Claims Collection

CourtNational Endowment For The Humanities,National Foundation On The Arts And Humanities
Citation86 FR 66964
Published date24 November 2021
Record Number2021-23742
Federal Register, Volume 86 Issue 224 (Wednesday, November 24, 2021)
[Federal Register Volume 86, Number 224 (Wednesday, November 24, 2021)]
                [Rules and Regulations]
                [Pages 66964-66975]
                From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
                [FR Doc No: 2021-23742]
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                NATIONAL FOUNDATION ON THE ARTS AND HUMANITIES
                National Endowment for the Humanities
                45 CFR Part 1177
                RIN 3136-AA38
                Claims Collection
                AGENCY: National Endowment for the Humanities; National Foundation on
                the Arts and the Humanities.
                ACTION: Direct final rule.
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                SUMMARY: The National Endowment for the Humanities (NEH) is revising
                its Claims Collection regulation in accordance with the Debt Collection
                Improvement Act of 1996 (DCIA), as implemented by the Department of
                Justice (DOJ) and the Department of Treasury (Treasury) in the revised
                Federal Claims Collection Standards (FCCS). This final rule revises
                NEH's rules and procedures for administrative collection, offset,
                compromise, suspension, and termination of collection activity for
                civil claims for money, funds, or property. Additionally, this final
                rule revises the rules and procedures that NEH follows to refer civil
                claims to Treasury, Treasury-designated debt collection centers, or DOJ
                so that Treasury or DOJ may collect the civil claim through further
                administrative action or litigation, as applicable.
                DATES: This rule is effective February 22, 2022 without further action,
                unless adverse comment is received by December 27, 2021. If adverse
                comment is received, NEH will publish a timely withdrawal of the rule
                in the Federal Register.
                ADDRESSES: You may send comments by email to [email protected].
                 Instructions: Include ``Claims Collection'' and RIN 3136-AA38 in
                the subject line of the email.
                FOR FURTHER INFORMATION CONTACT: Elizabeth Voyatzis, Deputy General
                Counsel, Office of the General Counsel, National Endowment for the
                Humanities, 400 7th Street SW, Room 4060, Washington, DC 20506; (202)
                606-8322; [email protected].
                SUPPLEMENTARY INFORMATION:
                1. Background
                 The original FCCS provided guidance for implementing the Debt
                Collection Act of 1982, Public Law 97-365 on a government-wide basis.
                NEH implemented the FCCS in 1986 in its Claims Collection regulation,
                set forth at 45 CFR 1177 et seq. As mandated by the DCIA, in 2000, DOJ
                and Treasury jointly promulgated the revised FCCS, set forth at 31 CFR
                900-904, to reflect the DCIA's legislative changes to federal debt
                collection procedures. The revised FCCS superseded the original FCCS.
                As a result, NEH is revising its Claims Collection regulation to
                conform with the DCIA and the current FCCS.
                2. Basic Provisions
                 In accordance with the requirements of the DCIA and the revised
                FCCS, this rule revises NEH's rules and procedures for the
                administrative collection, offset, compromise, suspension, and
                termination of collection activity for civil claims for money, funds,
                or property, as defined by 31 U.S.C. 3701(b). Additionally, this rule
                revises the rules and procedures that NEH will use to refer applicable
                civil claims to Treasury, Treasury-designated debt collection centers,
                or DOJ for collection by further administrative action or litigation.
                This rule affects NEH's debtors, but it does not apply to claims
                between federal agencies.
                 This rule incorporates the following changes to NEH's current
                Claims Collection regulation (45 CFR 1177, et seq.):
                A. Demand Letter
                 One demand letter should be sufficient. The demand letter will
                include: (1) The applicable standards NEH follows for imposing any
                interest, penalties, or administrative costs; (2) NEH's policies
                regarding its use of collection agencies, federal salary offset, tax
                refund offset, administrative offset, and litigation; (3) any rights
                the debtor may have to seek review of NEH's determination of the debt
                and to enter into a reasonable repayment agreement; and (4) information
                regarding NEH's remedies to enforce payment of the debt.
                [[Page 66965]]
                B. Mutual Releases
                 In all appropriate instances, NEH and debtors will exchange mutual
                releases of non-tax liabilities when compromising a claim.
                C. Increase in Amount
                 The principal claim amount for which NEH is authorized to
                compromise, suspend, or terminate collection activity--without
                concurrence by DOJ--will increase from $20,000 to $100,000.
                Additionally, the minimum claim amount that NEH may refer to DOJ for
                litigation will increase from $600 to $2,500.
                D. Transferring or Referring Delinquent Debt
                 There are new procedures for transferring or referring delinquent
                debt to Treasury or a Treasury-designated debt collection center for
                debt collection.
                E. Centralized Administrative Offset
                 There are new debt collection procedures for disbursing officials
                to follow when conducting mandatory centralized administrative offset.
                F. Mandatory Credit Bureau Reporting
                 There are new debt collection procedures for mandatory credit
                bureau reporting.
                G. Prohibition Against Federal Financial Assistance
                 There are new debt collection procedures prohibiting federal
                financial assistance, which includes grants, cooperative agreements,
                contracts, loans, loan guarantees, and loan insurance to debtors,
                unless waived by NEH's Chairperson (the ``Chairperson'') or the
                Chairperson's designee.
                Executive Order 12866, Regulatory Planning and Review, and Executive
                Order 13563, Improving Regulation and Regulatory Review
                 This action is not a significant regulatory action and was
                therefore not submitted to the Office of Management and Budget for
                review.
                Executive Order 13771, Reducing Regulations and Controlling Regulatory
                Costs
                 This action is not expected to be an Executive Order 13771
                regulatory action because this action is not significant under
                Executive Order 12866.
                Executive Order 13132, Federalism
                 This rulemaking does not have federalism implications. It will not
                have substantial direct effects on the states, on the relationship
                between the national government and the states, or on the distribution
                of power and responsibilities among the various levels of government.
                Executive Order 12988, Civil Justice Reform
                 This rulemaking meets the applicable standards set forth in section
                3(a) and 3(b)(2) of Executive Order 12988. Specifically, this
                rulemaking is written in clear language designed to help reduce
                litigation.
                Executive Order 13175, Indian Tribal Governments
                 Under the criteria in Executive Order 13175, NEH evaluated this
                rulemaking and determined that it will not have any potential effects
                on Federally recognized Indian Tribes.
                Executive Order 12630, Takings
                 Under the criteria in Executive Order 12630, this rulemaking does
                not have significant takings implications. Therefore, a takings
                implication assessment is not required.
                Administrative Procedure Act of 1946
                 NEH finds good cause to issue this regulation as a direct final
                rule, without prior notice and comment, because the agency views it as
                a noncontroversial amendment and anticipates no significant adverse
                comment. This rulemaking merely conforms NEH's claims collection
                regulation to the standards of agency practice and procedure previously
                jointly promulgated by DOJ and Treasury according to the DCIA.
                Therefore, under 5 U.S.C. 553(b)(3)(A), this rule is not subject to the
                Administrative Procedure Act's requirements for a notice of proposed
                rulemaking.
                Regulatory Flexibility Act of 1980
                 This rulemaking will not have a significant adverse impact on a
                substantial number of small entities, including small businesses, small
                governmental jurisdictions, or certain small not-for-profit
                organizations.
                Paperwork Reduction Act of 1995
                 This rulemaking does not impose an information collection burden
                under the Paperwork Reduction Act. This action contains no provisions
                constituting a collection of information pursuant to the Paperwork
                Reduction Act.
                Unfunded Mandates Act of 1995
                 This rulemaking does not contain a Federal mandate that will result
                in the expenditure by State, local, and Tribal governments, in the
                aggregate, or by the private sector of $100 million or more in any one
                year.
                National Environmental Policy Act of 1969
                 This rulemaking will not have a significant effect on the human
                environment.
                Small Business Regulatory Enforcement Fairness Act of 1996
                 This rulemaking will not be a major rule as defined in section 804
                of the Small Business Regulatory Enforcement Fairness Act of 1996. This
                rulemaking will not result in an annual effect on the economy of $100
                million or more, a major increase in costs or prices, significant
                adverse effects on competition, employment, investment, productivity,
                innovation, or the ability of United States-based companies to compete
                with foreign-based companies in domestic and export markets.
                E-Government Act of 2002
                 All information about NEH required to be published in the Federal
                Register may be accessed at www.neh.gov. The website https://www.regulations.gov contains electronic dockets for NEH's rulemakings
                under the Administrative Procedure Act of 1946.
                Plain Writing Act of 2010
                 To ensure this rulemaking was written in plain and clear language
                so that it can be used and understood by the public, NEH modeled the
                language of this rulemaking on the Federal Plain Language Guidelines.
