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April 01, 2011

New Legislation Attacks Court Debt with Expansion of Tax-Intercept Program

Sen. Rob Wyden (D-Ore.) and Rep. Erik Paulsen (R-Minn.) have introduced federal legislation to help collect overdue court-ordered financial obligations.

The bills, S. 755 and H.R. 1416, would allow state courts to coordinate with the IRS to intercept federal tax refunds of individuals who owe restitution to their victims or have overdue court fines and fees.

“It is only common sense that those convicted of a crime pay their debts to society before benefiting from tax refunds,” Wyden said. Paulsen added that “there is absolutely no reason that the federal government should be giving tax refunds to criminals who owe restitution to their victims.” The legislation, he explained, “will ensure that criminals who still owe money to their victims and the court don’t receive their tax refunds until they repay every last cent.”

Under the legislation, the Treasury Department would be authorized to expand its existing Tax Offset Program, which currently coordinates the interception of federal tax refunds to pay outstanding child support, state tax and other federal debts. The new program would apply only to criminal and traffic cases, and participation by the states would be optional.

According to the ABA, which was instrumental in getting the bills introduced, the strength and attraction of the legislation is that it taps into an efficient and sophisticated federal collection program already in place, thereby incurring no start-up costs. During the 110th Congress, similar legislation was scored by the Congressional Budget Office as having no effect on federal spending.

National Center for State Courts (NCSC) statistics, which show that outstanding court debts total approximately $15 billion across the country, reflect the urgency for enactment of the legislation. Courts are struggling to maintain essential services on slashed budgets, and many have been forced to reduce hours of operations, downsize essential staff, furlough judicial officers, and reduce salaries. They do not have the resources for collection activities.

Passage of this bill, according to NCSC, would hold debtors accountable and deliver justice to crime victims who are owed restitution and will enable states to collect millions of dollars annually without raising taxes or imposing any new cost burdens on the government.

In addition to the support of the American Bar Association and NCSC, the legislation is endorsed by numerous other organizations, including the Conference of Chief Justices, the Conference of Court Administrators, the National Association for Court Managers, the National Conference of State Legislatures, and the National Association of Counties.

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