OFFSET OF PAST-DUE, LEGALLY ENFORCEABLE STATE INCOME TAX OBLIGATIONS AGAINST OVERPAYMENTS.

SEC. 3711. OFFSET OF PAST-DUE, LEGALLY ENFORCEABLE STATE INCOME TAX OBLIGATIONS AGAINST OVERPAYMENTS. (a) In General.— Section 6402 (relating to authority to make credits or refunds), as amended by section 3505, is amended by redesignating subsections (e) through (j) as subsections (f) through (k), respectively, and by inserting after subsection (d) the following new subsection: “(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;112 STAT. 780 “(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) 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.— 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 112 STAT. 781the 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).”. “(b) Disclosure of Certain Information to States Requesting Refund Offsets for Past-Due, Legally Enforceable State Income Tax Obligations.— (1) Paragraph (10) of section 6103(1) is amended by striking “(c) or (d)” each place it appears and inserting “(c), (d), or (e)”. (2) The heading for paragraph (10) is amended by striking “section 6402 (c) OR 6402 (d)” and inserting “subsection (c), (d), OR (e) of section 6402”. (c) Conforming Amendments.— (1) Subsection (a) of section 6402 is amended by striking “(c) and (d)” and inserting “(c), (d), and (e)”. (2) Paragraph (2) of section 6402(d) is amended by striking “and before such overpayment” and inserting “and before such overpayment is reduced pursuant to subsection (e) and before such overpayment”. (3) Subsection (f) of section 6402, as redesignated by subsection (a), is amended— (A) by striking “(c) or (d)” and inserting “(c), (d), or (e)”; and (B) by striking “Federal agency” and inserting “Federal agency or State”. (4) Subsection (h) of section 6402, as redesignated by subsection (a), is amended by striking “subsection (c)” and inserting “subsection (c) or (e)”. (d) Effective Date.— The amendments made by this section (other than subsection (d)) shall apply to refunds payable under section 6402 of the Internal Revenue Code of 1986 after December 31, 1999.