                List of Subjects in 45 CFR 1177
                 Administrative practice and procedure, Claims, Debt, Government
                employees, Privacy.
                0
                For the reasons set forth in the preamble, the National Endowment for
                the Humanities revises 45 CFR part 1177 to read as follows:
                PART 1177--CLAIMS COLLECTION
                Subpart A--Scope of Standards
                Sec.
                1177.1 Prescription of standards.
                1177.2 Definitions and construction.
                1177.3 Antitrust, fraud, and tax and interagency claims excluded.
                1177.4 Compromise, waiver, or disposition under other statutes not
                precluded.
                1177.5 Form of payment.
                1177.6 Subdivision of claims not authorized.
                1177.7 Required administrative proceedings.
                1177.8 No private rights created.
                Subpart B--Standards for the Administrative Collection of Claims
                1177.9 Aggressive NEH collection activity.
                1177.10 Demand for payment.
                1177.11 Collection by administrative offset.
                1177.12 Reporting debts.
                [[Page 66966]]
                1177.13 Contracting with private collection contractors and with
                entities that locate and recover unclaimed assets.
                1177.14 Suspension or revocation of eligibility for federal
                financial assistance.
                1177.15 Liquidation of collateral.
                1177.16 Collection in installments.
                1177.17 Interest, penalties, and administrative costs.
                1177.18 Analysis of costs.
                1177.19 Use and disclosure of mailing addresses.
                1177.20 Exemptions.
                Subpart C--Standards for the Compromise of Claims
                1177.21 Scope and application.
                1177.22 Bases for compromise.
                1177.23 Enforcement policy.
                1177.24 Joint and several liability.
                1177.25 Further review of compromise offers.
                1177.26 Consideration of tax consequences to the Government.
                1177.27 Mutual releases of the debtor and the Government.
                Subpart D--Standards for Suspending or Terminating Collection Activity
                1177.28 Scope and application.
                1177.29 Suspension of collection activity.
                1177.30 Termination of collection activity.
                1177.31 Exception to termination.
                1177.32 Discharge of indebtedness; reporting requirements.
                Subpart E--Referrals to the Department of Justice
                1177.33 Prompt referral.
                1177.34 Claims Collection Litigation Report.
                1177.35 Preservation of evidence.
                1177.36 Minimum amount of referrals to the Department of Justice.
                 Authority: 31 U.S.C. 3711, 3716-3719; Pub. L. 104-134; 31 CFR
                900-904.
                Subpart A--Scope of Standards
                Sec. 1177.1 Prescription of standards.
                 (a) The National Endowment for the Humanities (NEH) is issuing the
                regulation the regulations in this part pursuant to 31 CFR 900-904 and
                under the authority contained in 31 U.S.C. 3711(d)(2). The regulations
                in this part prescribe the standards that NEH will use in the
                administrative collection, offset, compromise, suspension, and
                termination of collection activity for civil claims for money, funds,
                or property, as defined by 31 U.S.C. 3701(b), unless specific Federal
                agency statues or regulations apply to such activities or, as provided
                for by Title 11 of the United States Code, when the claims involve
                bankruptcy. Federal agencies include agencies of the executive,
                legislative, and judicial branches of the Government, including
                Government corporations. The regulations in this part also prescribe
                standards for referring debts to the Department of Justice (DOJ) for
                litigation. Additional guidance is contained in the Office of
                Management and Budget's circular A-129 (Revised), ``Policies for
                Federal Credit Programs and Non-Tax Receivables,'' the Department of
                the Treasury's (Treasury) ``Managing Federal Receivables,'' and other
                publications concerning debt collection and debt management. These
                publications are available from the Debt Management Services, Financial
                Management Service, Department of the Treasury, 401 14th Street SW,
                Room 151, Washington, DC 20227.
                 (b) Additional rules governing centralized administrative offset
                and the transfer of delinquent debts to Treasury or Treasury-designated
                debt collection centers for collection (cross-servicing) under the Debt
                Collection Improvement Act of 1996, Public Law 104-134, 110 Stat. 1321,
                1358 (April 26, 1996) (DCIA), are issued in separate regulations by
                Treasury. Rules governing the use of certain debt collection tools
                created under the DCIA, such as administrative wage garnishment, also
                are issued in separate regulations by Treasury. See generally 31 CFR
                285.
                 (c) NEH is not limited to the remedies contained in this part and
                may use all authorized remedies, including alternative dispute
                resolution and arbitration, to collect civil claims, to the extent that
                such remedies are not inconsistent with the Federal Claims Collection
                Act, as amended, Public Law 89-508, 80 Stat. 308 (July 19, 1966), the
                Debt Collection Act of 1982, Public Law 97-365, 96 Stat. 1749 (October
                25, 1982), the DCIA, or other relevant statutes. The regulations in
                this part are not intended to impair NEH's common law rights to collect
                debts.
                 (d) Standards and policies regarding the classification of debt for
                accounting purposes (for example, write off of uncollectible debt) are
                contained in the Office of Management and Budget's Circular A-129
                (Revised), ``Policies for Federal Credit Programs and Non-Tax
                Receivables.''
                Sec. 1177.2 Definitions and construction.
                 (a) For the purposes of the standards in this part, the terms
                ``claim'' and ``debt'' are synonymous and interchangeable. They refer
                to an amount of money, funds, or property that an agency official has
                determined to be due the United States from any person, organization,
                or entity, except another Federal agency. For the purposes of
                administrative offset under 31 U.S.C. 3716, the terms ``claim'' and
                ``debt'' include an amount of money, funds, or property owed by a
                person to a State (including past-due support being enforced by a
                State), the District of Columbia, American Samoa, Guam, the United
                States Virgin Islands, the Commonwealth of the Northern Mariana
                Islands, or the Commonwealth of Puerto Rico.
                 (b) ``Chairperson'' means the Chairperson of NEH or the
                Chairperson's designee.
                 (c) A debt is ``delinquent'' if it has not been paid by the date
                specified in the initial written demand for payment or applicable
                agreement or instrument (including a post-delinquency payment
                agreement), unless other satisfactory payment arrangements have been
                made.
                 (d) Words in the plural form shall include the singular and vice
                versa, and words signifying the masculine gender shall include the
                feminine and vice versa. The terms ``includes'' and ``including'' do
                not exclude matters not listed but do include matters that are in the
                same general class.
                 (e) ``Recoupment'' is a special method for adjusting debts arising
                under the same transaction or occurrence. For example, obligations
                arising under the same contract generally are subject to recoupment.
                 (f) Unless otherwise stated, ``Secretary'' means the Secretary of
                the Treasury or the Secretary's delegate.
                Sec. 1177.3 Antitrust, fraud, and tax and interagency claims
                excluded.
                 (a) The standards in this part relating to compromise, suspension,
                and termination of collection activity do not apply to any debt based
                in whole or in part on conduct that violates the antitrust laws or to
                any debt involving fraud, the presentation of a false claim, or
                misrepresentation on the part of the debtor or any party having an
                interest in the claim. Only DOJ has the authority to compromise,
                suspend, or terminate collection activity on such claims. The standards
                in this part relating to the administrative collection of claims do
                apply, but only to the extent authorized by DOJ in a particular case.
                Upon identification of a claim based in whole or in part on conduct in
                violation of the antitrust laws or any claim involving fraud, the
                presentation of a false claim, or misrepresentation on the part of the
                debtor or any party having an interest in the claim, NEH shall promptly
                refer the case to DOJ for action. At its discretion, DOJ may return the
                claim to NEH for further handling, in accordance with the standards in
                this part.
                 (b) This part does not apply to tax debts.
                 (c) This part does not apply to claims between Federal agencies.
                NEH will attempt to resolve interagency claims by negotiation in
                accordance with
                [[Page 66967]]
                Executive Order 12146 (3 CFR, 1979 Comp., pp. 409-412).
                Sec. 1177.4 Compromise, waiver, or disposition under other statutes
                not precluded.
                 Nothing in this part precludes NEH's disposition of any claim under
                statutes and implementing regulations other than 31 U.S.C. 37,
                subchapter II (Claims of the United States Government). See e.g., the
                Federal Medical Care Recovery Act, Public Law 87-693, 76 Stat. 593
                (September 25, 1962) (codified at 42 U.S.C. 2651 et seq.), and
                applicable regulations, 28 CFR 43. In such cases, the laws and
                regulations that are specifically applicable to NEH's claims collection
                activities generally take precedence over this part.
                Sec. 1177.5 Form of payment.
                 Debtors may pay claims in the form of money or, when a contractual
                basis exists, the Government may demand the return of specific property
                or the performance of specific services.
                Sec. 1177.6 Subdivision of claims not authorized.
