Lawmakers Unite Against IRS Plan to Limit Access to Taxpayer Data for Child Support Enforcement

In a show of bipartisanship, the House Ways and Means Committee unanimously advanced a bill that would allow child support enforcement contractors to access the same taxpayer information as state and local agencies — while giving Tribal agencies information access and the authority to collect past-due support from federal tax overpayments.

The Strengthening State and Tribal Child Support Enforcement Act (HR 7906) advanced 37-0 at a July 24 committee markup. Lawmakers noted the over 60 Tribal nations that operate child support enforcement programs but that must contract with state entities to access taxpayer data for enforcement purposes and to collect overdue amounts.

But beyond helping Tribal agencies, the bill would increase information access for all child enforcement third-party contractors, said Representative Kevin Hern (R-OK). It would allow states to continue to use third-party contractors for enforcement, explained Hern, whereas bringing enforcement “in house” would cost “hundreds of millions of dollars” and cause an “immediate pause of child support payments to millions of families.” Hern added that the issue is “personal” for him, describing his childhood and asserting that “every kid deserves a childhood without the weight of poverty dragging them down.”

Representative Gwen Moore (D-WI) noted that federal tax offsets — where past-due child support amounts are withheld from taxpayers’ refund checks — comprise “about 12% of child support services collections.” While requesting these offsets is currently unavailable to tribes, Moore noted the “workarounds” Tribal agencies have developed. Those workarounds include relying on states where tribes are located to garnish tax refunds, as well as working with a consortium in North Dakota that Moore said helped “facilitate the process for many tribes across the nation.” Moore called out the IRS for wavering on the legality of that consortium and for “shutting it down entirely last tax season.” Though the IRS has since reversed course, Moore said a “permanent statutory fix” is “long overdue.”

The committee felt a sense of urgency given the IRS’ February 2023 alert to child support enforcement agencies calling on them to develop plans to mitigate unauthorized disclosures of taxpayer information to contractors. The IRS set an initial deadline of October 1, 2023, but that has since been extended to October 1, 2024.

The IRS clarified in May that it is not cutting off Tribal access to federal tax offsets through state agencies. It said that it is “focused on not disrupting child-support collections, while respecting the current taxpayer privacy laws.” According to the IRS’ May statement, the agency is “open to potentially extending the Oct. 1 deadline” and “is working with Congress on potential legislative changes.”

Underpinning the IRS’ efforts is Code Sec. 6103, which provides that taxpayer return information is confidential and may not be disclosed by the IRS or federal and state employees except as specified in the Tax Code. Among those exceptions are disclosures of return information to federal, state, and local child support enforcement agencies in connection with a taxpayer’s child support obligations. However, Tribal agencies and other third-party contractors are excluded from this list. The bill would put Tribal agencies on par with state agencies, while allowing other third-party contractors access to information “to the extent necessary” to establish and collect child support obligations and to locate taxpayers with obligations.

The bill also would amend Code Sec. 6402(c), which allows child support enforcement agencies to tap into taxpayers’ federal refunds when a taxpayer has a past-due child support obligation. It would give Tribal organizations receiving grants under Social Security Act Section 455(f) the same access to this Federal Tax Refund Offset Program as states — eliminating the need for tribes to contract with states to collect past-due amounts.

A bipartisan bill addressing the issue is also pending in the Senate (S 3154). That chamber passed a similar bill (S 534) in the previous legislative session, but it saw no further action.

Support for the bill also poured in from the states, including in a July 23 letter sent by 26 state governors to congressional leadership. That letter notes that compliance with the IRS’ new requirements “would total over $1 billion nationally in additional costs for child support programs each year” based on preliminary estimates of program directors. Those costs, the governors say, would result from “bringing current vendor-provided services in-house.”

For more on disclosures by the IRS to child support enforcement agencies and their agents, see Checkpoint’s Federal Tax Coordinator ¶ S-6360 and ¶ S-6360.05.

For more on offsets of tax overpayments by past-due child support debts, see ¶ T-6013.