[House Report 112-630]
[From the U.S. Government Publishing Office]
112th Congress Report
HOUSE OF REPRESENTATIVES
2d Session 112-630
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AMENDING TITLE 5, UNITED STATES CODE, TO MAKE CLEAR THAT ACCOUNTS IN
THE THRIFT SAVINGS FUND ARE SUBJECT TO CERTAIN FEDERAL TAX LEVIES
_______
July 30, 2012.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
_______
Mr. Issa, from the Committee on Oversight and Government Reform,
submitted the following
R E P O R T
[To accompany H.R. 4365]
[Including cost estimate of the Congressional Budget Office]
The Committee on Oversight and Government Reform, to whom
was referred the bill (H.R. 4365) to amend title 5, United
States Code, to make clear that accounts in the Thrift Savings
Fund are subject to certain Federal tax levies, having
considered the same, report favorably thereon with an amendment
and recommend that the bill as amended do pass.
CONTENTS
Page
Committee Statement and Views.................................... 2
Section-by-Section............................................... 3
Explanation of Amendments........................................ 3
Committee Consideration.......................................... 3
Application of Law to the Legislative Branch..................... 3
Statement of Oversight Findings and Recommendations of the
Committee...................................................... 4
Statement of General Performance Goals and Objectives............ 4
Federal Advisory Committee Act................................... 4
Unfunded Mandate Statement....................................... 4
Committee Estimate............................................... 4
Budget Authority and Congressional Budget Office Cost Estimate... 4
Changes in Existing Law Made by the Bill as Reported............. 6
The amendment is as follows:
At the end of the bill, add the following:
SEC. 2. DISPOSITION OF AMOUNTS.
Any potential revenue gain attributable to the enactment of
this Act, as determined by the Director of the Congressional
Budget Office--
(1) shall be deposited in the general fund of the
Treasury of the United States; and
(2) shall be used solely for purposes of deficit
reduction.
Committee Statement and Views
PURPOSE AND SUMMARY
H.R. 4365 provides the Internal Revenue Service (IRS)
explicit authority to levy an individual's Thrift Savings Plan
(TSP) account. Levy is the IRS's administrative authority to
seize a taxpayer's property, or right to property, to pay the
taxpayer's liability. The legislation would bring the TSP in
line with private sector 401(k) savings plans, which are
already subject to levy.
BACKGROUND AND NEED FOR LEGISLATION
Failure to pay federal taxes is a violation of the
Government Code of Ethics, which prescribes that federal
employees ``satisfy in good faith their obligations as good
citizens, including all just financial obligations, especially
those such as Federal, State or local taxes that are imposed by
law.''\1\
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\1\5 CFR 2635.809.
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Despite this requirement to comply with federal tax law,
279,000 federal employees owed $3.4 billion in federal taxes by
the end of 2010.\2\ When an employee in the private sector is
delinquent on his or her taxes, the IRS can levy the person's
401(k) account. Levy is the legal process by which the IRS
orders a third party to turn over property in its possession
that belongs to the delinquent taxpayer named in a notice of
levy.\3\ The IRS may establish a levy by attaching a tax lien
to a taxpayer's property as long as that property is not exempt
from levy, the IRS has provided notice of its intent to levy,
and the IRS provides notice to the taxpayer of his or her right
to an administrative hearing at least 30 days before it applies
the levy.
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\2\Internal Revenue Service, Federal Employee/Retiree Delinquency
Initiative (FERDI), Civilian/Military/Retiree Detail Report (2010).
\3\26 U.S.C. Sec. 6331(a).
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The TSP's governing statute includes an anti-alienation
provision that protects funds from execution, levy attachment,
garnishment, or other legal process, except to provide for
child support, alimony payments, restitution orders, certain
forfeitures, or certain obligations of the TSP Executive
Director.\4\ The anti-alienation provision does not
specifically mention the authority for the IRS to levy an
individual's TSP account. In the absence of such explicit
authorization in title 5, the Federal Retirement Thrift
Investment Board has not honored notice of levies against TSP
accounts.\5\
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\4\5 U.S.C. Sec. 8437(e)(3).
\5\Statement of Gregory T. Long, Executive Director, Federal
Retirement Thrift Investment Board, Before the House Subcommittee on
Federal Workforce, U.S. Postal Service and Labor Policy, 112th Cong.,
1-12 (July 27, 2011). Print.
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The IRS has asserted that IRS levies on TSP accounts should
be honored. In May 2010, the Department of Justice Office of
Legal Counsel provided a formal opinion which states the IRS is
allowed to levy TSP accounts under the Internal Revenue Code,
notwithstanding the anti-alienation provision in title 5 that
governs TSP accounts.\6\
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\6\Office of Legal Counsel, U.S. Department of Justice,
Applicability of Tax Levies Under 26 U.S.C. Sec. 6334 To Thrift Savings
Plan Accounts, 34 Opinions of Legal Counsel, (May 3, 2010).