                 NEH will not subdivide debts in order to avoid the monetary ceiling
                established by 31 U.S.C. 3711(a)(2). NEH will consider a debtor's
                liability arising from a particular transaction or contract as a single
                debt in determining whether the debt is one of less than $100,000
                (excluding interest, penalties, and administrative costs) or such
                higher amount as the Attorney General shall from time to time prescribe
                for purposes of compromising, suspending, or terminating collection
                activity.
                Sec. 1177.7 Required administrative proceedings.
                 NEH is not required to omit, foreclose, or duplicate administrative
                proceedings required by contract or other laws or regulations.
                Sec. 1177.8 No private rights created.
                 The standards in this part do not create any right or benefit,
                substantive or procedural, enforceable at law or in equity by a party
                against the United States, its agencies, its officers, or any other
                person, nor shall NEH's failure to comply with any of the provisions of
                this part be available to any debtor as a defense.
                Subpart B--Standards for the Administrative Collection of Claims
                Sec. 1177.9 Aggressive NEH collection activity.
                 (a) NEH will aggressively collect all debts that arise out of its
                activities, or that are referred or transferred for collection services
                to NEH. NEH will promptly undertake collection activities and take
                follow-up action as necessary. Nothing in 31 CFR 900 through 904
                requires DOJ, Treasury, or other Treasury-designated debt collection
                centers to duplicate collection activities previously undertaken by NEH
                or to perform collection activities that NEH should have undertaken.
                 (b) Debts that NEH refers or transfers to Treasury or Treasury-
                designated debt collection centers under the authority of 31 U.S.C.
                3711(g) will be serviced, collected, or compromised, or the collection
                action will be suspended or terminated, in accordance with the
                statutory requirements and authorities applicable to the collection of
                such debts.
                 (c) NEH will cooperate with other agencies in debt collection
                activities.
                 (d) NEH will consider referring debts that are less than 180 days
                delinquent to Treasury or to Treasury-designated debt collection
                centers to accomplish efficient, cost effective debt collection.
                Treasury is a debt collection center, is authorized to designate other
                Federal agencies as debt collection centers based on their performance
                in collecting delinquent debts, and may withdraw such designations.
                Referrals to debt collection centers are at the discretion of, and for
                a time period acceptable to, the Secretary. Referrals may be for
                servicing, collection, compromise, suspension, or termination of
                collection action.
                 (e) NEH will transfer to the Secretary any debt that has been
                delinquent for a period of 180 days or more so that the Secretary may
                take appropriate action to collect the debt or terminate collection
                action. See 31 CFR 285.12 (Transfer of Debts to Treasury for
                Collection). This requirement does not apply to any debt that:
                 (1) Is in litigation or foreclosure;
                 (2) Will be disposed of under an approved asset sale program;
                 (3) Has been referred to a private collection contractor for a
                period of time acceptable to the Secretary;
                 (4) Is at a debt collection center for a period of time acceptable
                to the Secretary (see paragraph (d) of this section);
                 (5) Will be collected under internal offset procedures within three
                years after the debt first became delinquent; or
                 (6) Is exempt from this requirement based on a determination by the
                Secretary that exemption for a certain class of debt is in the best
                interests of the United States. NEH may request that the Secretary
                exempt specific classes of debts.
                 (e) Agencies operating Treasury-designated debt collection centers
                are authorized to charge a fee for services rendered regarding referred
                or transferred debts. NEH may pay the fee out of amounts it collects
                and may add the fee to the debt as an administrative cost (see Sec.
                1177.18).
                Sec. 1177.10 Demand for payment.
                 (a) NEH will promptly make a written demand, as described in
                paragraph (b) of this section, upon a debtor of the United States in
                terms that inform the debtor of the consequences of failing to
                cooperate with NEH to resolve the debt. The specific content, timing,
                and number of demand letters will depend upon the type and amount of
                the debt and the debtor's response, if any, to NEH's letters or
                telephone calls. Generally, one demand letter should suffice. In
                determining the timing of the demand letter(s), NEH will give due
                regard to the need to refer debts promptly to DOJ for litigation, in
                accordance with Sec. 1177.33 or otherwise. When necessary to protect
                the Government's interest (for example, to prevent a statute of
                limitations from running), NEH may precede written demand by other
                appropriate actions under this part, including immediate referral for
                litigation.
                 (b) Demand letters will inform the debtor of:
                 (1) The basis for the indebtedness and the rights, if any, the
                debtor may have to seek review within NEH;
                 (2) The applicable standards for imposing any interest, penalties,
                or administrative costs;
                 (3) The date by which the debtor should make payment in order to
                avoid late charges (i.e., interest, penalties, and administrative
                costs) and enforced collection, which generally should not be more than
                thirty (30) days from the date that NEH mails or hand-delivers the
                demand letter; and
                 (4) The name, address, and phone number of a contact person or
                office within NEH.
                 (c) NEH will exercise care to ensure that demand letters are mailed
                or hand-delivered on the same day that they are dated. There is no
                prescribed format for demand letters. NEH will utilize demand letters
                and procedures that will lead to the earliest practicable determination
                of whether the agency can resolve the debt administratively or must
                refer it for litigation.
                 (d) NEH will include in demand letters such items as the agency's
                willingness to discuss alternative methods of payment; its policies
                with respect to the use of credit bureaus, debt collection centers, and
                collection agencies; its remedies to enforce payment of the debt
                (including
                [[Page 66968]]
                assessment of interest, administrative costs and penalties,
                administrative garnishment, the use of collection agencies, Federal
                salary offset, tax refund offset, administrative offset, and
                litigation); the requirement that any debt delinquent for more than 180
                days be transferred to Treasury for collection; and, depending on
                applicable statutory authority, the debtor's entitlement to
                consideration of a waiver.
                 (e) NEH will respond promptly to communications from debtors,
                within thirty (30) days whenever feasible, and will advise debtors who
                dispute debts to furnish available evidence to support their
                contentions.
                 (f) Prior to initiating the demand process, or at any time during
                or after completing the demand process, if NEH determines to pursue, or
                is required to pursue, offset, it will follow the offset procedures in
                Sec. 1177.11. The availability of funds or money for debt satisfaction
                by offset, and NEH's determination to pursue collection by offset, will
                release NEH from further compliance with paragraphs (a), (b), (c), and
                (d) of this section.
                 (g) Prior to referring a debt for litigation, NEH will advise each
                person it determines to be liable for the debt that, unless the agency
                can collect the debt administratively, it may initiate litigation. This
                notification will comply with Executive Order 12988 (3 CFR, 1996 Comp.,
                pp. 157-163) and may be given as part of a demand letter under
                paragraph (b) of this section or in a separate document. NEH will
                notify DOJ that it has given this notice.
                 (h) When NEH learns that a bankruptcy petition has been filed with
                respect to a debtor, before proceeding with further collection action,
                the agency will immediately seek legal advice from its Office of the
                General Counsel concerning the impact of the Bankruptcy Code on any
                pending or contemplated collection activities. Unless NEH determines
                that the automatic stay imposed at the time of filing pursuant to 11
                U.S.C. 362 has been lifted or is no longer in effect, in most cases NEH
                will immediately stop collection activity against the debtor.
                 (1) After seeking legal advice, in most cases NEH will file a proof
                of claim with the bankruptcy court or the Trustee. NEH will refer to
                the provisions of 11 U.S.C. 106 relating to the consequences on
                sovereign immunity of filing a proof of claim.
                 (2) If NEH is a secured creditor, it may seek relief from the
                automatic stay regarding its security, subject to the provisions and
                requirements of 11 U.S.C. 362.
                 (3) In most cases, offset is stayed by the automatic stay. However,
                NEH will seek legal advice from its Office of the General Counsel to
                determine whether it may freeze its payments to the debtor, and other
                agencies' payments that are available for offset, until it can obtain
                from the bankruptcy court relief from the automatic stay. NEH will also
                seek legal advice from its Office of the General Counsel to determine
                whether recoupment is available.
                Sec. 1177.11 Collection by administrative offset.
                 (a) Scope. (1) The term ``administrative offset'' has the meaning
                provided in 31 U.S.C. 3701(a)(1).
                 (2) This section does not apply to:
                 (i) Debts arising under the Social Security Act, except as provided
                in 42 U.S.C. 404;
                 (ii) Payments made under the Social Security Act, except as
                provided for in 31 U.S.C. 3716(c) (see 31 CFR 285.4, Federal Benefit
                Offset);
                 (iii) Debts arising under, or payments made under, the Internal
                Revenue Code (see 31 CFR 285.2, Tax Refund Offset) or the tariff laws
                of the United States;
                 (iv) Offsets against Federal salaries to the extent these standards
                are inconsistent with regulations published to implement such offsets
                under 5 U.S.C. 5514 and 31 U.S.C. 3716 (see 5 CFR part 550, subpart K,
                and 31 CFR 285.7, Federal Salary Offset);
                 (v) Offsets under 31 U.S.C. 3728 against a judgment that a debtor
                obtained against the United States;
                 (vi) Offsets or recoupments under common law, State law, or Federal
                statutes specifically prohibiting offsets or recoupments of particular
                types of debts; or
                 (vii) Offsets in the course of judicial proceedings, including
                bankruptcy.
