objectionable provisions, including one that restricts our ability to redirect food aid dollars for emergency use at a time of great need globally.  The bill does not include the requested authority to buy food in the developing world to save lives. Additionally, provisions in the bill raise serious constitutional concerns. For all the reasons outlined above, I must veto H.R. 2419, and I urge the Congress to extend current law for a year or more.

I have no political antennae on whether this was the case, but it’s possible the portion I highlighted was a veiled reference to the implications of this piece of the legislation.  Removing the statute of limitations on collecting on a debt that’s “outstanding”, in light of the action against Ms. Grice in the WaPo article, would raise questions about this enforcement being an “ex post facto” law.  In other words, if a debt arose in 1977 that, at the time, expired 10 years later, why would it be revived by an abrogation of the statute of limitations by a law enacted in 2008?  Again, I defer to the political coverage over this bill six years ago if I’m not accurate.  I don’t believe this portion of the farm bill received great attention, so I can accept that there are other explanations for President Bush’s statement.

To bring this back to the context of this little provision that is apparently enabling the federal government to take refunds to pay decades-old debt “owed” by relatives of the alleged debtors.  Given the context of this mammoth farm bill, the provision was likely an offhand provision that was designed to offset the costs of paying for the outlays of this bill.  The Congressional Budget Office, in a report issued October 5, 2007 (page 12), addressed this provision and some others (1):

Section 11314 would eliminate the statute of limitations applicable to collection of debt by administrative offset on any debt outstanding on or after the date of enactment of this act.  CBO estimates that this provision would enable the federal government to recover $35 million over the 2008-2012 period and $65 million over the 2008-2017 period.

This estimate would turn out to be understated.  According to the Washington Post article, the scope of this offset program has greatly exceeded expectations:

Since the drive to collect on very old debts began in 2011, the Treasury Department has collected $424 million in debts that were more than 10 years old. Those debts were owed to many federal agencies, but the one that has many Americans howling this tax season is the Social Security Administration, which has found 400,000 taxpayers who collectively owe $714 million on debts more than 10 years old. The agency expects to have begun proceedings against all of those people by this summer.

The power of the federal government to take federal and state tax refunds is nothing new, and a concise summary of what it can do is shown in a table here.

To summarize, a law passed was passed in 2008, over the president’s veto, that included a small provision allowing the federal government to take current refunds to pay for ancient debts.  And now we have descendants of supposed fraud perps footing the bill for their ancestors’ misdeeds.

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