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H.R. 4365 amends Section 8437(e)(3) of title 5, United
States Code to clarify that monies in the Thrift Savings Fund
accounts of federal employees are subject to IRS levy for
payment of delinquent taxes, in addition to the other
provisions currently enumerated.
LEGISLATIVE HISTORY
The Federal Employees' Retirement System Act of 1986\7\
(FERSA) provides that ``[e]xcept as provided in paragraph (3),
sums in the Thrift Savings Fund may not be assigned or
alienated and are not subject to execution, levy, attachment,
garnishment, or other legal process. . . .''\8\ FERSA excepted
from this provision court orders for child support, alimony and
enforcement of a judgment for physical, sexual, or emotional
abuse of a child.\9\ FERSA contained one other exception to the
anti-alienation prohibition outside of paragraph 5 U.S.C.
8437(e)(3), for a court ordered property settlement in
connection with a divorce, legal separation, or annulment.\10\
FERSA was subsequently amended to allow for forfeiture of
employer contributions and attributable earnings of TSP
accounts of employees convicted of a national security
offense.\11\ The Thrift Savings Plan Enhancement Act of 2009
made clear that Mandatory Victims' Restitution Act orders may
be satisfied from TSP accounts.\12\
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\7\P.L. 99-335, 100 Stat. 514.
\8\5 U.S.C. 8437(e)(2).
\9\5 U.S.C. 8437(e)(3).
\10\5 U.S.C. 8467(a)(1).
\11\P.L. 104-93, 109 Stat. 961, 965.
\12\P.L. 111-31, 123 Stat. 2815, 1856.
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Section-by-Section
Section 1. Amendments
This section makes clear that the Internal Revenue Service
may issue a levy against an individual's Thrift Savings Plan
account.
Section 2. Disposition of amounts
This section requires any increase in revenue resulting
from enactment of H.R. 4363 be deposited in the general fund of
the U.S. Treasury and used solely for deficit reduction.
Explanation of Amendments
Mr. Cummings offered an amendment directing that any
revenue gain attributable to enactment of H.R. 4365 be
deposited in the general fund of the U.S. Treasury for purposes
of deficit reduction. The amendment was agreed to by voice
vote.
Committee Consideration
On April 18, 2012, the Committee met in open session and
ordered reported favorably the bill, H.R. 4365, as amended, by
voice vote, a quorum being present.
Application of Law to the Legislative Branch
Section 102(b)(3) of Public Law 104-1 requires a
description of the application of this bill to the legislative
branch where the bill relates to the terms and conditions of
employment or access to public services and accommodations.
This bill provides the Internal Revenue Service explicit
authority to levy an individual's Thrift Savings Plan (TSP)
account. As such this bill does not relate to employment or
access to public services and accommodations.
Statement of Oversight Findings and Recommendations of the Committee
In compliance with clause 3(c)(1) of rule XIII and clause
(2)(b)(1) of rule X of the Rules of the House of
Representatives, the Committee's oversight findings and
recommendations are reflected in the descriptive portions of
this report.
Statement of General Performance Goals and Objectives
In accordance with clause 3(c)(4) of rule XIII of the Rules
of the House of Representatives, the Committee's performance
goals and objectives are reflected in the descriptive portions
of this report.
Federal Advisory Committee Act
The Committee finds that the legislation does not establish
or authorize the establishment of an advisory committee within
the definition of 5 U.S.C. App., Section 5(b).
Unfunded Mandate Statement
Section 423 of the Congressional Budget and Impoundment
Control Act (as amended by Section 101(a)(2) of the Unfunded
Mandates Reform Act, P.L. 104-4) requires a statement as to
whether the provisions of the reported bill include unfunded
mandates. In compliance with this requirement the Committee has
received a letter from the Congressional Budget Office included
herein.
Earmark Identification
H.R. 4365 does not include any congressional earmarks,
limited tax benefits, or limited tariff benefits as defined in
clause 9 of rule XXI.
Committee Estimate
Clause 3(d)(2) of rule XIII of the Rules of the House of
Representatives requires an estimate and a comparison by the
Committee of the costs that would be incurred in carrying out
H.R. 4365. However, clause 3(d)(3)(B) of that rule provides
that this requirement does not apply when the Committee has
included in its report a timely submitted cost estimate of the
bill prepared by the Director of the Congressional Budget
Office under section 402 of the Congressional Budget Act.