                 (3) Unless otherwise provided for by contract or law, NEH may
                collect debts or payments that are not subject to administrative offset
                under 31 U.S.C. 3716 by administrative offset under the common law or
                other applicable statutory authority.
                 (4) Unless otherwise provided by law, NEH will not collect a debt
                by administrative offset under the authority of 31 U.S.C. 3716 more
                than ten (10) years after the Government's right to collect the debt
                first accrued, unless facts material to the Government's right to
                collect the debt were not known and could not reasonably have been
                known by the Government official or officials who were charged with the
                responsibility to discover and collect such debts. This limitation does
                not apply to debts reduced to a judgment.
                 (5) In bankruptcy cases, NEH will seek legal advice from its Office
                of the General Counsel concerning the impact of the Bankruptcy Code,
                particularly 11 U.S.C. 106, 362, and 553, on pending or contemplated
                collections by offset.
                 (b) Mandatory centralized administrative offset. (1) NEH is
                required to refer past due, legally enforceable nontax debts which are
                over 180 days delinquent to the Secretary for collection by centralized
                administrative offset. NEH may also refer debts which are less than 180
                days delinquent to the Secretary for this purpose. See paragraph (b)(5)
                of this section for debt certification requirements.
                 (2) The names and taxpayer identifying numbers (TINs) of debtors
                who owe debts which NEH referred to the Secretary as described in
                paragraph (b)(1) of this section will be compared to the names and TINs
                on payments to be made by Federal disbursing officials. Federal
                disbursing officials include disbursing officials of Treasury, the
                Department of Defense, the United States Postal Service, other
                Government corporations, and United States disbursing officials
                designated by the Secretary. When a debtor's name and TIN match a
                payee's name and TIN and all other requirements for offset have been
                met, the payment will be offset to satisfy the debt.
                 (3) Federal disbursing officials will notify the debtor/payee in
                writing that an offset has occurred to satisfy, in part or in full, a
                past due, legally enforceable delinquent debt. The notice will include
                a description of the type and amount of the payment from which the
                offset was taken, the amount of offset that was taken, the identity of
                the creditor agency requesting the offset, and a contact point within
                the creditor agency who will respond to questions regarding the offset.
                 (4) NEH will initiate offsets only after:
                 (i) Sending the debtor written notice of the type and amount of the
                debt, NEH's intention to use administrative offset to collect the debt,
                and an explanation of the debtor's rights under 31 U.S.C. 3716; and
                 (ii) Giving the debtor the opportunity:
                 (A) To inspect and copy NEH records related to the debt;
                 (B) For a review within NEH of its determination of indebtedness;
                and
                 (C) To make a written agreement to repay the debt.
                 (5) NEH may omit the procedures set forth in paragraph (b)(4) of
                this section when:
                 (i) The offset is in the nature of a recoupment;
                 (ii) The debt arises under a contract as set forth in Cecile
                Industries, Inc. v. Cheney, 995 F.2d 1052 (Fed. Cir. 1993) (notice and
                other procedural protections
                [[Page 66969]]
                set forth in 31 U.S.C. 3716(a) do not supplant or restrict established
                procedures for contractual offsets accommodated by the Contracts
                Disputes Act); or
                 (iii) In the case of non-centralized administrative offsets
                conducted under paragraph (c) of this section, NEH first learns of the
                amount owed by the debtor when there is insufficient time before
                payment would be made to the debtor/payee to allow for prior notice and
                an opportunity for review. When NEH omits prior notice and an
                opportunity for review, it will give the debtor such notice and an
                opportunity for review as soon as practicable, and it will promptly
                refund any money which it ultimately finds the debtor did not owe to
                the Government.
                 (6) When an agency has previously given a debtor any of the
                required notice and review opportunities with respect to a particular
                debt (see e.g., Sec. 1177.10), NEH need not duplicate such notice and
                review opportunities before initiating administrative offset.
                 (7) When referring delinquent debts to the Secretary, NEH will
                certify, in a form acceptable to the Secretary, that:
                 (i) The debt(s) is (are) past due and legally enforceable; and
                 (ii) NEH has complied with all due process requirements under 31
                U.S.C. 3716(a) and paragraphs (b)(4), (b)(5), and (b)(6) of this
                section.
                 (8) Payments that are prohibited by law from being offset are
                exempt from centralized administrative offset. The Secretary will
                exempt payments under means-tested programs from centralized
                administrative offset when the head of the payment certifying or
                authorizing agency requests in writing that the Secretary do so. Also,
                the Secretary may exempt other classes of payments from centralized
                offset upon the head of the payment certifying or authorizing agency's
                written request.
                 (9) NEH may offset benefit payments made under the Social Security
                Act (42 U.S.C. 301, et seq.), part B of the Black Lung Benefits Act (30
                U.S.C. 921, et seq.), and any law administered by the Railroad
                Retirement Board (other than tier two (2) benefits), only in accordance
                with Treasury regulations, issued in consultation with the Social
                Security Administration, the Railroad Retirement Board, and the Office
                of Management and Budget. See 31 CFR 285.4.
                 (10) In accordance with 31 U.S.C. 3716(f), the Secretary may waive
                the Computer Matching and Privacy Protection Act of 1988's provisions
                concerning matching agreements and post-match notification and
                verification (5 U.S.C. 552a(o) and (p)) for centralized administrative
                offset upon receipt of a certification from NEH, as the creditor
                agency, that it has met the due process requirements enumerated in 31
                U.S.C. 3716(a). NEH's certification in accordance with paragraph (b)(7)
                of this section will satisfy this requirement. If the Secretary grants
                such a waiver, only Treasury's Data Integrity Board is required to
                oversee any matching activities, in accordance with 31 U.S.C. 3716(g).
                This waiver authority does not apply to offsets conducted under
                paragraphs (c) and (d) of this section.
                 (c) Non-centralized administrative offset. (1) Generally, NEH will
                conduct non-centralized administrative offsets at its discretion on an
                ad hoc case-by-case basis, internally or in cooperation with the agency
                certifying or authorizing payments to the debtor. Unless otherwise
                prohibited by law, when centralized administrative offset is not
                available or appropriate, NEH may collect past due, legally enforceable
                non-tax delinquent debts through non-centralized administrative offset.
                In these cases, a creditor agency may make a request directly to a
                payment authorizing agency to offset a payment due a debtor in order to
                collect a delinquent debt. For example, it may be appropriate for a
                creditor agency to request that the Office of Personnel Management
                (OPM) offset a Federal employee's lump sum payment upon leaving
                Government service in order to satisfy an unpaid advance.
                 (2) Before requesting that a payment authorizing agency conduct a
                non-centralized administrative offset, NEH will provide:
                 (i) The debtor with due process as set forth in paragraphs (b)(4)
                through (6) of this section; and
                 (ii) The payment authorizing agency with written certification that
                the debtor owes past due, legally enforceable delinquent debt in the
                amount stated, and that NEH has fully complied with its regulations
                concerning administrative offset.
                 (3) Payment authorizing agencies will comply with offset requests
                by creditor agencies to collect debts owed to the United States, unless
                the offset would not be in the best interests of the United States with
                respect to the authorizing agency's program, or would otherwise be
                contrary to law. NEH will make appropriate use of other agencies'
                cooperative efforts in effecting collection by administrative offset.
                 (4) When collecting multiple debts by non-centralized
                administrative offset, NEH will apply the recovered amounts to those
                debts in accordance with the best interests of the United States, as
                determined by the facts and circumstances of the specific case,
                particularly the applicable statute of limitations.
                 (d) Requests to OPM to offset a debtor's anticipated or future
                benefit payments under the Civil Service Retirement and Disability
                Fund. Upon providing OPM written certification that a debtor has been
                afforded the procedures provided in paragraphs (b)(4) through (6) of
                this section, NEH may request that OPM offset a debtor's anticipated or
                future benefit payments under the Civil Service Retirement and
                Disability Fund (Fund) in accordance with regulations codified at 5 CFR
                831.1801-831.1808. Upon receipt of such a request, OPM will identify
                and ``flag'' a debtor's account in anticipation of the time when the
                debtor requests, or becomes eligible to receive, payments from the
                Fund. This will satisfy any requirement that NEH initiate offset prior
                to the expiration of the time limitations referenced in paragraph
                (a)(4) of this section.
