Federal Offset of Local Debt

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Federal Offset of Local Debt

• Make it work!
• (It will be worth your while!)
• Frank OLeary
• Treasurer
• Arlington County, Virginia

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The Basics of Debt OffsetDIDO
Data In
Dollars Out!
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The History of Federal Offset

• Created in the 1980s to allow states to submit
  unpaid child support debt to offset the Federal
  tax refunds of the deadbeat dads.
• Expanded to include debt owed to the Federal
  government (such as delinquent HUD loans).
• In 2000, states were allowed to submit delinquent
  tax debt.
• The Future?????

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Participating States in the Federal Debt Offset
Program
Alabama Arkansas Arizona California Connecticut Co
lorado Delaware Georgia Hawaii Idaho Illinois Indi
ana Iowa Kansas
Kentucky Louisiana Maine Maryland Massachusetts Mi
nnesota Mississippi Missouri Montana Nebraska New
Jersey New Mexico New York North Carolina
North Dakota Ohio Oklahoma Oregon Pennsylvania Rho
de Island South Carolina Utah Vermont Virginia Wes
t Virginia Wisconsin Washington, DC
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The Objective

• To allow states participating
• in the Federal Program
• to submit delinquent taxes
• owed to localities
• within the State.

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Status of Current Legislation

• HR 3060 was introduced on June 25, 2009 again by
  Congressman Moran and others of both parties to
  be referred to the House Ways and Means
  Committee.
• Chairman Charles Rangel (D-NY) has verbally
  expressed his support.

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The Process
Data In
Sam
Financial Management Services (FMS) Debt
Management Services (DMS)
Uncle
Dollars Out
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Fees to be Paid by Debtor

• In the event of a hit at the State level, the
  State receives a fee of 20 (in Virginia).
• In the event of a hit at the Federal level, the
  US Department of Treasury and the State each
  receive 25.
• In the event that the debt should prove to be
  unfounded, the locality must pay the US
  Department of Treasury the 25 fee.

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A Sticky Wicket?

• In order for a locality to participate in the
  federal program
• 1) its state must already be a participant in
  the federal program.
• 2) the state must have an intra-state program
  in operation.
• US Treasury and IRS refuse to try to directly
  work with thousands of localities.

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Participating States in Federal Offset With an
Intra- State Offset Program
Arkansas Arizona California Connecticut Iowa India
na Kansas Maryland Maine Massachusetts
Mississippi Montana North Carolina New
Jersey Rhode Island South Carolina Virginia West
Virginia Wisconsin Washington, DC
Note South Dakota offers a State Offset
Program, but does not participate in the Federal
Offset Program.
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To Help Pass HR 3060

• Please
• Send me an email at foleary_at_arlingtonva.us, so
  that I can add you to our national network and
  keep you informed.
• Work with your state department of taxation to
  lay the groundwork (if it does not already
  exist).
• Lobby your respective Congressman and US Senators.

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Why bother?

• Together we can make this happen and realize
  additional annual tax revenues of
• 2 - 3 Billion Dollars!

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