Budget Authority and Congressional Budget Office Cost Estimate
With respect to the requirements of clause 3(c)(2) of rule
XIII of the Rules of the House of Representatives and section
308(a) of the Congressional Budget Act of 1974 and with respect
to requirements of clause 3(c)(3) of rule XIII of the Rules of
the House of Representatives and section 402 of the
Congressional Budget Act of 1974, the Committee has received
the following cost estimate for H.R. 4365 from the Director of
Congressional Budget Office:
U.S. Congress,
Congressional Budget Office,
Washington, DC, July 19, 2012.
Hon. Darrell Issa,
Chairman, Committee on Oversight and Government Reform,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 4365, a bill to
amend title 5, United States Code, to make clear that accounts
in the Thrift Savings Fund are subject to certain federal tax
levies.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Barbara
Edwards.
Sincerely,
Douglas W. Elmendorf.
Enclosure.
H.R. 4365--A bill to amend title 5, United States Code, to make clear
that accounts in the Thrift Savings Fund are subject to certain
federal tax levies
H.R. 4365 would eliminate an apparent conflict that exists
in current law between the Federal Employees' Retirement System
Act of 1986 (FERSA) and the Internal Revenue Code. The Internal
Revenue Code provides broad authority to the Internal Revenue
Service to collect unpaid federal taxes by levy, a legal
process that includes ordering a third party to turn over
property in its possession that belongs to the taxpayer who has
unpaid tax liabilities. FERSA includes a provision (as
contained in U.S. Code, title 5, section 8437) that broadly
protects assets in Thrift Savings Plan accounts from levy, with
certain exceptions. Currently, those exceptions do not include
federal tax levies, and the Federal Retirement Thrift
Investment Board has refused to honor notices of such levies.
H.R. 4365 would include federal tax levies in the list of
exceptions.
The staff of the Joint Committee on Taxation (JCT)
estimates that enacting H.R. 4365 would increase revenues by
$24 million over the 2012-2022 period. The entire revenue
increase would result from an increase in on-budget revenues,
and thus pay-as-you-go procedures apply. Enacting the bill
would not affect direct spending.
The Statutory Pay-As-You-Go Act of 2010 establishes budget-
reporting and enforcement procedures for legislation affecting
direct spending or revenues. Enacting H.R. 4365 would result in
revenue gains in each year from 2013 to 2022. The net reduction
in the deficit is shown in the following table.
CBO ESTIMATE OF PAY-AS-YOU-GO EFFECTS OF H.R. 4365, AS ORDERED REPORTED BY THE HOUSE COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM ON APRIL 18, 2012
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By fiscal year, in millions of dollars--
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2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2012-2017 2012-2022
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NET INCREASE OR DECREASE (-) IN THE DEFICIT
Statutory Pay-As-You-Go Impact............ 0 -1 -2 -2 -2 -2 -3 -3 -3 -3 -3 -10 -24
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Source: Staff of the Joint Committee on Taxation.
Note: Components may not sum to totals because of rounding.
JCT has determined that the bill contains no
intergovernmental or private-sector mandates as defined in the
Unfunded Mandates Reform Act.
The CBO staff contact for this estimate is Barbara Edwards.
The estimate was approved by Frank Sammartino, Assistant
Director for Tax Analysis.
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 (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italic, existing law in which no change is
proposed is shown in roman):
TITLE 5, UNITED STATES CODE
* * * * * * *
PART III--EMPLOYEES
* * * * * * *
SUBPART G--INSURANCE AND ANNUITIES
* * * * * * *
CHAPTER 84--FEDERAL EMPLOYEES' RETIREMENT SYSTEM
* * * * * * *
SUBCHAPTER III--THRIFT SAVINGS PLAN
* * * * * * *
Sec. 8437. Thrift Savings Fund
(a) * * *
* * * * * * *
(e)(1) * * *
* * * * * * *
(3) Moneys due or payable from the Thrift Savings Fund to any
individual and, in the case of an individual who is an employee
or Member (or former employee or Member), the balance in the
account of the employee or Member (or former employee or
Member) shall be subject to legal process for the enforcement
of the individual's legal obligations to provide child support
or make alimony payments as provided in section 459 of the
Social Security Act (42 U.S.C. [659)] 659), the enforcement of
an order for restitution under section 3663A of title 18,
forfeiture under section 8432(g)(5) of this title, or an
obligation of the Executive Director to make a payment to
another person under section 8467 of this title[.], and shall
be subject to a Federal tax levy under section 6331 of the
Internal Revenue Code of 1986. For the purposes of this
paragraph, an amount contributed for the benefit of an
individual under section 8432(c)(1) (including any earnings
attributable thereto) shall not be considered part of the
balance in such individual's account unless such amount is
nonforfeitable, as determined under applicable provisions of
section 8432(g).
* * * * * * *