                 (e) Review Requirements. (1) For purposes of this section, whenever
                NEH is required to afford a debtor a review, it will provide the debtor
                with a reasonable opportunity for an oral hearing when the debtor
                requests reconsideration of the debt and NEH determines that the
                question of indebtedness cannot be resolved by reviewing the
                documentary evidence; for example, when the validity of the debt turns
                on an issue of credibility or veracity.
                 (2) Unless otherwise required by law, an oral hearing under this
                section is not required to be a formal evidentiary hearing, although
                NEH will carefully document all significant matters discussed at the
                hearing.
                 (3) This section does not require an oral hearing with respect to
                debt collection systems in which a determination of indebtedness rarely
                involves issues of credibility or veracity and NEH has determined that
                the review of the written record is ordinarily an adequate means to
                correct prior mistakes.
                 (4) In those cases when an oral hearing is not required by this
                section, NEH will accord the debtor a ``paper hearing;'' that is, a
                determination of the request for reconsideration based upon a review of
                the written record.
                Sec. 1177.12 Reporting debts.
                 (a) NEH procedures for reporting delinquent debts to credit bureaus
                and other automated databases will comply with the Bankruptcy Code and
                the Privacy Act of 1974, 5 U.S.C. 552a, as amended. The provisions of
                the Privacy Act do not apply to credit bureaus.
                [[Page 66970]]
                 (b) NEH procedures for reporting delinquent consumer debts to
                credit bureaus will be consistent with the due process and other
                requirements contained in 31 U.S.C. 3711(e). When an agency has given a
                debtor any of the required notice and review opportunities with respect
                to a particular debt, NEH need not duplicate such notice and review
                opportunities before reporting that delinquent consumer debt to credit
                bureaus.
                 (c) NEH will report delinquent debts to the Department of Housing
                and Urban Development's Credit Alert Interactive Voice Response System
                (CAIVRS). NEH will contact the Director of Information Resources
                Management Policy and Management Division, Office of Information
                Technology, Department of Housing and Urban Development, 451 7th Street
                SW, Washington, DC 20410 for information about the CAIVRS program.
                Sec. 1177.13 Contracting with private collection contractors and with
                entities that locate and recover unclaimed assets.
                 (a) Subject to the provisions of paragraph (b) of this section, NEH
                may contract with private collection contractors, as defined in 31
                U.S.C. 3701(f), to recover delinquent debts, provided that:
                 (1) NEH retains the authority to resolve disputes, compromise
                debts, suspend or terminate collection activity, and refer debts for
                litigation;
                 (2) The private collection contractor is not allowed to offer the
                debtor, as an incentive for payment, the opportunity to pay the debt
                less the private collection contractor's fee unless NEH has granted
                such authority prior to the offer;
                 (3) The contract provides that the private collection contractor is
                subject to the Privacy Act of 1974, to the extent specified in 5 U.S.C.
                552a(m), and to applicable Federal and state laws and regulations
                pertaining to debt collection practices, including but not limited to
                the Fair Debt Collection Practices Act, 15 U.S.C. 1692; and
                 (4) The private collection contractor is required to account for
                all amounts collected.
                 (b) NEH will use government-wide debt collection contracts to
                obtain debt collection services provided by private contractors.
                However, NEH may refer debts to private collection contractors pursuant
                to a contract with the private collection contractor only if such debts
                are not subject to the requirement to transfer debts to Treasury for
                collection. See 31 U.S.C. 3711(g); 31 CFR 285.12(e).
                 (c) NEH may fund private collection contractor contracts in
                accordance with 31 U.S.C. 3718(d), or as otherwise permitted by law.
                 (d) NEH may enter into contracts for locating and recovering United
                States assets, such as unclaimed assets. NEH will establish procedures
                that are acceptable to the Secretary before entering into contracts to
                recover United States assets held by a state government or a financial
                institution.
                 (e) NEH may enter into contracts for debtor asset and income search
                reports. In accordance with 31 U.S.C. 3718(d), such contracts may
                provide that the fee a contractor charges NEH for such services may be
                payable from the amounts recovered, unless otherwise prohibited by
                statute.
                Sec. 1177.14 Suspension or revocation of eligibility for federal
                financial assistance.
                 (a) Unless waived by the Chairperson (or the Chairperson's
                designee), NEH will not extend financial assistance, which includes
                grants, cooperative agreements, contracts, loans, loan guarantees, or
                loan insurance to any person delinquent on a nontax debt owed to a
                Federal agency. NEH may extend credit after the delinquency has been
                resolved. The Secretary may exempt classes of debts from this
                prohibition and has prescribed standards defining when a
                ``delinquency'' is ``resolved'' for purposes of this prohibition. See
                31 CFR 285.13 (Barring Delinquent Debtors from Obtaining Federal Loans
                or Loan Insurance or Guarantees).
                 (b) In non-bankruptcy cases, when NEH is seeking the collection of
                statutory penalties, forfeitures, or other types of claims, it will
                consider suspending or revoking a debtor's licenses, permits, grants,
                cooperative agreements, contracts, or other privileges for inexcusable
                or willful failure to pay such a debt in accordance with NEH's
                regulations or governing procedures. In its written demand for payment,
                NEH will advise the debtor of the agency's ability to suspend or revoke
                licenses, permits, grants, cooperative agreements, contracts, or other
                privileges. In instances where NEH is making, guaranteeing, insuring,
                acquiring, or participating in grants, cooperative agreements,
                contracts, or loans, it will consider suspending or disqualifying any
                lender, contractor, grantee, partner, counterparty, broker, or
                participant from doing further business with NEH or engaging in
                programs, agreements, or activities that are sponsored, co-sponsored or
                otherwise supported by NEH if such lender, contractor, grantee,
                partner, counterparty, broker, or participant fails to pay its debts to
                the Government within a reasonable time or if such lender, contractor,
                grantee, partner, counterparty, broker, or participant has been
                suspended, debarred, or disqualified from participation in a program,
                agreement, or activity by another Federal agency. NEH will report to
                Treasury the failure of any surety to honor its obligations in
                accordance with 31 U.S.C. 9305. The Treasury will forward to all
                interested agencies a notification that a surety's certificate of
                authority to do business with the Government has been revoked by
                Treasury.
                 (c) NEH will also extend the suspension or revocation of licenses,
                permits, grants, cooperative agreements, contracts, or other privileges
                to Federal programs, agreements, or activities that are administered by
                the states or other third parties on behalf of the Federal Government,
                to the extent that they affect the Federal Government's ability to
                collect money or funds owed by debtors. Therefore, states or other
                third parties that manage Federal programs, agreements, or activities,
                pursuant to NEH approval, should ensure that appropriate steps are
                taken to safeguard against issuing licenses, permits, grants,
                cooperative agreements, contracts, or other privileges to debtors who
                fail to pay their debts to the Federal Government.
                 (d) In bankruptcy cases, before advising the debtor of its
                intention to suspend or revoke licenses, permits, grants, cooperative
                agreements, contracts, or other privileges, NEH will seek legal advice
                from its Office of the General Counsel concerning the impact of the
                Bankruptcy Code, particularly 11 U.S.C. 362 and 525, which may restrict
                such action.
                Sec. 1177.15 Liquidation of collateral.
                 (a) NEH will liquidate security or collateral through the exercise
                of a power of sale in the security instrument or a nonjudicial
                foreclosure, and apply the proceeds to the applicable debt(s), if the
                debtor fails to pay the debt(s) within a reasonable time after demand
                and if such action is in the best interest of the United States.
                Collection from other sources, including liquidation of security or
                collateral, is not a prerequisite to requiring payment by a surety,
                insurer, or guarantor unless such action is expressly required by
                statute or contract.
                 (b) When NEH learns that a bankruptcy petition has been filed with
                respect to a debtor, the agency will seek legal advice from its Office
                of the General Counsel concerning the impact of the Bankruptcy Code,
                including but not limited to 11 U.S.C. 362, to
                [[Page 66971]]
                determine the applicability of the automatic stay and the procedures
                for obtaining relief from such stay prior to proceeding under paragraph
                (a) of this section.
                Sec. 1177.16 Collection in installments.
                 (a) Whenever feasible, NEH will collect the total amount of a debt
                in one lump sum. If a debtor is financially unable to pay a debt in one
                lump sum, NEH may accept payment in regular installments. NEH will
                obtain financial statements from debtors who represent that they are
                unable to pay in one lump sum and independently verify such
                representations whenever possible (see Sec. 1177.22(g) of this part).
                If NEH agrees to accept payments in regular installments, it will
                obtain a legally enforceable written agreement from the debtor that
                specifies all of the terms of the arrangement and that contains a
                provision accelerating the debt in the event of default.
                 (b) The size and frequency of installment payments will bear a
                reasonable relation to the size of the debt and the debtor's ability to
                pay. If possible, the installment payments should be sufficient in size
                and frequency to liquidate the debt in three years or less.
                 (c) NEH will obtain security for deferred payments, in appropriate
                cases. NEH may accept installment payments notwithstanding the debtor's
                refusal to execute a written agreement or to give security, at the
                agency's option.
                Sec. 1177.17 Interest, penalties, and administrative costs.
                 (a) Except as provided in paragraphs (g), (h), and (i) of this
                section, NEH will charge interest, penalties, and administrative costs
                on debts owed to the United States pursuant to 31 U.S.C. 3717. NEH will
                mail or hand-deliver a written notice to the debtor, at the debtor's
                most recent address available to NEH, explaining the agency's
                requirements concerning these charges, except where these requirements
                are included in a contractual or repayment agreement. These charges
                shall continue to accrue until the debt is paid in full or otherwise
                resolved through compromise, termination, or waiver of the charges.
                 (b) NEH will charge interest on debts owed the United States as
                follows:
                 (1) Interest will accrue from the date of delinquency, or as
                otherwise provided by law.
                 (2) Unless otherwise established in a grant, cooperate agreement,
                contract, repayment agreement, or by statute, the rate of interest that
                NEH charges will be the rate that the Secretary establishes annually in
                accordance with 31 U.S.C. 3717. Pursuant to 31 U.S.C. 3717, NEH may
                charge a higher rate of interest if it reasonably determines that a
                higher rate is necessary to protect the rights of the United States.
                NEH will document the reason(s) for its determination that the higher
                rate is necessary.
                 (3) The rate of interest that NEH initially charges will remain
                fixed for the duration of the indebtedness. When a debtor defaults on a
                repayment agreement and seeks to enter into a new agreement, NEH may
                require payment of interest at a new rate that reflects the Treasury's
                value of funds at the time the new agreement is executed. NEH will not
                compound interest; that is, it will not charge interest on interest,
                penalties, or administrative costs required by this section. If,
                however, a debtor defaults on a previous repayment agreement, NEH will
                add to the principal under the new repayment agreement any charges that
                accrued but which NEH did not collect under the defaulted agreement.
                 (c) NEH will assess administrative costs it incurred for processing
                and handling delinquent debts. NEH will base its calculation of
                administrative costs on the actual costs it incurred or upon its
                estimated costs.
                 (d) Unless otherwise established in a contract, repayment
                agreement, or by statute, NEH will charge a penalty, pursuant to 31
                U.S.C. 3717(e)(2), not to exceed six (6) percent a year on the amount
                due on a debt that is delinquent for more than ninety (90) days. This
                charge shall accrue from the date of delinquency.
                 (e) NEH may increase an ``administrative debt'' by the cost-of-
                living adjustment in lieu of charging interest and penalties under this
                section. ``Administrative debt'' includes but is not limited to a debt
                based on fines, penalties, and overpayments, but does not include a
                debt based on the extension of Government credit, such as those arising
                from loans and loan guaranties. The cost-of-living adjustment is the
                percentage by which the Consumer Price Index for the month of June of
                the calendar year preceding the adjustment exceeds the Consumer Price
                Index for the month of June of the calendar year in which the debt was
                determined or last adjusted. NEH will annually compute increases to
                administrative debts. NEH will use this alternative only when there is
                a legitimate reason to do so, such as when calculating interest and
                penalties on a debt would be extremely difficult because of the debt's
                age.
                 (f) When a debtor pays a debt in partial or installment payments,
                the Government will first apply the amount it receives to any
                contingency fees added to the debt, second to outstanding penalties,
                third to administrative costs other than contingency fees, fourth to
                interest, and last to principal. For purposes of this paragraph (f),
                ``contingency fees'' are administrative costs resulting from fees paid
                by a Federal agency to other Federal agencies or private collection
                contractors for collection services rendered when the fees are paid
                from the amounts collected from a debtor.
                 (g) NEH will waive the collection of interest and administrative
                costs imposed pursuant to this section on the portion of the debt that
                the debtor pays within thirty (30) days after the date on which
                interest began to accrue. NEH may extend this thirty-day period on a
                case-by-case basis. In addition, NEH may waive interest, penalties, and
                administrative costs charged under this section, in whole or in part,
                without regard to the amount of the debt, either under the criteria set
                forth in these standards for the compromise of debts, or if NEH
                determines that collection of these charges is against equity and good
                conscience or is not in the best interest of the United States.
                 (h) NEH will not suspend the assessment of interest, penalties, and
                administrative costs during the administrative review of a debt, except
                for periods during which it has suspended collection activity under
                Sec. 1177.29 of this part.
                 (i) NEH is authorized to impose interest and related charges on
                debts not subject to 31 U.S.C. 3717, in accordance with the common law.
                Sec. 1177.18 Analysis of costs.
                 NEH will periodically compare costs incurred and amounts collected.
                NEH will use data on costs and corresponding recovery rates for debts
                of different types and in various dollar ranges to compare the cost
                effectiveness of alternative collection techniques, establish
                guidelines with respect to points at which costs of further collection
                efforts are likely to exceed recoveries, assist in evaluating
                compromise offers, and establish minimum debt amounts below which
                collection efforts need not be taken.
                Sec. 1177.19 Use and disclosure of mailing addresses.
                 (a) When attempting to locate a debtor in order to collect or
                compromise a debt under this part or other authority, NEH may send a
                request to the Secretary to obtain a debtor's mailing address from the
                Internal Revenue Service's records.
                 (b) NEH is authorized to use mailing addresses it obtained under
                paragraph
                [[Page 66972]]
                (a) of this section to enforce collection of a delinquent debt and may
                disclose such mailing addresses to other agencies and to collection
                agencies for collection purposes.
                Sec. 1177.20 Exemptions.
                 (a) The preceding sections of this part, to the extent that they
                reflect remedies or procedures prescribed by the Debt Collection Act of
                1982 and the DCIA, such as administrative offset, use of credit
                bureaus, contracting for collection agencies, and interest and related
                charges, do not apply to debts arising under, or payments made under,
                the Internal Revenue Code of 1986, as amended (26 U.S.C. 1, et seq.);
                the Social Security Act (42 U.S.C. 301, et seq.), except to the extent
                provided under 42 U.S.C. 404 and 31 U.S.C. 3716(copyright); or the
                tariff laws of the United States. These remedies and procedures,
                however, may be authorized with respect to debts that are exempt from
                the Debt Collection Act of 1982 and the DCIA, to the extent that they
                are authorized under some other statute or the common law.
                 (b) NEH does not construe this section as prohibiting its use of
                these authorities or requirements when collecting debts owed by persons
                employed by agencies administering the laws cited in paragraph (a) of
                this section, unless the debt arose under those laws.
                Subpart C--Standards for the Compromise of Claims
                Sec. 1177.21 Scope and application.
                 (a) The standards set forth in this subpart apply to the compromise
                of debts pursuant to 31 U.S.C. 3711. NEH may exercise such compromise
                authority for debts that arise out of its activities, or that are
                referred or transferred to it for collection services, when the amount
                of the debt then due, exclusive of interest, penalties, and
                administrative costs, does not exceed $100,000 or any higher amount
                authorized by the Attorney General. The Chairperson may designate
                officials within NEH to exercise the authorities in this section.
                 (b) Unless otherwise provided by law, when the principal balance of
                a debt, exclusive of interest, penalties, and administrative costs,
                exceeds $100,000 or any higher amount authorized by the Attorney
                General, the authority to accept the compromise rests with DOJ. NEH
                will evaluate the compromise offer, using the factors set forth in this
                subpart. If NEH finds that an offer to compromise a debt in excess of
                $100,000 is acceptable, it will refer the debt to the Civil Division or
                other appropriate litigating division in DOJ using a Claims Collection
                Litigation Report (CCLR). NEH may obtain the CCLR from DOJ's National
                Central Intake Facility. The referral will include appropriate
                financial information and a recommendation for the acceptance of the
                compromise offer. DOJ approval is not required if NEH rejects a
                compromise offer.
                Sec. 1177.22 Bases for compromise.
                 (a) NEH may compromise a debt if the Government cannot collect the
                full amount because:
                 (1) The debtor is unable to pay the full amount in a reasonable
                time, as verified through credit reports or other financial
                information;
                 (2) The Government is unable to collect the debt in full by
                enforced collection proceedings within a reasonable time;
                 (3) The cost of collecting the debt does not justify the enforced
                collection of the full amount; or
                 (4) There is significant doubt concerning the Government's ability
                to prove its case in court.
                 (b) NEH will consider the following relevant factors when
                determining the debtor's inability to pay:
                 (1) The debtor's age and health;
                 (2) The debtor's present and potential income;
                 (3) The debtor's inheritance prospects;
                 (4) The possibility that the debtor has concealed or improperly
                transferred assets; and
                 (5) The availability of assets or income that may be realized by
                enforced collection proceedings.
                 (c) NEH will verify the debtor's claim of inability to pay by using
                a credit report and other financial information as provided in
                paragraph (g) of this section. NEH will consider the applicable
                exemptions available to the debtor under state and Federal law in
                determining the Government's ability to enforce collection. NEH also
                may consider uncertainty as to the price that collateral or other
                property will bring at a forced sale in determining the Government's
                ability to enforce collection. A compromise that NEH effects under this
                section will be for an amount that bears a reasonable relation to the
                amount that can be recovered by enforced collection procedures, with
                regard to the exemptions available to the debtor and the time that
                collection will take.
                 (d) If there is significant doubt concerning the Government's
                ability to prove its case in court for the full amount claimed, either
                because of the legal issues involved or because of a bona fide dispute
                as to the facts, then the amount that NEH accepts in compromise of such
                cases should fairly reflect the probabilities of successful prosecution
                to judgment, with due regard given to the availability of witnesses and
                other evidentiary support for the Government's claim. In determining
                the litigative risks involved, NEH will consider the probable amount of
                court costs and attorney fees pursuant to the Equal Access to Justice
                Act, 28 U.S.C. 2412, that may be imposed against the Government if it
                is unsuccessful in litigation.
                 (e) NEH may compromise a debt if the cost of collecting the debt
                does not justify the enforced collection of the full amount. The amount
                NEH accepts in compromise in such cases may reflect an appropriate
                discount for the administrative and litigative costs of collection,
                with consideration given to the time it will take to effect collection.
                Collection costs may be a substantial factor in the settlement of small
                debts. In determining whether the cost of collecting justifies enforced
                collection of the full amount, NEH will consider whether continued
                collection of the debt, regardless of cost, is necessary to further an
                enforcement principle, such as the Government's willingness to pursue
                aggressively defaulting and uncooperative debtors.
                 (f) NEH generally will not accept compromises payable in
                installments. This is not an advantageous form of compromise in terms
                of time and administrative expense. If, however, payment of a
                compromise in installments is necessary, NEH will obtain a legally
                enforceable written agreement providing that, in the event of default,
                the debtor's full original principal balance prior to compromise, less
                sums paid thereon, will be reinstated. Whenever possible, NEH also will
                obtain security for repayment in the manner set forth in subpart B of
                this part.
                 (g) To assess the merits of a compromise offer based in whole or in
                part on the debtor's inability to pay the full amount of a debt within
                a reasonable time, NEH will obtain a current financial statement from
                the debtor, executed under penalty of perjury, showing the debtor's
                assets, liabilities, income, and expenses. NEH also may obtain credit
                reports or other financial information to assess compromise offers. NEH
                may use its own financial information form or may request suitable
                forms from DOJ or the local United States Attorney's Office.
                [[Page 66973]]
                Sec. 1177.23 Enforcement policy.
                 Pursuant to this subpart, NEH may compromise statutory penalties,
                forfeitures, or claims that it established as an aid to enforcement and
                to compel compliance, if NEH's enforcement policy in terms of
                deterrence and securing compliance, present and future, will be
                adequately served by the agency's acceptance of the compromise offer.
                Sec. 1177.24 Joint and several liability.
                 a. When two or more debtors are jointly and severally liable, NEH
                will pursue collection activity against all debtors, as appropriate.
                NEH will not attempt to allocate the burden of payment between the
                debtors but will proceed to liquidate the indebtedness as quickly as
                possible.
                 b. NEH will ensure that a compromise agreement with one debtor does
                not release the agency's claim against the remaining debtors. The
                amount of a compromise with one debtor will not be considered a
                precedent or binding in determining the amount that will be required
                from other debtors jointly and severally liable on the claim.
                Sec. 1177.25 Further review of compromise offers.
                 If NEH is uncertain whether to accept a firm, written, substantive
                compromise offer on a debt that is within the agency's delegated
                compromise authority, it may refer the offer to the Civil Division or
                other appropriate litigating division in DOJ, using a CCLR accompanied
                by supporting data and particulars concerning the debt. DOJ may act
                upon such an offer or return it to NEH with instructions or advice.
                Sec. 1177.26 Consideration of tax consequences to the Government.
                 In negotiating a compromise, NEH will consider the tax consequences
                to the Government. In particular, NEH will consider requiring a waiver
                of the debtor's tax-loss-carry-forward and tax-loss-carry-back rights.
                For information on discharge of indebtedness reporting requirements,
                see Sec. 1177.32.
                Sec. 1177.27 Mutual releases of the debtor and the Government.
                 In all appropriate instances, NEH will implement acceptable
                compromises by means of a mutual release, in which the debtor is
                released from further non-tax liability on the compromised debt in
                consideration of payment in full of the compromise amount and the
                Government and its officials, past and present, are released and
                discharged from any and all of the debtor's claims and causes of action
                arising from the same transaction. In the event NEH does not execute a
                mutual release when it compromises a debt, unless prohibited by law,
                the debtor is still deemed to have waived any and all claims and causes
                of action against the Government and its officials related to the
                transaction that gave rise to the compromised debt.
                Subpart D--Standards for Suspending or Terminating Collection
                Activity
                Sec. 1177.28 Scope and application.
                 (a) The standards set forth in this subpart apply to the suspension
                or termination of collection activity, pursuant to 31 U.S.C. 3711, on
                debts that do not exceed $100,000, or such other amount as the Attorney
                General may direct, exclusive of interest, penalties, and
                administrative costs, after deducting the amount of partial payments or
                collections, if any. Prior to referring a debt to DOJ for litigation,
                NEH may suspend or terminate collection under this subpart with respect
                to debts that arise out of its activities, or that are referred or
                transferred to it for collection services.
                 (b) If, after deducting the amount of any partial payments or
                collections, the principal amount of a debt exceeds $100,000, or such
                other amount as the Attorney General may direct, exclusive of interest,
                penalties, and administrative costs, the authority to suspend or
                terminate rests solely with DOJ. If NEH believes that suspension or
                termination of any debt in excess of $100,000 may be appropriate, it
                will refer the debt to the Civil Division or other appropriate
                litigating division in DOJ, using the CCLR. The referral will specify
                the reasons for NEH's recommendation. If, prior to referral to the DOJ,
                NEH determines that a debt is plainly erroneous or clearly without
                legal merit, NEH may terminate collection activity without obtaining
                DOJ concurrence, regardless of the amount involved.
                Sec. 1177.29 Suspension of collection activity.
                 (a) NEH may suspend collection activity on a debt when:
                 (1) NEH cannot locate the debtor;
                 (2) NEH expects the debtor's financial condition to improve; or
                 (3) The debtor has requested a waiver or review of the debt.
                 (b) NEH may suspend collection activity on a debt when, based on
                the debtor's current financial condition, the debtor's future prospects
                justify retention of the debt for periodic review and collection
                activity and:
                 (1) The applicable statute of limitations has not expired; or
                 (2) Future collection can be effected by administrative offset,
                notwithstanding the expiration of the applicable statute of limitations
                for litigation of claims, with due regard to the ten-year limitation
                for administrative offset prescribed by 31 U.S.C. 3716(e)(1); or
                 (3) The debtor agrees to pay interest on the amount of the debt on
                which collection will be suspended, and such suspension is likely to
                enhance the debtor's ability to pay the full amount of the debt with
                interest at a later date.
                 (c)(1) NEH will suspend collection activity during the time
                required to consider the debtor's request for waiver or administrative
                review of the debt, if the statute under which the debtor makes the
                request prohibits NEH from collecting the debt during that time.
                 (2) If the statute under which the debtor makes the request does
                not prohibit collection activity pending consideration of the debtor's
                request, NEH may use discretion, on a case-by-case basis, to suspend
                collection. Further, NEH ordinarily will suspend collection action upon
                a request for waiver or review if a statute or regulation prohibits NEH
                from issuing a refund of amounts it collected prior to considering the
                debtor's request. However, NEH should not suspend collection when it
                determines that the request for waiver or review is frivolous or was
                made primarily to delay collection.
                 (d) If NEH learns that a bankruptcy petition has been filed with
                respect to a debtor, in most cases it must suspend the collection
                activity on that debtor's debt, pursuant to the provisions of 11 U.S.C.
                362, 1201, and 1301, unless NEH can clearly establish that the
                automatic stay has been lifted or is no longer in effect. NEH will
                immediately seek legal advice from its Office of the General Counsel
                and, if legally permitted, take the necessary legal steps to ensure
                that the agency does not pay any funds or money to the debtor until it
                obtains relief from the automatic stay.
                Sec. 1177.30 Termination of collection activity.
                 (a) NEH may terminate collection activity when:
                 (1) NEH is unable to collect any substantial amount through its own
                efforts or through the efforts of others;
                 (2) NEH is unable to locate the debtor;
                 (3) NEH anticipates that the costs of collection will exceed the
                amount recoverable;
                 (4) The debt is legally without merit or enforcement of the debt is
                barred by any applicable statute of limitations;
                 (5) NEH cannot substantiate the debt; or
                [[Page 66974]]
                 (6) The debt against the debtor has been discharged in bankruptcy.
                 (b) Before terminating collection activity, NEH will have pursued
                all appropriate means of collection and determined, based upon the
                results of the collection activity, that the debt is uncollectible.
                Terminating collection activity ceases active collection of the debt
                but does not preclude NEH from retaining a record of the account for
                purposes of:
                 (1) Selling the debt, if the Secretary determines that such sale is
                in the best interests of the United States;
                 (2) Pursuing collection at a subsequent date in the event there is
                a change in the debtor's status or a new collection tool becomes
                available;
                 (3) Offsetting against future income or assets not available at the
                time the agency terminated collection activity; or
                 (4) Screening future applicants for prior indebtedness.
                 (c) Generally, NEH will terminate collection activity on a debt
                that has been discharged in bankruptcy, regardless of the amount. NEH
                may continue collection activity, however, subject to the provisions of
                the Bankruptcy Code, for any payments provided under a plan of
                reorganization. Offset and recoupment rights may survive the discharge
                of the debtor in bankruptcy and, under some circumstances, claims also
                may survive the discharge. For example, if NEH is a known creditor of
                the debtor, its claims may survive a discharge if it did not receive
                formal notice of the proceedings. NEH will seek legal advice from its
                Office of the General Counsel if it believes it has claims or offsets
                that may survive the discharge of a debtor.
                Sec. 1177.31 Exception to termination.
                 When a significant enforcement policy is involved, or recovery of a
                judgment is a prerequisite to the imposition of administrative
                sanctions, NEH may refer debts for litigation even though termination
                of collection activity may otherwise be appropriate.
                Sec. 1177.32 Discharge of indebtedness; reporting requirements.
                 (a) Before discharging a delinquent debt (also referred to as a
                close out of the debt), NEH will take all appropriate steps to collect
                the debt in accordance with 31 U.S.C. 3711(g), including, as
                applicable, administrative offset; tax refund offset; Federal salary
                offset; referral to Treasury, Treasury-designated debt collection
                centers, or private collection contractors; credit bureau reporting;
                wage garnishment; litigation; and foreclosure. Discharge of
                indebtedness is distinct from termination or suspension of collection
                activity under this subpart and is governed by the Internal Revenue
                Code. When NEH suspends or terminates collection action on a debt, the
                debt remains delinquent and NEH may pursue further collection action at
                a later date, in accordance with the standards set forth in this part.
                When NEH discharges a debt in full or in part, further collection
                action is prohibited. Therefore, NEH will make the determination that
                collection action is no longer warranted before discharging a debt. NEH
                must also terminate debt collection action before discharging a debt.
                 (b) Section 3711(i), title 31, United States Code, requires NEH to
                sell a delinquent nontax debt upon termination of collection action if
                the Secretary determines such a sale is in the best interests of the
                United States. Since the discharge of a debt precludes any further
                collection action (including the sale of a delinquent debt), NEH may
                not discharge a debt until it meets the requirements of 31 U.S.C.
                3711(i).
                 (c) Upon discharge of an indebtedness, NEH must report the
                discharge to the IRS in accordance with the requirements of 26 U.S.C.
                6050P and 26 CFR 1.6050P-1. NEH may request Treasury or Treasury-
                designated debt collection centers to file such a discharge report to
                the IRS on NEH's behalf.
                 (d) When discharging a debt, NEH must request that litigation
                counsel release any liens of record securing the debt.
                Subpart E--Referrals to the Department of Justice
                Sec. 1177.33 Prompt referral.
                 (a) NEH will promptly refer to DOJ for litigation any debts on
                which it has taken aggressive collection activity in accordance with
                subpart B of this part and that it cannot compromise, or on which it
                cannot suspend or terminate collection activity, in accordance with
                subparts C and D of this part. NEH may refer those debts arising out of
                its activities, or that were referred or transferred to it for
                collection services. NEH will refer debts for which the principal
                amount is over $1,000,000, or such other amount as the Attorney General
                my direct, exclusive of interest and penalties, to the Civil Division
                or other division responsible for litigating such debts at DOJ,
                Washington, DC. NEH will refer debts for which the principal amount is
                $1,000,000 or less, or such other amount as the Attorney General may
                direct, exclusive of interest or penalties, to DOJ's Nationwide Central
                Intake Facility as required by the CCLR instructions. NEH will refer
                debts as early as possible, consistent with aggressive agency
                collection activity and the standards contained in this part, and, in
                any event, well within the period for initiating timely lawsuits
                against the debtors. NEH will make every effort to refer delinquent
                debts to DOJ for litigation within one year of the date that such debts
                last became delinquent.
                 (b) DOJ has exclusive jurisdiction over the debts NEH refers to it,
                pursuant to this section. As the referring agency, NEH will immediately
                terminate its administrative debt collection activities at the time it
                refers the debt to the DOJ. NEH will advise DOJ of the collection
                activities it has utilized to date, and their result. NEH will refrain
                from having any contact with the debtor and shall direct all debtor
                inquiries concerning the debt to DOJ. NEH will immediately notify DOJ
                of any payments it credited to the debtor's account after it referred a
                debt under this section. DOJ will notify NEH, in a timely manner, of
                any payments it receives from the debtor.
                Sec. 1177.34 Claims Collection Litigation Report.
                 (a) Unless excepted by DOJ, NEH will complete the CCLR (see Sec.
                1177.21(b)), accompanied by a signed Certificate of Indebtedness, to
                refer all administratively uncollectible claims to DOJ for litigation.
                As a referring agency, NEH will complete all sections of the CCLR that
                are appropriate to each claim, as required by the CCLR instructions,
                and furnish such other information as may be required in specific
                cases.
                 (b) NEH will indicate clearly on the CCLR the actions it wishes DOJ
                to take with respect to the referred claim. The CCLR permits NEH to
                indicate specifically any of a number of litigative activities which
                DOJ may pursue, including enforced collection, judgment lien only,
                renew judgment lien only, renew judgment lien and enforce collection,
                program enforcement, foreclosure only, and foreclosure and efficiency
                judgment.
                 (c) NEH also will use the CCLR to refer claims to DOJ to obtain
                approval of any proposals to compromise the claims or to suspend or
                terminate NEH collection activity.
                Sec. 1177.35 Preservation of evidence.
                 When NEH refers claims to DOJ, it will take care to preserve all
                files and records that DOJ may need to prove its claims in court. NEH
                ordinarily will include certified copies of the documents that form the
                basis for its
                [[Page 66975]]
                claims in the packages it creates to refer its claims to DOJ for
                litigation. NEH will provide originals of such documents immediately
                upon DOJ's request.
                Sec. 1177.36 Minimum amount of referrals to the Department of
                Justice.
                 (a) NEH will not refer to DOJ for litigation any claims of less
                than $2,500, exclusive of interest, penalties, and administrative
                costs, or such other amount as the Attorney General shall from time to
                time prescribe. DOJ will promptly notify NEH if the Attorney General
                changes this minimum amount.
                 (b) NEH will not refer claims of less than the minimum amount
                unless:
                 (1) Litigation to collect such smaller claims is important to
                ensure compliance with NEH's policies or programs;
                 (2) NEH is referring the claim solely for the purpose of securing a
                judgment against the debtor, which will be filed as a lien against the
                debtor's property pursuant to 28 U.S.C. 3201 and returned to NEH for
                enforcement; or
                 (3) The debtor has the clear ability to pay the claim and the
                Government can effectively enforce payment, with due regard for the
                exemptions available to the debtor under state and Federal law and the
                judicial remedies available to the Government.
                 (c) NEH will consult with the Executive Office for United States
                Attorneys' Financial Litigation Staff at the DOJ prior to referring
                claims valued at less than the minimum amount.
                 Dated: October 27, 2021.
                Samuel Roth,
                Attorney-Advisor, National Endowment for the Humanities.
                [FR Doc. 2021-23742 Filed 11-23-21; 8:45 am]
                BILLING CODE 7536-01-P
                

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